Tribunal rules FAPCCI not liable for service tax on membership fees

The Tribunal ruled in Appeal No. ST/337/2010 that the Federation of Andhra Pradesh Chamber of Commerce & Industry (FAPCCI) was not liable to pay service tax on membership fee collected from members between 01.10.2005 to 30.09.2008. The retrospective amendment exempting service tax on such fees and legal precedents emphasizing the nature of mutuality of interest within such organizations led to the decision that FAPCCI, as a not-for-profit company, was not subject to service tax for the disputed period. The appeal was allowed, and the demand, interest, and penalties were deemed unsustainable.

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Issues:
Whether the Federation of Andhra Pradesh Chamber of Commerce & Industry is liable to pay service tax on membership fee/subscription fee collected from members during a specific period.

Analysis:

Issue 1: Liability to pay service tax on membership fee/subscription fee
The issue in this case revolved around the liability of the Federation of Andhra Pradesh Chamber of Commerce & Industry (FAPCCI) to pay service tax on the membership fee/subscription fee collected from its members between 01.10.2005 to 30.09.2008. The Revenue contended that the amount collected was chargeable to service tax under the category of "Club or Association Service" as per Section 65(25a) read with Section 65(105)(zzze) of the Finance Act, 1994. A show cause notice was issued to the appellant demanding service tax along with interest and penalties. The lower authority confirmed the demand, interest, and penalties. The appellant appealed to the first appellate authority, which set aside the penalty under section 78 but upheld the order of the lower authority. The Revenue was aggrieved by the setting aside of the penalty under section 78, while the appellant was unhappy with the confirmation of duty, interest, and penalties under sections 76 & 77.

Issue 2: Retrospective amendment and legal precedents
The appellant's counsel argued that a retrospective amendment through the insertion of Section 96J in the Finance Act, 1994, exempted the service tax on membership fee collected by clubs or associations representing industry or commerce between 16th June 2005 to 31st March 2008. The counsel contended that this amendment covered the disputed period up to 31.03.2008, necessitating the setting aside of the demand, interest, and penalties for that period. Additionally, legal precedents from the High Courts of Jharkhand and Gujarat were cited, emphasizing that service tax could not be levied on amounts paid by members to clubs or associations due to the nature of mutuality of interest and self-service within such organizations. The Tribunal, considering these arguments and legal precedents, held that FAPCCI, being a not-for-profit company formed out of mutuality of interest, was not liable to pay service tax for the entire disputed period. Consequently, the demand, interest, and penalties were deemed unsustainable.

In conclusion, the Tribunal allowed the appeal of the assessee in Appeal No. ST/337/2010, granting consequential benefits, and rejected the Department's appeal No. ST/345/2010.

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