Cooperative society's service tax on commercial building management set aside under mutuality doctrine Section 65B(44)

CESTAT Ahmedabad set aside the service tax levy on a cooperative society managing commercial buildings for its members. The tribunal applied the doctrine of mutuality, holding that no service was provided between separate persons since the society and its members were legally one entity. Following its identical ruling in Sumel Business Park-3 case, the tribunal found the activity did not constitute "service" under Section 65B(44) due to the mutual relationship between the cooperative society and its members. The appeal was allowed.

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Issues Involved:
1. Liability to Service Tax under the Club or Association Service.
2. Adjudication order exceeding the scope of the show cause notice.
3. Applicability of the doctrine of mutuality.
4. Classification of maintenance deposits.
5. Invocation of the extended period for demand.

Summary:

1. Liability to Service Tax under the Club or Association Service:
The department argued that the amounts collected by the appellant (maintenance charges, maintenance deposits, parking deposits, and other amounts) were liable to Service Tax under the Club or Association Service as per sub-clause (zzze) of clause (105) Section 65 of the Finance Act, 1994. The appellant contended that the issue was already decided in their favor in a similar case (Sumel Business Park-3) by the Tribunal, making the demand unsustainable.

2. Adjudication Order Exceeding the Scope of the Show Cause Notice:
The Tribunal noted that the show cause notice was based on the definition of club or association service under the Finance Act, 1994, while the adjudication order confirmed the demand based on the statutory provisions effective from 01.07.2012. The order thus traveled beyond the scope of the show cause notice, rendering the demand invalid. This principle was supported by multiple judgments, including those from the Supreme Court in cases like Commissioner of Central Excise Vs. Gas Authority of India Ltd and Precision Rubber Industries (P) Ltd. Vs. Commissioner of Central Excise.

3. Applicability of the Doctrine of Mutuality:
The Tribunal held that the appellant, being a registered cooperative society under the Gujarat Cooperative Societies Act, 1961, fell within the exclusion provided in the definition of club or association under sub-clause (zzze) of clause (105) of Section 65 of the Finance Act, 1994. The doctrine of mutuality applied, meaning there was no service provision by one person to another, as both the cooperative society and its members were considered one entity. This was reinforced by the Supreme Court's ruling in the case of State of West Bengal Vs. Calcutta Club Ltd., which applied to both pre and post-01.07.2012 periods.

4. Classification of Maintenance Deposits:
The appellant argued that maintenance deposits were refundable and not consideration for any service. The Tribunal agreed, noting that the maintenance deposit was shown as refundable in the ledger and thus not chargeable to Service Tax. This view was supported by judgments in cases like Ashiana Maintenance Services LLP and Murli Realtors Pvt. Ltd. Vs. CCE Pune-III.

5. Invocation of the Extended Period for Demand:
The Tribunal found that the issue of taxability under club or association service was under dispute for a long time, with various decisions favoring the assessee. Given this legal context, no suppression of facts or mala fide intention could be attributed to the appellant, making the invocation of the extended period for demand unsustainable.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief, as the Service Tax demand was not sustainable on multiple grounds, including exceeding the scope of the show cause notice, the doctrine of mutuality, and the refundable nature of maintenance deposits.

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