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TMI Blog2018 (6) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... STAT NEW DELHI] - The Ld counsel for appellant has argued that in the case of FICCI, the Tribunal after examining the definition of Club and Association Service has held that Electronic and Computer Software Export Promotion Council would fall under the exclusionary clause (i) of Section 65(25a) of the Act. Section 65(25a) of the Act defines Club or Association - Held that:- The ratio of this decision squarely applies to the instant case. The appellants are identically placed organization. The facts in the case of Federation of Indian Chambers of Commerce & Industries squarely apply to the instant case, Thus no demand can be made against the appellant under the head of "Club or Association" service - appeal allowed. Technical Inspection and Certification Services - services provided by the appellant in respect of issuing Kimberley Process Certificate - Held that:- It is seen that the duty of issuing the KP cerificates has been expressly and exclusively, by law given to the appellant. The appellants are a body created under the law. In these circumstances it cannot be denied that the issue of KP is a mandatory and statutory function and the benefit of the circular cannot be denied t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition Services, Business Auxiliary Service, convention Services, Intellectual Property Services, Membership of Club or Association Services, Renting of Immovable Property Services and Sale of space or time for advertisement services etc. During the scrutiny of records maintained by the appellant, Revenue issued two show-cause notices demanding Service Tax on the following services:- (i) Technical Inspection and Certification Services, (ii) Membership of Club & Association Services, (iii) Business Exhibition Service (iv) Business Auxiliary Services, 2.1 Learned Counsel pointed out that while issuing Kimberley Process Certificate (KP Certificate in short), the appellants are no carrying out any inspection or examination of goods or process or material. The KP certificate is issued to various exporters/ importers of Gem & Jewellery to certify the product being exported and the same is issued on the basis of documents and information furnished by the applicant for the issue of KP certificate. He argued that the said certification process does fall under the category of Technical Inspection and Certification Services. He further argued that the service provided on export of goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertake to promotional activities by organizing international jewellery shows, sending and hosting trade delegation, and sustained image building exercises through advertisements abroad, publications and audio-visuals. The appellant also organizes 'India Pavilion' at major international trade exhibitions. Learned Counsel relies on the decision in the case of Federation of Indian Chambers of Commerce & Industries (FICCI) - 2015 (38) STR 529 (Tri-Del), wherein the Tribunal after examining the definition of Club and Association Service has held that Electronic and Computer Software Export Promotion Council would fall under the exclusionary clause (i) of Section 65(25a) of the Act. Section 65(25a) of the Act defines Club or Association and clause (i) excludes from its purview as body'established' or 'constituted' by or any other law for the time being in force. It has been argued that appellant, just like ECSEPC are a body constituted in the EXIM Policy. Thus, the decision of Tribunal in the case of FICCI (supra) squarely applies to the appellant's case. He further pointed out that the services provided by the appellant to the respective purpose are not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. He argued that the amount collected from the clients is in the nature of reimbursement of expenditure of cost incurred by them as per agent of exhibitor. He further argued that the Council had bona fide belief that they were discharging the tax liability bonafidely and therefore, penalty under Sections 76 and 77 cannot be imposed. 3. Learned AR for the Revenue argued that the appellant had not taken the above grounds before the lower authority and therefore, they are precluded from raising the same at the appellate stage. He argued that the appellant had never challenged before the lower appellate authority the classification of service provided by them to its members. He pointed out that the impugned order correctly holds that the appellants are not covered by the exclusionary clause (iii) of section 65(25a) of the Finance Act, 1994. He submitted that the activities of the appellant were exempted by Notification No. 16/2009 from 7.7.2009 to 31.3.2010. He argued that in case the activities of the appellant were to be considered charitable in nature, then there was no need to exempt these services. He argued that the fact that the Govt. has granted exemption to the appellant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? (ii) Whether the judgment of this Court in Young Men's Indian Association (supra) still holds the field even after the 46th amendment of the Constitution of India; and whether the decisions in Cosmopolitan Club (supra) and FatehMaidan Club (supra) which remitted the matter applying the doctrine of mutuality after the constitutional amendment can be treated to be stating the correct principle of law ? (iii) Whether the 46th amendment to the Constitution, by deeming fiction provides that provision of food and beverages by the incorporated clubs to its permanent members constitute sale thereby holding the same to be liable to sales tax? In view of the same, all the judgments passed on the basis of Mutuality, based on the Hon'ble Supreme Court's judgment in the case of Young Men's Indian Association, are in jeopardy. These judgments which were to be relied on the same cannot be made the basis for setting aside the taxability of the service at this stage. 