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2025 (3) TMI 968 - AT - Service TaxLevy of service tax - Business Exhibition Services - business exhibitions conducted by the appellant - doctrine of mutuality - intellectual property service - income received by the appellant under a memorandum of understanding for conducting property - club or association services - membership fees and subscription fees collected by the appellant. Levy of service tax - Business Exhibition Services - business exhibitions conducted by the appellant - HELD THAT - Though the exhibition conducted by the appellant is squarely falling under the category of service tax as confirmed by the adjudicating authority since the participants for the exhibition were only the members and in the absence of any evidence regarding participation of any other person it cannot be considered as exhibition as provided and there is no service provided to anyone else in this regard. Regarding the contribution collected from the members since it is collected for the benefit of the members of the association the decision in the case of State of West Bengal Vs. Calcutta club Ltd. 2019 (10) TMI 160 - SUPREME COURT squarely covers the issue and hence the demand is unsustainable. Levy of service tax - intellectual property service - income received by the appellant under a memorandum of understanding for conducting property - HELD THAT - In the absence of any legally protected intellectual property the agreement entered by the referred in the impugned order cannot be classified as falling under the category of intellectual property service as per section 65(55b) of the Finance Act 1994. Levy of service tax - club or association services - membership fees and subscription fees collected by the appellant - HELD THAT - The said demand is also unsustainable since the doctrine of mutuality continues to be applicable to incorporated and unincorporated members clubs even after the 46th Amendment adding Article 366(29A) to the Constitution of India as per the judgment of the Hon ble Supreme Court in the matter of State of West Bengal Vs. Calcutta club Ltd. 2019 (10) TMI 160 - SUPREME COURT . Hence demand confirmed as per impugned order under club or association is also unsustainable. Penalty under section 78 of the Finance Act 1994 - HELD THAT - Since the demand as per the impugned order itself is held as unsustainable the appeal filed by the department is dismissed. Conclusion - The demands for service tax under the categories of business exhibition service intellectual property service and club or association service are deemed unsustainable. The appeal filed by the Revenue regarding penalties is dismissed as the underlying service tax demands are found to be unsustainable. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The primary issues addressed in this judgment revolve around the sustainability of service tax demands on the appellant association under three categories: business exhibition service, intellectual property service, and club or association service. The core legal questions considered include:
2. ISSUE-WISE DETAILED ANALYSIS Business Exhibition Service: The appellant contends that the exhibitions and property shows are conducted for the benefit of its members, thereby invoking the doctrine of mutuality, which exempts such activities from being classified as taxable services. The relevant legal framework includes Section 65 (105) of the Finance Act, 1994, which defines taxable services, and the doctrine of mutuality as upheld in State of West Bengal Vs. Calcutta Club Ltd. The Court interpreted that for a service to be taxable, there must be a service provider and a recipient. Since the exhibitions were conducted solely for the members, no service was provided to an external party. The Court found that the exhibitions were not taxable as they did not constitute a service to any person other than the members. Intellectual Property Service: The adjudication authority had confirmed a levy of service tax on the appellant under the intellectual property service category. The appellant argued that the transaction did not involve the transfer of any legally protected intellectual property rights as defined under Section 65 (105)(zzr) and Section 65 (55a) of the Finance Act, 1994. The Court considered the memorandum of understanding and concluded that the transaction did not involve any transfer of intellectual property rights recognized under Indian law. The Court relied on precedents such as Catapro Technologies Vs. C.EX. Nashik and ABB Limited Vs. C.Ex. & S.T, LTU, which clarified that for a service to be taxable under intellectual property service, the service provider must hold enforceable intellectual property rights. The absence of such rights in this case rendered the demand unsustainable. Club or Association Service: The appellant argued that the membership fees collected were not subject to service tax due to the doctrine of mutuality. The Court referred to the definition of "club or association" under Sections 65(25a) and 65(25aa) of the Finance Act, 1994, and the Supreme Court's decision in State of West Bengal Vs. Calcutta Club Ltd., which upheld the doctrine of mutuality for incorporated and unincorporated members' clubs. The Court concluded that the doctrine of mutuality applied, and the membership fees collected were not subject to service tax. The appellant's association, being constituted under the Travancore Cochin Literacy, Scientific and Charitable Societies (Registration) Act, 1955, was not included in the tax net. 3. SIGNIFICANT HOLDINGS The Court's significant holdings include:
Verbatim Quotes of Crucial Legal Reasoning: "The doctrine of mutuality continues to be applicable to incorporated and unincorporated members' clubs after the 46th Amendment adding Article 366(29A) to the Constitution of India." "Since the participants for the exhibition were only the members and in the absence of any evidence regarding participation of any other person, it cannot be considered as exhibition as provided, and there is no service provided to anyone else in this regard." Final Determinations: The appeal filed by the assessee is allowed, and the demands for service tax under the categories of business exhibition service, intellectual property service, and club or association service are deemed unsustainable. The appeal filed by the Revenue regarding penalties is dismissed, as the underlying service tax demands were found to be unsustainable.
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