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TMI Blog2009 (9) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sr. Counsel for Nanavati Nanavati, for the Petitioner. S/Shri Y.N. Ravani, Standing Counsel and R.J. Oza, for the Respondent. [Judgment per: K.S. Jhaveri, J. (Oral)]. - Whether the petitioners, who are basically engaged in promoting different sports, are liable to pay service tax on the services rendered by it to its members is the issue that has come up for our consideration in these petitions. 2. The petitioners are companies registered under the provisions of the Companies Act, 1956. The main object of the petitioners is to encourage and promote the game of cricket and other different games and sports in the State of Gujarat and to provide facilities and infrastructure in connection with such games, sports and for other purpose. The petitioner is a members club without any shareholders and makes available facilities exclusively for its members and their guests and recoups expenses. The petitioner is therefore, a mutual undertaking which does not earn any profit as understood in commercial parlance and does not carry on any trade or business. In legal parlance, the element of mutuality in the affairs and dealing of the club exists. The petitioner club is having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Calcutta High Court in the case of Dalhousie Institute v. Assistant Commissioner, Service Tax Cell reported in 2005 (180) E.L.T. 18 (Cal.), wherein, it has been held that the members of a club are allowed exclusively to participate in the services rendered by the club and its fund and that providing such facility to the members by its club cannot be termed to be a letting-out nor the members using the facility of any portion of the premises for any function can be termed to be a client. Similar principle is also laid down in another decision of the Calcutta High Court in the case of Saturday Club Ltd. v. Asst. Commissioner, Service Tax Cell, Calcutta reported in 2005 (180) E.L.T. 437 (Cal.). 6.3 Learned Sr. counsel has further submitted that keeping in mind the principle laid down in the aforesaid decisions, the Union Government has also amended the Finance Act, by introducing the Finance (Amendment) Act, 2005, which came into force w.e.f. 16.06.2005. Therefore, the submissions canvassed by the petitioners have been indirectly endorsed by the Union Government as well. Hence, the impugned action of the respondents is illegal and bad in the eyes of law and deserves to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and only supply of food and drinks and other articles for human consumption, is deemed to be sale or purchase of goods. 8. Having considered the rival submissions raised by the respective parties, the point is whether going by the definition of 'mandap' and 'mandap keeper', as defined in the Finance Act, 1994, the petitioner/club can be made liable to pay service tax or not. Service Tax was introduced in India vide the Finance Act, 1994. It is legislated by the Parliament under the residuary entry, i.e. Entry 97 of List I of the Seventh Schedule of the Constitution of India. It is an indirect tax and is to be paid on all the services notified by the Union Government for the said purpose. The said tax is on the service and not on the service provider. 9. However, under Section 68 of the Finance Act, 1994, as amended by the Finance Act, 1997 the service provider is expected to collect tax from the client utilizing its services. Amongst other services, the Finance Act, 1997 made the services rendered by mandap keepers liable to service tax. 10. Looking to the facts of the case, a reference to some of the amended provisions of Section 65 of the Finance Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mporary parting with the possession to a third party for consideration. Thus, it is obvious that legislature intended this transaction must be for commercial purposes. Again, the words, 'provided to a client' used in the definition of 'taxable service' necessarily presupposes that the 'mandap keeper' must be letting out an immoveable property to any person on consideration. 13. Now, it has to be examined in the context of the aforesaid reading and meaning of the three definitions as to whether the petitioner/Club does come within the purview of the same or not. One of the criteria is that such service must be provided to a client. If such service is not provided to a client, then it would not attract levy under the provisions of the Act. Hence, the question that is now required to be considered by this Court is as to whether the members of the clubs fall under the definition of client or not so as to attract levy of tax under the provisions of the Act. 14. To decide the same, we shall refer to the meaning of the term client as defined in some of the leading dictionaries. In Concise Oxford Dictionary, the word client is defined as a person using the ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may raise a bill along with the service tax upon the club and the club as an agent of the members, is supposed to pay the same. 17. The authority cannot impose service tax twice once upon the people carrying out the business of mandap keeper and then upon the members club for the purpose of using the space for constructing or using it as a mandap. Therefore, apart from any other question, the possibility of double taxation cannot be ruled out. 18. If, in a given case, a person, being an owner of a house, allows another to occupy the house for the purpose of carrying out any function in that house, then it will not be construed as transfer of property. But, if such person calls upon a third party, a mandap keeper, to construct a mandap in such house, then in that case, such mandap keeper can be able to raise bill upon the user of the premises along with the service tax. Therefore, it cannot be held that the members club is covered by the Finance Act, 1994 for imposition of service tax to use its space as mandap. 19. For the applicability of service tax, there should be existence of two sides/entities, viz. transaction as against consideration. In a members club there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be letting-out nor the members of the club using the facility/s or any portion of the premises for any function can be termed to be client/s. The services rendered by any person to his client pre-suppose the element of commerciality and obviously this transaction must be involved with a third party, as opposed to the members of the Club. 24. Merely because the clubs are exempted from the levy of income-tax, the respondents could not impose service tax, unless and until the same is permissible under the law. It has now become an elementary principle of law that the question of estoppel cannot arise nor the principle thereof can be applied as against the provisions of law. If it is found that a particular statute is not applicable to any person/s, the action taken by mistake cannot operate as an estoppel or acquiescence. Therefore, the entire proceedings against the clubs about the applicability of service tax are required to be quashed and set aside. 25. In taxation matters, where a High Court is concerned with the interpretation of an all India statute, it should be a practice and policy that if one High Court has interpreted a provision or section of a taxing statute w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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