2022 (12) TMI 601 - AT - Service Tax

Co-op housing society exempt from service tax for members; entitled to refund under mistake of law.

M/s. Raheja Regency Cooperative Housing Society Ltd. Versus Commissioner of GST & Central Excise, Mumbai

The Tribunal allowed the appeal, holding that the cooperative housing society is not liable to pay service tax on services provided to its members under ... Refund of service tax wrongly / under a mistake of law - Period of limitation - Club or Association Services - refund claim on the ground that, they have paid service tax under protest as they are Co-operative Society not engaged in any activity of profit and as per the principle of mutuality, services provided by them to their members would not be liable to Service tax under the Club or Association Service. - HELD THAT:- In view of series of decisions it is clear that the appellant cannot be said to be liable to pay service tax in any manner whatsoever inasmuch as what was paid by the appellant was not tax as envisaged under the Finance Act, 1994. Thus, the amount paid by the Appellant would not take the character of tax but is simply an amount paid under a mistake of law. Since Service Tax received by the concerned authority is not backed by any authority of law, in view of the provisions of Article 265 of the Constitution, the authority concerned has no right to retain the same. A similar view has been taken by the Hon’ble High Court of Judicature at Bombay in the matter of Parijat Construction v. Commissioner Excise, Nashik, [2017 (10) TMI 659 - BOMBAY HIGH COURT]. by holding that limitation prescribed under Section 11B of Central Excise Act, 1944 not applicable to refund claims for Service Tax paid under mistake of law. Refund allowed. Issues Involved:1. Applicability of service tax on services provided by a cooperative housing society to its members under the principle of mutuality.2. The applicability of the limitation period under Section 11B of the Central Excise Act, 1944 for refund claims.Issue-Wise Detailed Analysis:1. Applicability of Service Tax on Cooperative Housing Society Services:The appellant, a cooperative housing society, argued that services provided to its members should not be taxed under the principle of mutuality. The principle of mutuality implies that a service provided by a society to its members is not considered a service between two distinct persons, thus not liable for service tax. The Tribunal referenced several judgments, including the Supreme Court's decision in Calcutta Club Ltd. and Young Men's Indian Association, which established that services provided by a club to its members are not taxable as there is no service by one legal entity to another. The Tribunal also cited its own decision in Tahnee Heights Co-operative Housing Society Ltd. v. Commr. of CGST, Mumbai South, which held that activities undertaken by a cooperative housing society do not constitute taxable services under the service tax statute. The Tribunal concluded that the appellant's activities fall under the principle of mutuality and are not liable to service tax.2. Applicability of Limitation Period under Section 11B for Refund Claims:The appellant contended that the service tax was paid under protest, and thus the limitation period prescribed under Section 11B of the Central Excise Act, 1944, should not apply. The Tribunal noted that the principle of mutuality exempts the appellant from service tax liability, making the tax paid a mistake of law. Consequently, the limitation period under Section 11B does not apply to claims for refunds of amounts paid under such a mistake. The Tribunal referenced several judgments, including the Bombay High Court's decision in Parijat Construction v. Commissioner Excise, Nashik, and the Madras High Court's decision in 3E Infotech v. CESTAT, Chennai, which held that the limitation period under Section 11B does not apply to refunds of taxes paid under a mistake of law. The Tribunal concluded that the appellant is entitled to a refund, as the amount paid was not a tax under the Finance Act, 1994, and retaining it would violate Article 265 of the Constitution of India.Conclusion:The Tribunal allowed the appeal, holding that the appellant is not liable to pay service tax on services provided to its members under the principle of mutuality. Consequently, the appellant is entitled to a refund of the service tax paid, as the limitation period under Section 11B does not apply to amounts paid under a mistake of law. The Tribunal set aside the impugned order and granted the appellant consequential relief as per law.