2021 (8) TMI 1311 - AT - Service Tax

Member-only clubs exempt from Service Tax on services to members based on mutuality principle

The Tribunal allowed the appeal of a member-only club, holding that it is not liable to pay Service Tax on services provided to its members based on the ... Club or Association Services - member only club incorporated under the provisions of the Indian Companies Act 1913 - mutuality of interest - period from 2006-07 to 2008-09 and from 2009-10 to 2010-11 - HELD THAT:- The issue is no longer res integra in view of the Judgement of Hon’ble Supreme Court in the case of STATE OF WEST BENGAL Versus CALCUTTA CLUB LIMITED [STATE OF WEST BENGAL & ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE & ORS. VERSUS M/S. RANCHI CLUB LTD. [2019 (10) TMI 160 - SUPREME COURT]], whereby it was held that there cannot be any levy of Service Tax between the members of the club and the club and the history of taxation of Service Tax was also traced by the Hon’ble Supreme Court. The above judgment of the Supreme Court was also referred to in the case of COMMISSIONER OF SERVICE TAX, KOLKATA & ORS. VERSUS THE BENGAL ROWING CLUB & ANR. [2020 (2) TMI 1640 - CALCUTTA HIGH COURT], wherein the Hon’ble Calcutta High Court has also dismissed the appeal filed by the Revenue in a similar matter concerning taxability between the members of the club and the club itself. Appeal allowed - decided in favor of appellant. Issues Involved:1. Liability of Service Tax on services provided by a member-only club to its members.2. Applicability of the mutuality principle to transactions between a club and its members.3. Interpretation of statutory provisions defining 'club or association' and 'taxable service.'4. Impact of judicial precedents on the taxability of member-only clubs.Issue-wise Detailed Analysis:1. Liability of Service Tax on services provided by a member-only club to its members:The core issue in the appeal was whether the Appellant, a member-only club, is liable to pay Service Tax on the services provided to its members during the period from 2006-07 to 2010-11. The demand for Service Tax amounting to Rs. 23,19,837/- was confirmed by the Commissioner (Appeals), Guwahati, which the Appellant contested based on the mutuality principle.2. Applicability of the mutuality principle to transactions between a club and its members:The Appellant argued that it operates on the mutuality concept, where transactions between the club and its members cannot be construed as transactions between two different parties. Consequently, no Service Tax should be levied on these transactions. This argument was supported by various High Court decisions, which held that services provided by a club to its members are not taxable under the mutuality principle.3. Interpretation of statutory provisions defining 'club or association' and 'taxable service':The Tribunal referred to the Hon'ble Supreme Court's judgment in the case of STATE OF WEST BENGAL Versus CALCUTTA CLUB LIMITED [2019 (29) G.S.T.L. 545 (S.C.)], which traced the history of Service Tax and clarified that there cannot be any levy of Service Tax between the members of a club and the club itself. The Supreme Court's judgment explained the definitions and amendments related to 'club or association' and 'taxable service' under the Finance Act, 1994, and subsequent amendments, emphasizing that incorporated clubs or associations are not included in the Service Tax net.4. Impact of judicial precedents on the taxability of member-only clubs:The Tribunal noted that the issue is no longer res integra in light of the Supreme Court's judgment in the Calcutta Club case. The Supreme Court held that incorporated clubs or associations are not liable to Service Tax on services provided to their members. This judgment was also referred to in the case of COMMISSIONER OF SERVICE TAX, KOLKATA & ORS. Versus THE BENGAL ROWING CLUB & ANR, where the Calcutta High Court dismissed the Revenue's appeal in a similar matter.Conclusion:By respectfully following the Supreme Court's judgment in the Calcutta Club case, the Tribunal allowed the Appellant's appeal, granting consequential relief if any, and disposed of the appeal in these terms. The operative part of the order was pronounced in the open Court.