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TMI Blog2022 (5) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... the club is formed for the purpose for mutual benefit of its members. Therefore, any amount paid by the members to the club and the services rendered by the club to its members are self service and cannot be taxed. The fact that the club is incorporated as a separate legal entity makes no difference. There are no good reason not to apply the same principle to the appellant, which is also a cooperative federation of milk unions who are its members. Although the milk unions (district cooperative societies) and the appellant (apex society) are registered under the Cooperative Societies Act of the State and are, therefore, distinct legal entities, the nature of relationship between the appellant and the milk unions continues to that of club to its members. Therefore, no service tax is payable on the services rendered by the appellant to the milk unions. Thus, in view of the judgment of the Constitution Bench of the Supreme Court in Calcutta Club, it has to be held that no service tax was payable by the appellant for the services rendered to its members - the interest on the demand and the penalties imposed also need to be set aside and are set aside - appeal allowed - decided in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er confirming service tax demand of Rs. 6,55,25,588/- along with interest under Section 75 of the Finance Act, 1994. He also imposed penalties under Section 78 and 77 upon the appellant. 4. Aggrieved, the appellant filed the present appeal on the following grounds: (i) No service tax is leviable on services as the appellant is an association of its members and the principle of mutuality applies. Although the appellant is registered as a separate entity under the Rajasthan Cooperative Societies Act, 2001, its members are district cooperative societies and milk unions. Thus, it is akin to club or association which renders service to its own members. It has been held in various case laws that no service tax can be levied on a club or association for the services which it renders to its own members as there is no service provider - service recipient relationship between a club and its members. Reliance was placed on the following decisions: a) State of West Bengal Vs. Calcutta Club Ltd. [ 2019 (29) GSTL 545 (SC) ] ; b) Commissioner of Service Tax, Bangalore Vs. Sobha Developers Ltd. [ 2020-TIOL-904-HC-KAR-ST ] ; c) Ootacamund Club, Ootty Vs. Additional Commissioner, Coim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation.-For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security (iii) As per minutes of meeting of Board of Directors of the RCDF, it was decided to levy service charge to 1.25% on the annual turnover of unions, to provide the following services: (i) Marketing support as per requirement. (ii) Coordination with the state/central government and financial institutions for various schemes; (iii) Finalizing rate contracts for purchase of raw material for cattle feed plants, packing material for milk and milk products and cattle feed etc.; (iv) Assist to plant management, engineering and integrated business planning and related financial analysis (v) Use of SARAS brand; (vi) Development and launching of new products; (vii) MIS system support. (iv) The district milk unions purchase milk and sell milk and milk prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking extended period of limitation and it also renders it liable to penalty. (ix) Penalty under Section 78 is mandatory and there is no provision in law for giving preferential treatment to assessees who are public sector undertakings. 7. We have gone through the records of the case and considered the submissions made by both sides. 8. It is undisputed that the appellant is registered as a cooperative society under the Rajasthan State Cooperative Act, 2001 and the district cooperatives and milk unions are its members. As an apex cooperative society, the appellant is a legal entity by itself. The milk unions are also legal entities by themselves. The milk unions are engaged in purchasing milk, processing it and selling milk and milk products. The appellant is providing various services to support the milk unions in this endeavour and is charging a fee which is called RCDF cess at the rate of 1.25% on the turnover of the milk unions. The question which falls consideration is whether in this factual matrix the services provided by the appellant to its own members (who are also separate legal entities) can be considered as service provided by one entity to another. 9. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy Service Tax in respect of services purportedly provided by the petitioner club to its members, to be ultra vires. Rule is made absolute with no order as to costs. 55 . The appeals that are listed before us concern impugned judgments that have in essence followed these two judgments, insofar as Service Tax that is levied on members clubs is concerned. The vast majority of cases before us concerns members clubs that have been registered as Companies under Section 25 of the Companies Act, or registered cooperative societies under various State Acts, such societies being bodies corporate under the aforesaid Acts. 72 . 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. Shri Dhruv Agarwal laid great emphasis on the judgments in DALCO Engineering Private Limited v. Satish Prabhakar Padhye and Ors. Etc., (2010) 4 SCC 378 (in particular paragraphs 10, 14 and 32 thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by virtue of written documents as also those which may have initially come into existence by oral agreements, but which had subsequently been constituted under written deeds. 73 . It is, thus, clear that companies and cooperative societies which are registered under the respective Acts, can certainly be said to be constituted under those Acts. This being the case, we accept the argument on behalf of the respondents that incorporated clubs or associations or prior to 1st July, 2012 were not included in the Service Tax net. 76 . What has been stated in the present judgment so far as Sales Tax is concerned applies on all fours to Service Tax; as, if the doctrine of agency, trust and mutuality is to be applied qua members clubs, there has to be an activity carried out by one person for another for consideration. We have seen how in the judgment relating to Sales Tax, the fact is that in members clubs there is no sale by one person to another for consideration, as one cannot sell something to oneself. This would apply on all fours when we are to construe the definition of service under Section 65B(44) as well. 77 . However, Explanation 3 has now been incorporated, under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s incorporated as a separate legal entity makes no difference. We find no good reason not to apply the same principle to the appellant, which is also a cooperative federation of milk unions who are its members. Although the milk unions (district cooperative societies) and the appellant (apex society) are registered under the Cooperative Societies Act of the State and are, therefore, distinct legal entities, the nature of relationship between the appellant and the milk unions continues to that of club to its members. Therefore, no service tax is payable on the services rendered by the appellant to the milk unions. 12. Thus, in view of the judgment of the Constitution Bench of the Supreme Court in Calcutta Club, and the decision of the Tribunal in Karnataka Co-operative Milk Producers Federation Limited it has to be held that no service tax was payable by the appellant for the services rendered to its members. 13. Accordingly, the demand confirmed by the impugned order cannot be sustained. The interest on the demand and the penalties imposed also need to be set aside and are set aside. The appeal is, accordingly, allowed and impugned order is set aside with consequential benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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