CESTAT sets aside service tax demand on club's advance entrance fees citing mutuality doctrine under Section 65B(44)

CESTAT Bangalore set aside service tax demand on club's advance entrance fees for April 2012 to March 2014. Revenue alleged fees constituted taxable service under Section 65B(44) of Finance Act, 1994, not covered by negative list. CESTAT relied on SC judgment in Calcutta Club Limited case, holding doctrine of mutuality of interest applies post-July 2012. SC interpreted that "body of persons" under Section 65B(37) and Explanation 3(a) to Section 65B(44) excludes incorporated member clubs. Commissioner's order confirming demands lacked merit as mutuality principle protected incorporated clubs from service tax liability on member contributions.

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Issues involved:
Leviability of Service Tax on advance entrance/admission fee collected by the appellant from the applicants for the period from April 2012 to June 2012 and under the amended scheme of Service Tax from July 2012 to March 2014.

Summary:

Background:
The appellant, a registered society under Mysore Societies Registration Act, 1960, was discharging service tax under the category of 'Mandap Keeper service.' Show cause notices were issued for recovery of Service Tax for the period from 2005 to April 2012, alleging that amounts collected as advance admissions/enrolment fee from prospective members applying for club membership were chargeable to Service Tax under "Club or Membership Association Service."

Appellant's Contentions:
The appellant argued that a previous Tribunal decision in their favor had attained finality for a certain period. They contended that the Revenue's contrary stand could not be sustained. They also argued that the definition of 'Service' under the Finance Act was not fulfilled to attract Service Tax. The appellant further stated that the entrance fee paid by prospective members was akin to a gratuitous bailment and did not enter the revenue stream.

Revenue's Position:
The Revenue argued that processing the application of prospective members constituted a service under the negative list regime, making the amount collected as advance subject to Service Tax levy.

Tribunal's Decision:
The Tribunal noted previous decisions in the appellant's favor and held that the amount collected as advance fee for membership could not be subjected to Service Tax levy. The Tribunal found that the Revenue's arguments regarding the definition of 'Service' post-July 2012 were not valid. Referring to the Supreme Court's judgment on the Doctrine of Mutuality of Interest, the Tribunal concluded that the impugned order was not meritorious and set it aside, allowing the appeals with consequential relief.

Final Outcome:
The Tribunal held in favor of the appellant, ruling that the advance entrance/admission fee collected was not subject to Service Tax levy under the category of 'Club or Membership Association Service' for the specified periods. The impugned order was set aside, and the appeals were allowed with any consequential relief as per law.

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