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2023 (10) TMI 740 - AT - Service TaxDoctrine of mutuality - Club or association service - non-payment of service tax on amounts collected from the Members - scope of SCN - adjudication order travelled beyond SCN - Levy of service tax on Maintenance deposit - Time Limitation - Suppression of facts or not - HELD THAT - It is found that in the entire SCN the proposal of service tax demand was only on the basis of the definition of club or association service as specified in sub clause (zzze) of clause (105) of section 65 of the Finance Act, 1994. Whereas in the adjudication order, the demand was confirmed on the basis of the statutory provision prevailing with effect from 01.07.2012 where under the concept of definition of service was given away and negative list was introduced, according to which irrespective of any service provided by one person to another person except the services prescribed under the negative list are chargeable to Service Tax. The allegation made in the show cause notice is on the completely different provision and the grounds than the statutory provision applied while confirming the demand of Service Tax in the adjudication order. Therefore, the adjudication order has travelled absolutely beyond the scope of show cause notice. The demand of Service Tax is liable to be set aside on this ground itself that the adjudication order cannot travel beyond the show cause notice. From the consistent view of the Apex Court in COMMISSIONER OF CENTRAL EXCISE VERSUS GAS AUTHORITY OF INDIA LTD. 2007 (11) TMI 276 - SUPREME COURT and PRECISION RUBBER INDUSTRIES (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI 2016 (4) TMI 841 - SUPREME COURT and following the same by the Hon ble Gujarat High Court in COMMISSIONER VERSUS RELIANCE PORTS AND TERMINALS LTD. 2015 (10) TMI 1571 - GUJARAT HIGH COURT , it is settled that the show cause notice is foundation of a case and any proceeding whether adjudication or appellate proceeding cannot travel beyond the show cause notice. Therefore, following the settled legal position as cited above, the demand in the present case is not sustainable on the ground that the adjudication order has travelled beyond show cause notice. In the present case since there is a doctrine of mutuality between the appellant s corporative society and its members, it cannot be said that a person had provided service to another person. There is no difference between the corporative society and its members that means both are one. Accordingly, there is no service provision by one person to another person. Therefore even as per the definition of service provided under section 65B(44) with effect from 01.07.2012, the activity between the appellant and it's members does not fall under the definition of service. Levy of service tax - Maintenance deposit - HELD THAT - The maintenance deposit was received as a refundable deposit and the same was shown as refundable in the ledger. Therefore, such amount cannot be considered as a consideration towards any service. Hence, the same is not chargeable to Service Tax on this ground also. This issue has been considered in various judgments, wherein the refundable deposit was held to be not consideration towards the service. Time Limitation - Suppression of facts or not - HELD THAT - No suppression of facts or mis-declaration or any mala fide intention can be attributed to the appellant for non-payment of service tax. Therefore the extended period is not invocable in the present case. Accordingly, the demand for the extended period is not sustainable on limitation also. The Service Tax demand is not sustainable on multiple grounds - the impugned order set aside - appeal allowed.
Issues Involved:
1. Whether the demand of Service Tax is sustainable based on the statutory provisions effective prior to and post 01.07.2012. 2. Whether the appellant, being a registered cooperative society, falls under the definition of "club or association" service. 3. Applicability of the doctrine of mutuality between the appellant and its members. 4. Treatment of maintenance deposits as consideration for services. 5. Invocation of the extended period under Section 73(1) of the Finance Act, 1994. Summary: Issue 1: Demand of Service Tax Based on Statutory Provisions The appellant argued that the demand of Service Tax, whether based on the statutory provisions prevailing prior to 01.07.2012 or post 01.07.2012, is not sustainable. The adjudicating order confirmed the demand based on provisions effective from 01.07.2012, which was beyond the scope of the show cause notice. The Tribunal held that the adjudication order cannot travel beyond the show cause notice, making the demand unsustainable. Issue 2: Definition of "Club or Association" Service The appellant, a registered cooperative society under the Gujarat Cooperative Societies Act, 1961, argued that it is excluded from the definition of "club or association" under sub clause (zzze) of clause (105) of Section 65 of the Finance Act, 1994. The Tribunal agreed, stating that the appellant falls under the exclusion provided for bodies established by law. Issue 3: Doctrine of Mutuality The appellant contended that based on the doctrine of mutuality, there is no provision of service by an association to its members. The Tribunal cited the Supreme Court's judgment in the case of State of West Bengal Vs. Calcutta Club Ltd., which held that no service tax is chargeable in cases where the principle of mutuality applies, including post 01.07.2012. Issue 4: Maintenance Deposits The appellant argued that maintenance deposits, being refundable, should not be treated as consideration for services. The Tribunal found that these deposits were indeed refundable and thus not chargeable to Service Tax, relying on various judgments supporting this view. Issue 5: Extended Period Under Section 73(1) The appellant claimed that there was no suppression of facts or mala fide intention, and thus the extended period for demand was not invocable. The Tribunal agreed, noting the ongoing legal disputes and favorable judgments for assessees, concluding that the extended period was not applicable. Conclusion: The Tribunal set aside the impugned order, ruling that the Service Tax demand was not sustainable on multiple grounds, including the doctrine of mutuality, the exclusion of cooperative societies from the definition of "club or association," and the improper invocation of the extended period. The appeal was allowed with consequential relief.
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