3.3 He further argued that the Legislature has power to enact law and to include deeming provision under the taxing statute. He pointed out that in certain cases, labelling or relabeling of containers or repacking fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of Business Auxiliary Service, the amount collected from the Indian clients to book the stalls in foreign exhibitions, which is paid by the appellant is sought to be excluded from the gross value of the taxable service. He argued that the expenses incurred are an integral part of the service provided by the appellant, 3.5 Learned AR relied on the decision of the Larger Bench of the Tribunal in the case of Bhagvathy Traders reported in 2011(24) STR 290 (Tri-LB) to assert that the claim of reimbursement towards expenses like rent for premises, telephone charges, stationery charges, etc. cannot be permitted as reimbursable expenses. 3.6 Learned AR relied on sub-rule (2) of the Service Tax Determination of Value Rules 2006, wherein expenditure or cost incurred by the service provided as a pure agent of the recipient of service is excludible subject to the specific conditions. He argued that nothing has been brought on record by the appellant to establish that the respondent of service is liable to make these payments. In these circumstances, the said expenditure cannot be considered as reimbursable expenditure and not includible in the assessable value. 4.1 We have gone t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Legislature has power to enact law and to include deeming provision under the taxing statute, like that in certain cases, labelling or relabelling of containers or repacking from bulk packs to retail packs etc. have been treated as manufacture by virtue of deeming provision. He pointed out that the legislature in its wisdom has made the services provided by clubs and associations to its members taxable. In view of an express provision in the Finance Act 1994, to tax such transactions,prima facie the principal of mutuality cannot be invoked. However the matter being subjudice before the Hon Apex Court in the case of State of West Bengal &Ors. Vs. Calcutta Club Ltd. no final view can be taken at this stage on the issue regarding services provided by the appellant to its members. 4.2 The next ground to challange the demand under Membership of Club & Association Services is decision of tribunal in the case of Federation of Indian Chambers of Commerce & Industries (FICCI) - 2015 (38) STR 529 (Tri-Del. The Ld counsel for appellant has argued that in the case of Federation of Indian Chambers of Commerce & Industries (FICCI), the Tribunal after examining the definition of Club ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Boards is set out in the Appendix to the FTP, stipulating EPC to be an Authority for issuing RCMC; and that ECSEPC is listed and recognized as an EPC, in the Appendix, In Dr. Indramani Pyarelal Gupta v. W. R. Nathu and Ors. - AIR 1963 SC 274, inter alia the validity of bye-law 52AA of the bye-laws of the East India Cotton Association as amended/substituted by the Central Government, exercising powers conferred by Section 12 of the Forward Markets Regulation Act, 1952 was in issue. On behalf of the appellant therein it was contended that the function or the duty cast upon it by the amended bye-law 52AA was not such as could be assigned by the Forward Markets Commission, by or under the Act. The Constitution Bench was therefore required to consider the scope of "by or under" and the extent and nature of the duties assigned to the FMC by the Act. The Constitution Bench (per majority speaking through N. Rajagopala Ayyangar, J. K. Subba Rao J. dissenting) explained that the expression "under the Act" signifies what is not directly to be found in the statute itself but is conferred by virtue of powers enabling this to be done; in other words bylaws made by law makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(1) enacts : "11. (1) Any recognized association may, subject to the previous approval of the Central Government make bye-laws for the regulation and control of forward contracts', and sub-section (2) enumerates the matters in respect of which bye-laws might make provision. Subsection (3) refers to the bye-laws as these made under this section and the provisions of sub-section (4) puts this matter beyond doubt by enacting : "11 (4) Any bye-laws made under this section shall be subject to such conditions in regard to previous publication as may be prescribed, and when approved the Central Government, shall be published in the Gazette of India and also in the Official Gazette of State in which the principle office of the recognized association is situate; ……………………………………………" Section 12 under which the impugned bye-law was made states in subsection (2) : "12(2) where in pursuance of this section, any bye-laws have been made or amended, the bye-laws so made or amended shall be published in the Gazette of India and also in the Official Gazette o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; the words "under the Act" would comprehend powers which might be conferred under "bye-law" as well as those under "rules" we are unable to appreciate the line of reasoning by