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of <h1>Services to cooperative society members classified as mutuality, not banking/financial services; service tax demand set aside</h1> Dominant issue: whether services rendered by the appellant to members of a cooperative society attract service tax under 'Banking and Other Financial ... Levy of service tax under the category of banking and other financial services - liability of Appellant to pay service tax considering the threshold limit - doctrine of mutuality - HELD THAT:- As regarding demand under the category of Banking and Other Financial Services, it is found that appellant was providing services to the members of the cooperative society and in the absence of any evidence regarding service provided by the appellant to any non-members, following the ratio of the judgment of the Hon’ble Supreme Court in the matter Kolkata Club Ltd [2019 (10) TMI 160 - SUPREME COURT (LB)], no service tax can be demanded. As regarding other demand, it is found that the demand against other activities are also unsustainable since it is below threshold limit during the relevant period. Appeal allowed. Issues: (i) Whether service tax demand under the category of Banking and Other Financial Services on amounts received by the cooperative society from its members is sustainable by applying the doctrine of mutuality; (ii) Whether the remaining demands including reverse charge liabilities and other receipts are sustainable, having regard to applicability of Notification No.30/2012-ST and the threshold exemption.Issue (i): Whether amounts charged by the cooperative society for services provided to its members attract service tax under Banking and Other Financial Services despite being services within a members' cooperative.Analysis: The mutuality doctrine as applied to members' clubs and incorporated/cooperative bodies excludes services provided to members from being a taxable service for consideration between distinct persons. Explanation to Section 65 was considered and the scope of 'service' under Section 65B(44) was examined with reference to authorities establishing that services rendered exclusively to members of an incorporated cooperative society are not taxable. Precedent applying mutuality to cooperative societies and banks was relied upon to determine absence of taxable supply to non-members.Conclusion: Demand under the category of Banking and Other Financial Services is unsustainable and ruled in favour of the assessee.Issue (ii): Whether demands under reverse charge (legal services) and other receipts (sales officer costs, miscellaneous receipts) are maintainable and whether taxable turnover exceeds threshold exemption.Analysis: Notification No.30/2012-ST sets out reverse charge liability for legal services where the recipient is a business entity; the statutory definition of 'support services' under Section 65B(49) and the requirement that the service be rendered by Government/local authority for support services under the notification were examined. The sales officer activity was characterised as a statutory, mandatory function under the Co-operative Societies Act rather than a support service rendered by government/local authority. The taxable turnover figures for relevant years were compared with the threshold exemption to assess levy viability.Conclusion: Reverse charge demand for legal services and demand on sales officer costs are not sustainable; other contested receipts are below the threshold and therefore not taxable. The conclusions are in favour of the assessee.Final Conclusion: The appeal is allowed and all contested service tax demands (under Banking and Other Financial Services, reverse charge and other charges assessed below threshold) are set aside, producing a net decision favourable to the assessee.Ratio Decidendi: Services provided by an incorporated/cooperative society exclusively to its members fall outside the taxable 'service' under Section 65B where the doctrine of mutuality applies; reverse charge under Notification No.30/2012-ST applies only where the recipient is a business entity and where the service qualifies as a government/local authority support service; amounts below the statutory threshold exemption are not leviable as service tax.
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