2023 (10) TMI 809 - AT - Service Tax

Doctrine of mutuality of interest - Manpower Supply service - appellant is an association of the persons/firms providing stevedore services in Visakhapatnam Port to its members - Invocation of extended period of limitation - HELD THAT - The Association has been formed for the mutual benefit of its member, who are stevedores operating in the Visakhapatnam Port Area and therefore the service provided by the Association to its member cannot be treated as transaction between two different persons in order to attract levy of Service tax, during the material period. This issue is no longer res integra as per the decision of the Hon ble Supreme court in the case of STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. 2019 (10) TMI 160 - SUPREME COURT , wherein in paras 71 to 73, it was held It is, thus, clear that companies and cooperative societies which are registered under the respective Acts, can certainly be said to be constituted under those Acts. This being the case, we accept the argument on behalf of the respondents that incorporated clubs or associations or prior to 1st July, 2012 were not included in the Service Tax net. Admittedly the Appellant Association has been formed by the persons engaged in stevedoring and dock activities. In the very aims and objects, it is mentioned that as the members have been facing difficulties due to renting, behaviour of the labourers and collective bargaining as well as illegal strikes which each individual person engaged in stevedoring is unable to handle at its individual level. Accordingly, feeling the need for a collective concern to deal with workmen or labourers, the people engaged in stevedoring business formed this Association and registered themselves under the Societies Registration Act, 1860 - There is element of mutuality between the Appellant Association and its Members who have formed the Association and subscribed to its capital and also pay annual subscription charges for administrative expenses. Though the Appellant Association is providing the services of Manpower Supply to its members, the same is not taxable on the ground of mutuality. Invocation of extended period of limitation - HELD THAT - The ground of limitation is left open. The demand under Club or Association service is not tenable and thereby set aside - Appeal allowed.

Summary

Issues Involved:
1. Taxability of manpower supply services provided by the Appellant Association under the concept of mutuality.
2. Taxability of membership fees collected under 'Club or Association' services.
3. Applicability of extended period of limitation for demanding Service tax.

Summary of Judgment:

1. Taxability of Manpower Supply Services:
The core issue was whether the services provided by the Appellant Association, an association of persons/firms providing stevedore services, qualify as taxable under 'manpower recruitment or supply agency' services. The Show Cause Notice (SCN) alleged that the Appellant supplied gear boys and deck foremen to its members and raised bills, thus falling under the taxable category of 'manpower recruitment or supply agency' as defined under Section 65(68) of the Finance Act, 1994. The Appellant contended that there was mutuality of interest between the Association and its members, thus exempting them from Service tax. The Tribunal referred to the Supreme Court's decision in State of West Bengal Vs. Calcutta Club Ltd. - 2019 (29) GSTL 545 (SC), which held that services provided by an association to its members do not constitute a taxable service due to mutuality. Consequently, the Tribunal concluded that the manpower supply services provided by the Appellant to its members are not taxable.

2. Taxability of Membership Fees:
The SCN also alleged that the membership fees collected by the Appellant were liable for Service tax under 'Club or Association' services as defined u/s 65(25a) of the Finance Act, 1994. The Appellant argued that the fees were collected to meet administrative expenses and not for any specific service, and due to mutuality, the demand was erroneous. The Tribunal agreed with the Appellant, citing the principle of mutuality and various judicial precedents, including Sports Club of Gujarat vs. UOI and Ranchi Club Limited vs. Chief Commissioner of Central Excise & Service Tax, which held that services provided by a club or association to its members are not taxable. Therefore, the demand under 'Club or Association' services was set aside.

3. Extended Period of Limitation:
The SCN invoked the extended period of limitation, alleging that the Appellant consciously suppressed facts to evade Service tax. The Appellant argued that they operated under a bona fide belief that their services were not taxable due to mutuality and that there was no suppression of facts. The Tribunal noted that the Appellant had been operational since 1959 and their activities were well-known, thus rejecting the charge of suppression. The Tribunal emphasized that the extended period could not be invoked without cogent evidence of suppression. Consequently, the demand for the extended period was not justified.

Conclusion:
The Tribunal set aside the Impugned Order, ruling that the services provided by the Appellant Association to its members were not taxable due to the principle of mutuality. The demands under 'manpower recruitment or supply agency' services and 'Club or Association' services were annulled. The ground of limitation was left open. The appeal was allowed, and the Impugned Order was set aside.