2024 (12) TMI 1140 - AT - Service Tax

Classification of services - service of conduction seminars and charging delegate fees - Convention Services or Club or Association Services? - Applicability of the principle of mutuality to the services provided by the appellant - HELD THAT - The appellant is registered under Club or Association service which specifically excludes any person or body of persons engaged in the activities of Trade Unions. In the instant case, it is seen that the seminars and workshops being held by the appellant is for the benefit of their members only, as is obvious from the nature of these seminars. It is also noted that the appellant is an association of its members, and therefore no service tax can be charged on service to one self, as per the principle of mutuality. Reliance pplaced in 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 it was held that the definition of club or association contained in Section 65(25a) makes it plain that any person or body of persons providing services for a subscription or any other amount to its members would be within the tax net. However, what is of importance is that anybody established or constituted by or under any law for the time being in force, is not included. Consequently, the Hon ble Supreme Court concluded that companies and cooperative societies and like which are registered under the respective Acts, can certainly be said to be constituted under those Acts, and therefore incorporated clubs or associations constituted prior to 1st July, 2012 are not included in the service tax net. In the instant case, the appellant was an industry specific body of persons registered under the Trade Union Act, 1926. The main objectives, inter alia, to regulate the relationship between workmen and employers; to promote and regulate and consider all questions affecting them, make representations to local/State/Central government authorities on any matter connected them etc., falling within the parameters defined by the Hon ble Supreme Court. Consequently, the holding of seminars/workshops by the appellant does not fall within the ambit of Convention Services on the basis of the principle of mutuality. Consequently, the charging of Delegation Fee is not leviable to service tax. Thus, the demand of service tax on Convention service is liable to be set aside. Once the principle of mutuality is accepted, then all other activities carried out by the appellant on which demand has been confirmed is also set-aside - the impugned order is set aside - appeal allowed.

Issues Involved:

1. Classification of services provided by the appellant: Whether the services fall under 'Convention Services' or 'Club or Association Services'.
2. Applicability of the principle of mutuality to the services provided by the appellant.
3. Taxability of income from sale of publications and newsletters.
4. Exemption under the Trade Union Act, 1926.
5. Extended period of limitation for demand of service tax.

Detailed Analysis:

1. Classification of Services:

The primary issue was whether the seminars organized by the appellant fall under 'Convention Services' or 'Club or Association Services'. The appellant argued that the seminars were open to the general public upon payment of a fee, thus not fitting the definition of 'Convention Services', which are not open to the general public. The department contended that the seminars were restricted to those who paid the delegation fee, thus falling under 'Convention Services'. The tribunal concluded that since the appellant is registered under 'Club or Association Services' and the seminars were for the benefit of members, the services should not be classified as 'Convention Services'. The principle of mutuality further supported this classification, as services to members are not taxable.

2. Principle of Mutuality:

The appellant argued that as an association formed on the principle of mutuality, it is not a separate entity from its members, and transactions with members should not be taxable. The tribunal agreed, referencing the Supreme Court's decision in the Calcutta Club case, which held that services provided by a club to its members are not taxable due to the principle of mutuality. The tribunal noted that the appellant's activities were for the benefit of its members and not for commercial purposes, thus supporting the principle of mutuality.

3. Taxability of Publications and Newsletters:

The appellant contended that income from the sale of publications and newsletters should not be taxed under 'Club or Association Services' as it falls under the principle of mutuality. Additionally, the value of goods sold should not be included in the taxable value of services. The tribunal agreed, noting that the department had already deducted the value of publications from the taxable value in subsequent years and that the sale of goods is subject to VAT, not service tax.

4. Exemption under Trade Union Act:

The appellant, being registered under the Trade Union Act, claimed exemption from service tax under 'Club or Association Services'. The tribunal recognized this exemption, noting that the appellant's objectives aligned with those of a trade union, thus excluding it from the service tax net as per the definition in the Finance Act, 1994.

5. Extended Period of Limitation:

The appellant argued against the invocation of the extended period for demanding service tax, citing that there was no suppression of facts as all information was recorded in public documents accessible to revenue authorities. The tribunal agreed, referencing case law that supports non-invocation of the extended period in cases of ambiguity or prevalent differing views on taxability.

Conclusion:

The tribunal set aside the impugned order, restoring the original order that dropped the demand for service tax. The tribunal held that the services provided by the appellant fall under the principle of mutuality and are not taxable under 'Convention Services'. The appellant's activities were aligned with the objectives of a trade union, exempting it from service tax under 'Club or Association Services'. The appeal was allowed, emphasizing the importance of the principle of mutuality and the appellant's status as a trade union.

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