Principle of mutuality excludes service tax on membership receipts of an export promotion body under club or association service.

Membership fee and allied receipts of an export promotion body were treated as non-taxable on the principle of mutuality, because the body and its members were not separate persons for the relevant activity and the receipts did not amount to consideration for a service to another. The Tribunal followed prior rulings on the club or association entry and held that service tax under that category was not sustainable in these circumstances. The related penalties were also set aside, and the demand failed.

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Issues: Whether the appellant's receipts from membership fee and allied charges were liable to service tax under 'Club or Association Service' under the Finance Act, 1994, and whether the principle of mutuality excluded such levy.

Analysis: The appellant was an export promotion body constituted by its members and its activities were directed towards promotion of exports and public service objectives. The Tribunal applied the principle of mutuality and followed earlier decisions holding that where the association and its members do not constitute separate legal persons for the relevant activity, the receipts cannot be taxed as consideration for a service rendered to another. The Tribunal also relied on precedent which had held the levy under the club or association entry to be unsustainable in similar circumstances.

Conclusion: The service tax demand and consequential penalties under the club or association category were not sustainable. The appeal was allowed and the impugned order was set aside.

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