2025 (3) TMI 968 - AT - Service Tax

Exhibition limited to members, IP agreement lacking protected rights, and membership fees under mutuality doctrine defeat service tax demands.

Commissioner of Central Excise and Service Tax, Cochin Versus CREDAI Kochi Formerly (Kerala Builders Forum) (Vice-Versa)

Commissioner of Central Excise and Service Tax, Cochin Versus CREDAI Kochi Formerly (Kerala Builders Forum) (Vice-Versa) - TMI 1. ISSUES PRESENTED and CONSIDEREDThe primary issues addressed in this judgment revolve around the sustainability of service tax demands on the appellant association under three categories: business exhibition service, intellectual property service, and club or association service. The core legal questions considered include:Whether the business exhibitions conducted by the appellant are subject to service tax under the doctrine of mutuality as discussed in the Supreme Court's decision in State of West Bengal Vs. Calcutta Club Ltd.Whether the income received by the appellant under a memorandum of understanding for conducting property shows constitutes a taxable service under the category of intellectual property service.Whether the membership fees and subscription fees collected by the appellant are liable to service tax under the category of club or association service, considering the doctrine of mutuality.2. ISSUE-WISE DETAILED ANALYSISBusiness Exhibition Service:The appellant contends that the exhibitions and property shows are conducted for the benefit of its members, thereby invoking the doctrine of mutuality, which exempts such activities from being classified as taxable services. The relevant legal framework includes Section 65 (105) of the Finance Act, 1994, which defines taxable services, and the doctrine of mutuality as upheld in State of West Bengal Vs. Calcutta Club Ltd.The Court interpreted that for a service to be taxable, there must be a service provider and a recipient. Since the exhibitions were conducted solely for the members, no service was provided to an external party. The Court found that the exhibitions were not taxable as they did not constitute a service to any person other than the members.Intellectual Property Service:The adjudication authority had confirmed a levy of service tax on the appellant under the intellectual property service category. The appellant argued that the transaction did not involve the transfer of any legally protected intellectual property rights as defined under Section 65 (105)(zzr) and Section 65 (55a) of the Finance Act, 1994.The Court considered the memorandum of understanding and concluded that the transaction did not involve any transfer of intellectual property rights recognized under Indian law. The Court relied on precedents such as Catapro Technologies Vs. C.EX. Nashik and ABB Limited Vs. C.Ex. & S.T, LTU, which clarified that for a service to be taxable under intellectual property service, the service provider must hold enforceable intellectual property rights. The absence of such rights in this case rendered the demand unsustainable.Club or Association Service:The appellant argued that the membership fees collected were not subject to service tax due to the doctrine of mutuality. The Court referred to the definition of 'club or association' under Sections 65(25a) and 65(25aa) of the Finance Act, 1994, and the Supreme Court's decision in State of West Bengal Vs. Calcutta Club Ltd., which upheld the doctrine of mutuality for incorporated and unincorporated members' clubs.The Court concluded that the doctrine of mutuality applied, and the membership fees collected were not subject to service tax. The appellant's association, being constituted under the Travancore Cochin Literacy, Scientific and Charitable Societies (Registration) Act, 1955, was not included in the tax net.3. SIGNIFICANT HOLDINGSThe Court's significant holdings include:The doctrine of mutuality exempts the appellant's business exhibitions conducted for its members from service tax, as there is no service provided to an external party.The income received under the memorandum of understanding does not constitute a taxable service under the intellectual property service category, as there is no transfer of legally protected intellectual property rights.The membership fees collected by the appellant are not subject to service tax under the club or association service category, as the doctrine of mutuality continues to apply.Verbatim Quotes of Crucial Legal Reasoning:'The doctrine of mutuality continues to be applicable to incorporated and unincorporated members' clubs after the 46th Amendment adding Article 366(29A) to the Constitution of India.''Since the participants for the exhibition were only the members and in the absence of any evidence regarding participation of any other person, it cannot be considered as exhibition as provided, and there is no service provided to anyone else in this regard.'Final Determinations:The appeal filed by the assessee is allowed, and the demands for service tax under the categories of business exhibition service, intellectual property service, and club or association service are deemed unsustainable. The appeal filed by the Revenue regarding penalties is dismissed, as the underlying service tax demands were found to be unsustainable.