which powers conferred by bye-laws have to be excluded because of the specific reference to powers conferred by "rules". Undoubtedly, there is some little tautology in other use of the expression "as may be prescribed" after the comprehensive reference to the Dowers conferred 'under the Act" but in order merely to avoid redundancy you cannot adopt a rule of construction which cuts down the amplitude of the words used except, of course to avoid the redundancy. Thus the utmost that could be that though normally and in their ordinary signification the words "under the Act" would include both "rules" framed under Section 28 as well as "bye-law" under Section 11 or 12, the reference to "rules" might be eliminated as Tautologous since they have been specifically provided by the words that follow. But beyond that to claim that for the reason that it is redundant as to a part, the whole content of the words "unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Central Government. The issue therefore was whether the requirement of clause (i) of section 4A(2) of the Companies Act, namely of IFCI Limited being established or constituted by or under any Central Act, were satisfied The High Court explained that the expression "established" or "constituted under" has a different connotation from the expression "established" or "constituted by"; that the word "under" is wider in its sweep than the word "by". Drawing guidance from the principles postulated by the Supreme Court in R.C. Mitter & Sons v. CIT - AIR 1959 SC 868, the High Court ruled that the expression "constituted under any Central Act would have reference to institutions conceived or contemplated under a Central Act though subsequently clothed in legal form by registration such as under the Companies Act. The Court went on to explain that the word "constituted" would also refer to giving legal or official form or shape to and thus an institution constituted by or under any Central Act would have reference to a company which though formed and registered subsequently under the Companies Act, was concei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liberally interpreted to include cases where an organisation or a body is already set up by virtue of a Notification or order passed by an appropriate Government or a statutory body is conferred and given status of 'authority' or an "institution of self-government"; the words "established" or "constituted" have to be so read as to effectuate the legislative intent in Section 2(h) of the Act, observed the Court. The Court went on to explain that the word "under" would include establishment or constitution under power or authority conferred on an authority/body by an enactment, Notification/order; that a Notification or order could also be issued in exercise of Executive power and be a result of power conferred by legislation or even by subordinate legislation on an authority/body. As earlier noticed, the definition of "Club or Association" excludes from its ambit any body established or constituted by or under a law for the time being in force. The appellant - ECSEPC though a body registered under the Societies Registration Act, 1860, is notified to be an EPC and is enumerated to be so qua the Appendix to the FTP; the appellant is ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i.e. an agency constituted/set up by government) perform certain functions/ duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as 'provision of service' for the purpose of levy of service tax. 2.The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve activity carried out by the Chambers, involving certification of the national character of the export goods, squarely falls under 'technical inspection or certification', as defined in section 65(108) of Finance Act, 1994. In certain cases, when COOC is issued with reference to national character of the goods upon examination of the origin of their composition, requirements of the definition provided in section 65(108) of Finance Act, 1994 is clearly fulfilled. A chamber or EPC or Trade Association which issues COOC acts as a technical inspection and certification agency, and issuance of COOC attracts service tax under 'technical inspection and certification agency' service, which is a specific description when compared to a general description like 'club or association service', by the application of the principles of classification provided in section 65A of Finance Act, 1994. 4. Service tax paid on 'technical inspection and certification' of export goods is eligible for refund under Notification 17/2009-S.T., dated 7th July, 2009. It is seen that this circular merely decides the classification of the service. It does not specifically deals with the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buyer of the goods and recovers the said amount from the buyer of the goods. The following test prescribed in the sub-rule (2) of the Service Tax Determination of Value Rules 2006, are very specific: - (i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured; (ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service; (iii) the recipient of service is liable to make payment to the third party; (iv) the recipient of service authorises the service provider to make payment on his behalf; (v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party; (vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service; (vii) the service provider recovers from the recipient of service only such an-lount as has been paid by him to the third party; and (viii) the goods or ser ..... 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