2018 (3) TMI 632 - AT - Service Tax

Appellate tribunal rules in favor of appellant on service tax liability & license fees taxability.

The appellate tribunal ruled in favor of the appellant on both issues concerning the liability of service tax on charges collected from club members and ... Club or Association Service - Service provider-recipient relationship - Business Support Service - Renting of space not covered by Business Support Service - Infrastructure support serviceClub or Association Service - Service provider-recipient relationship - Taxability of service charges and amenity charges collected from club members as 'Club or Association Service' - HELD THAT: - The Tribunal accepted the appellant's contention that there is no distinct service provider-service recipient relationship between the club and its members for levy of service tax on amounts collected from members for use of facilities such as restaurant, accommodation and ancillary services. The decision relied on precedent (including Ranchi Club Ltd.) holding that where the relationship is internal to a single entity (the club and its members), the consideration received for members' use of club facilities does not attract tax under 'Club or Association Service.' The Tribunal applied that ratio to set aside the impugned confirmation of tax on such receipts. [Paras 8]The amounts collected from members for availing club facilities are not taxable as 'Club or Association Service' and the impugned demand on this ground is set aside.Business Support Service - Renting of space not covered by Business Support Service - Infrastructure support service - Taxability of licence fee collected from bookies for providing earmarked space in the racecourse as 'Business Support Service' - HELD THAT: - The Tribunal found that making available earmarked space or stalls within the club premises for bookies to conduct their gaming business amounted to mere provision of space and did not constitute an outsourced infrastructural or office support service covered by the statutory definition of 'Business Support Service.' Reliance was placed on earlier Tribunal authority (Royal Western India Turf Club Ltd.) and the Board's explanatory circular which narrow the scope of BSS and exclude mere renting of office/space. Applying that reasoning, the Tribunal concluded the licence fees could not be sustained as liable to service tax under BSS. [Paras 9]Licence fees charged for providing space to bookies are not taxable as 'Business Support Service' and the impugned demand on this ground is set aside.Final Conclusion: The Tribunal allowed the appeal, setting aside the service tax demand both insofar as charges collected from members (not exigible as 'Club or Association Service') and licence fees from bookies (not exigible as 'Business Support Service'); consequential relief ordered as per law. Issues:1. Liability of service tax on service charges and amenity charges collected from club members.2. Taxability of license fee collected from bookies under Business Support Service (BSS).Analysis:1. The appellant, a club organizing horse races, was facing a tax liability issue concerning service charges and amenity charges collected from its members. The Revenue sought to tax these charges under 'Club or Association Service.' However, the appellant argued that there was no service provider-service recipient relationship between the club and its members. Citing precedents, including decisions from the Tribunal and High Courts, the judges ruled in favor of the appellant. They emphasized that there is no separate entity for service tax levy in a club, and thus, the tax liability on charges from members cannot be imposed under 'Club or Association Service.'2. The second issue revolved around the taxability of license fees collected from bookies for providing space at the racecourse. The Revenue contended that these fees should be taxed under Business Support Service (BSS) as the club provided infrastructure support services to the bookies. However, the appellant argued that merely providing space for the bookies' activities did not constitute business support. The judges referred to a similar case where it was held that making space available within the club premises does not fall under BSS. Relying on this precedent and a circular from the Board, the judges concluded that the tax liability on the license fees collected from bookies was not sustainable under BSS.In conclusion, the appellate tribunal ruled in favor of the appellant on both issues, setting aside the tax liability confirmed in the impugned order. The appeal was allowed with consequential relief, and the Revenue's request for a change of cause title was also granted.