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2025 (4) TMI 105 - AT - Service TaxLevy of service tax - Club or Association Services - doctrine of mutuality - entities involved being incorporated societies fall under the ambit of service tax post the statutory amendment on 1st July 2012 or not - HELD THAT - The situation as far as Service Tax is concerned becomes clear as indicated in Clause 44 of Section 65B Explanation 3. It clearly brings out that the statutory provision by inserting an explanation brought out as an exception which indicates that the service will be considered from one person to another as consideration if it is in relation to unincorporated association or body of persons as the case may be and the member and club thereof shall be treated as different persons. The issue itself is covered post amendment and has been dealt with by the Hon ble Supreme Corut in the case of State of West Bengal Vs. Calcutta Club Ltd. ors. 2019 (10) TMI 160 - SUPREME COURT in second round of litigation by the Clubs post amendment and has been even followed in the matter decided by this bench in the matter of Sumel Business Park 3 Co-Operative Service Society Ltd. Vs. C.S.T- Service Tax- Ahmedabad 2023 (10) TMI 740 - CESTAT AHMEDABAD . Conclusion - The appellants being incorporated entities are not liable for service tax for the period post-1st July 2012 as the statutory provision explicitly exempts them. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Applicability of Service Tax Post-Amendment Relevant legal framework and precedents: The legal framework revolves around Clause 44 of Section 65B Explanation 3 of the Finance Act, 1994, which defines "service" and outlines exceptions. The doctrine of mutuality, as interpreted in the case of State of West Bengal Vs. Calcutta Club Ltd., plays a crucial role in determining the tax liability of clubs and associations. Court's interpretation and reasoning: The Tribunal interpreted that the statute, specifically Clause 44, explicitly provides that only unincorporated associations or bodies of persons are to be treated as distinct persons for service tax purposes. Therefore, incorporated entities like the appellants should not be subject to service tax post-amendment. Key evidence and findings: The Tribunal found that the appellants were incorporated entities, thus falling outside the purview of the exception meant for unincorporated associations. The Tribunal also noted that the statutory provisions incorporate the doctrine of mutuality with an explicit exception for unincorporated entities. Application of law to facts: The Tribunal applied the statutory provision to the facts, concluding that since the appellants were incorporated, they should not be liable for service tax post-1st July 2012. Treatment of competing arguments: The Tribunal rejected the argument presented by the Learned AR, which relied on income tax precedents and the liquidation of mutuality due to financial transactions. The Tribunal deemed these arguments irrelevant to the service tax context. Conclusions: The Tribunal concluded that the appellants, being incorporated entities, are not liable for service tax post-amendment, as the statutory provision clearly exempts them. 2. Applicability of the Doctrine of Mutuality Relevant legal framework and precedents: The doctrine of mutuality, as discussed in the Supreme Court's decision in State of West Bengal Vs. Calcutta Club Ltd., asserts that transactions between a club and its members are not subject to tax due to the mutual nature of the relationship. Court's interpretation and reasoning: The Tribunal acknowledged the doctrine of mutuality as incorporated into the statutory framework, with the exception for unincorporated entities. The Tribunal emphasized that the statutory provision prevails over judicial decisions unless explicitly overruled by a higher authority. Key evidence and findings: The Tribunal found that the appellants were incorporated societies, and thus, the mutuality principle as incorporated in the statute applies, exempting them from service tax. Application of law to facts: The Tribunal applied the doctrine of mutuality as incorporated in the statutory provision to the facts, reinforcing the conclusion that the appellants are exempt from service tax. Treatment of competing arguments: The Tribunal dismissed the argument that mutuality is liquidated by financial transactions, as this was deemed irrelevant to the service tax context and specific to income tax considerations. Conclusions: The Tribunal concluded that the doctrine of mutuality, as incorporated in the statutory provision, exempts the appellants from service tax liability. SIGNIFICANT HOLDINGS Core principles established: The Tribunal established that the statutory provision under Clause 44 of Section 65B Explanation 3 of the Finance Act, 1994, prevails in determining service tax liability, explicitly exempting incorporated entities from such liability post-amendment. Final determinations on each issue: The Tribunal determined that the appellants, being incorporated entities, are not liable for service tax for the period post-1st July 2012, as the statutory provision explicitly exempts them. The appeals were allowed, and consequential relief was granted.
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