2023 (10) TMI 1116 - AT - Service Tax

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

M/s. Karnataka Golf Association Versus The Commissioner of Service Tax, Bangalore

CESTAT Bangalore set aside service tax demand on club's advance entrance fees for April 2012 to March 2014. Revenue alleged fees constituted taxable ... Levy of Service Tax - Club and association service - mutuality of interest - advance entrance/admission fee collected by the appellant from the applicants - period from April 2012 to June 2012 - amended scheme of Service Tax from July 2012 to March 2014 - scope of service - HELD THAT:- Though in the show-cause notice dated 22.5.2014, the applicability of definition of ‘service’ has not been raised, however, in the show-cause notice dated 10.4.2015 it is alleged that the advances collected by the appellant would fall under the scope of ‘service’ as defined under Section 65B(44) of the Finance Act, 1994; also it is alleged that the activity of the appellant does not fall under the Negative List of services contained in Section 66D of the Finance Act, 1994, hence leviable to service tax. The Ld. Commissioner in the impugned order by interpreting the definition of ‘Service” has confirmed the demands for the period after 01.7.2012. The Hon’ble Supreme Court in STATE OF WEST BENGAL & ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE & ORS. VERSUS M/S. RANCHI CLUB LTD. [2019 (10) TMI 160 - SUPREME COURT] observed that ‘Doctrine of Mutuality of Interest’ is also applicable for the period after 01.7.2012; interpreting newly introduced definition of ‘person’ under Section 65B(37) and explanation 3(a) to Section 65B(44) of Finance Act,1994, Their Lordships observed as The expression “body of persons” may subsume within it persons who come together for a common purpose, but cannot possibly include a company or a registered cooperative society. Thus, Explanation 3(a) to Section 65B(44) does not apply to members’ clubs which are incorporated. There are no merit in the impugned order and accordingly, set aside the same - appeal allowed. 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.