2024 (5) TMI 200 - AT - Service Tax

Tribunal Confirms Refund Validity: Mutuality Principle Negates Unjust Enrichment Between Clubs and Members.

The Tribunal upheld the decision of the Commissioner (Appeal), dismissing the Revenue's appeal. It concluded that the principle of mutuality applies, ... Refund of of Service Tax paid under club or association services - doctrine of mutuality applicable - incidence of duty passed on not - hit by mischief of unjust enrichment as provided under Section 11B of Central Excise Act, 1944 or not - HELD THAT:- It is found that even the aspects of taxability decided by 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] is on the principle that due to doctrine of mutuality no service exists between the club or association and its members. When the Hon’ble Supreme Court held that the club or association and its members are not two distinct identity and there is a mutuality of interest between both of them on that basis only it was held that since no service provider or service recipient exists service tax is not payable. On the same principle, if any service tax is paid, it has gone from one hand to other within the same entity it cannot be said that the incidence of the service tax has been passed on. It can be seen that the Learned Commissioner (Appeals) held that unjust enrichment is not applicable due to principle of mutuality, it is completely agreed with the finding of the commissioner (Appeals) in the present case. The impugned orders are legal and correct which do not require any interference - the impugned order is upheld - Revenue’s appeal is dismissed. Issues involved:The issue involved in the present case is whether the refund claim of the appellant in respect of Service Tax paid under 'club or association services' is hit by the mischief of unjust enrichment as provided u/s 11B of Central Excise Act, 1944.Summary:Issue 1 - Unjust Enrichment:The Adjudicating Authority sanctioned the refund claim considering the issue of unjust enrichment. The Revenue filed an appeal before the Commissioner (Appeal) challenging this decision, which was rejected. The Revenue then filed the present appeal.Details:The Revenue argued that both lower authorities did not examine the aspect of unjust enrichment, which is mandatory for allowing any refund claim as per Section 11B of the Central Excise Act, 1944. They contended that without examining the facts regarding unjust enrichment, the sanction of the refund claim is not legal.Issue 2 - Taxability of Club or Association Services:The Respondent argued that various judgments, including those by the Hon'ble Supreme Court, have held that club or association services are not taxable due to the doctrine of mutuality. They emphasized that no service exists between the club or association and its members, as they are not two distinct entities.Details:The Respondent highlighted that the principle of mutuality dictates that no service provider or recipient exists between the club and its members. Therefore, any tax paid by the club does not pass on to its members, as there is no separate identity between them. They cited judgments supporting this view from various High Courts and the Supreme Court.Conclusion:Upon careful consideration, the Tribunal found that the principle of mutuality dictates that no service exists between the club or association and its members. Therefore, any tax paid by the club does not constitute unjust enrichment. The Tribunal upheld the decision of the Commissioner (Appeal) and dismissed the Revenue's appeal, stating that the impugned orders are legal and correct, requiring no interference.