2011 (3) TMI 612 - AT - Service Tax

Appellate tribunal upholds service tax demand against non-profit for health club services

The appellate tribunal upheld the demand for service tax against the appellant, a non-profit organization providing health club/sports activities, based ... Stay - The appellant clubs have maintained that it is a non profit organization and certificate has been issued by Assistant Charity Commissioner and therefore it has to be treated as a charitable trust - it cannot be said that the appellants have been able to make out a strong prima-facie case in their favour. Further as already observed, the services provided by the appellants are clearly covered by the definition of the taxable services under Section 65(25)(a) - Stay application allowed partly. Issues:1. Whether the appellant, a non-profit organization providing health club/sports activities to its members, is liable to pay service tax.2. Whether the services provided by the appellant fall under the definition of taxable services.3. Whether the appellant qualifies as a club or association under the relevant legal provisions.4. Whether the appellant is required to make a pre-deposit of the service tax demanded.Analysis:1. The appellant, a non-profit organization providing health club/sports activities, contested the demand for service tax and penalty imposed under Section 78 of the Finance Act, 1994. The appellant argued that it should be treated as a charitable trust based on a certificate issued by the Assistant Charity Commissioner. However, the tribunal found that the services provided by the appellant, including health club facilities, sports activities, renting grounds for events, and organizing tournaments, are chargeable services and do not qualify for exemption. The tribunal noted that previous decisions cited by the appellant were related to stay applications and did not establish a strong prima facie case in their favor.2. The tribunal examined the definition of taxable services under Section 65(25)(a), which includes 'club or association' providing services to its members for a subscription or any other amount. The definition excludes bodies established by law, trade unions, activities promoting public service, and press or media associations. The tribunal concluded that the appellant falls under the definition of a club or association and its activities are covered by taxable services. Despite the appellant's argument that services provided to members should not be considered as separate transactions, the tribunal held that the appellant is liable to pay service tax.3. The tribunal considered the appellant's financial situation and directed them to deposit 25% of the service tax demanded within twelve weeks. The tribunal waived the pre-deposit requirement for the remaining amount, granting a stay against the recovery of the balance dues subject to the initial deposit. The tribunal emphasized the lack of evidence showing acute financial difficulty and upheld the decision that the appellant is liable to pay the service tax as a club or association providing taxable services to its members.In conclusion, the appellate tribunal upheld the demand for service tax against the appellant, a non-profit organization providing health club/sports activities, based on the definition of taxable services and the appellant's classification as a club or association under the relevant legal provisions. The tribunal directed the appellant to make a partial deposit of the service tax demanded and granted a stay against the recovery of the remaining amount pending compliance.