2006 (11) TMI 19 - AT - Service Tax

Charitable trust exempt from service tax as 'Mandap Keepers' for swimming activities.

BREACH CANDY SWIMMING BATH TRUST Versus COMMR. OF C. EX., MUMBAI-I

The trust, primarily established for charitable purposes related to promoting swimming activities, was found not liable for service tax as 'Mandap ... Demand(Service tax)-Mandap Keeper providing service of salt water swimming bath –This were held charitable, so that no service tax appellant were liable to pay Issues involved:Whether the appellants are liable to pay service tax as 'Mandap Keepers' under Section 65(67) of the Finance Act, 1994 for providing services of salt water swimming bath and letting out premises for events.Analysis:The counsel for the appellants argued that the relationship between the trust and its members does not constitute a client-professional relationship as required under the definition of taxable service for Mandap Keepers. They emphasized that the members engaging the premises cannot be considered clients, as the word 'client' has a specific meaning in the Act. The principle of mutuality was also highlighted, citing various court decisions supporting the concept in the context of clubs and trusts, even though those decisions were related to the Income-tax Act. The counsel further contended that the trust, being a charitable entity, does not operate for profit, and penalties for any alleged evasion are unwarranted.The counsel referenced a specific case where a club was held not liable for service tax as a 'Mandap Keeper,' emphasizing that the proposed Finance Bill of 2005 excluded clubs or associations from the definition of 'Mandap Keeper.' This exclusion, according to the counsel, indicated that the original intent of the legislation was not to cover clubs or trusts providing services to their members. The Revenue department, represented by the JDR, upheld the initial order.After considering the arguments and case laws presented by the appellant's counsel, it was concluded that the trust was established for charitable purposes, primarily to promote swimming activities, and not for commercial gain. Drawing parallels with previous court decisions regarding clubs and associations, it was determined that the activities in question did not attract service tax liability. The judgment set aside the impugned order and allowed the appeal filed by the appellant.In conclusion, the judgment focused on the nature of the relationship between the trust and its members, the charitable purpose of the trust, and the exclusion of clubs from the definition of 'Mandap Keeper' under the Finance Act. The principle of mutuality and past court decisions played a significant role in determining the non-liability of the appellants for service tax in this case.