TaxTMI 
TaxTMI 
2014 (5) TMI 183
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.... service tax, interest and penalties on the same appellant i.e. the Federation of Indian Chambers of Commerce and Industry (in short FICCI). These appeals are directed against adjudication orders which are passed in respect of periods covering 1-7-2006 to 30-6-2010; 1-7-2010 to 30-6-2011 and 1-7-2011 to 30-6-2012, pursuant to show cause notices dated 19-10-2010; 21-10-2011 and 28-12-2012, respectively. 4. Service Tax Appeal No. 55424 of 2013 is preferred by M/s. Electronic and Computer Software Export Promotion Council (in short ECSEPC), against an adjudication order dated 18-10-2012 confirming distinct and specified service tax demands for 2005-2009 and 2010-2011 apart from interest and penalties as specified therein. The order dated 18-10-2012 is passed pursuant to two show cause notices dated 7-10-2010 and 18-10-2011, covering the two periods in issue. 5. The assessment levy and demand of service tax, interest and penalties as specified in the several adjudication orders is predicated on the conclusion that the assessees/appellants had provided the taxable "club or association" service enumerated in Section 65(105)(zzze), defined in Section 65(25a) of the Finance....
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....appeals preferred by FICCI and the appeal preferred by ECSEPC. An additional issue is presented for consideration in the appeal preferred by ECSEPC. For consideration of the common issues we take up service tax Appeal No. 58304 of 2013 (preferred by FICCI), as illustrative of the issues arising in all the appeals preferred by this appellant and the related issues arising in the appeal preferred by ECSEPC. 9. Service Tax Appeal No. 58304 of 2013 : (1) The Commissioner, Service Tax, New Delhi passed a common adjudication order No. 49-50/GB/2013, dated 26-3-2013 in respect of three show cause notices dated 19-10-2010; 21-10-2011 and 28-12-2012, covering the periods, adverted to supra (in para 3). The order confirmed service tax demand of Rs. 49,61,32,867/-; 21,73,55,168/- and Rs. 5,67,38,578/- apart from interest and penalties as specified therein, in respect of the three show cause notices, respectively. (2) FICCI is a company registered under Section 26 of the Indian Companies Act, 1913, for providing the taxable "Mandap Keeper"; "Event Management"; "Management Consultant" and "Business Exhibition" services. Founded on 16-3-1956 and incorporated under the 191....
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....untry. Clause 4 of the Memorandum of Association of FICCI stipulates that its income and property, whensoever derived, shall be towards the promotion of the objects of the Federation as set forth in the Memorandum of Association; and that no portion thereof shall be paid or transferred directly or indirectly, by way of dividend, bonus, or otherwise by way of profit to the members of the Federation. Clause 2 of the Articles of Association of FICCI sets out the criteria and eligibility for membership. There are three classes of Members - Ordinary Members, Associate Members and Corporate Members. Each of these categories are defined in this clause. Clause 3 of the Articles of Association set out criteria and procedure for admission to membership; Clauses 4 to 12 stipulate the annual subscription, admission and other fees payable by the members and the other substantive and procedural provisions for the operations and activities of FICCI. 10. Proceedings were initiated, on assumption by Revenue that all receipts by FICCI including amounts received towards Admission Fee/Subscription from Ordinary, Associate and Corporate Members; receipts in respect of meetings; for org....
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....dian Companies Act, 1913 (corresponding to Section 25 of the Companies Act, 1956), since its purposes and activities promote objectives enumerated in the said provision; and under its Memorandum and Articles of Association there is a prohibition of payment of dividends/profits to its members; (b) that the appellant is established to serve India's national, social and economic goals through promotion of appropriate policies covering - increase in gainful employment through expansion of production of goods and services for domestic/export markets; raising living standards of rural/urban population by promoting balanced economic development through industry, commerce, and services and for achievement of the foregoing to promote growth of Indian business; to build international relations for making India a 'Global Player'; to promote Indian business in matters of inland and foreign trade, transport, industry, manufacture, finance and all other economic subjects; and to encourage Indian banking, shipping and insurance; (c) that the appellant was established and delivers on critical and substantive functions which clearly fall within ....
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....his behalf including references to case law in support of the contentions, are summarised in paragraph 24E of the impugned order);     Thus levy of Service Tax under "Club or Association" service; on amounts received towards museum rent; by way of contributions from allied organizations; towards facilitation fees; sale of periodicals; miscellaneous receipts and other income; and Government grants could in any event not be attributable to consideration received for providing "Club or Association" service (contentions are summarized in paragraph 24G of the adjudication order); (h) Invocation of the best judgment assessment process under Section 72 of the Act is unsustainable; (i) The appellant filed ST-3 returns under the taxable category of "Mandap Keeper"; "Event Management", "Consultancy and Business Exhibition" services and remitted service tax for these taxable services provided; yet the total consideration received by it is now proposed to be brought to tax under "Club or Association" service. Without prejudice to the earlier contentions, the Service Tax remittances already made should therefore be giv....
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....o such allegation, expressed or implied in the show cause notice dated 28-12-2012 indicating recognition by Revenue, of the operational dynamics ushered in by the amendment. Paragraph 4 of the show cause notice (dated 28-12-2012) reveals that Revenue was not conscious of the change brought about by the amendment and had not asserted that after the amendment, services provided by a "Club or Association" to any other person would also be taxable. Para 4 of this show cause notice reads : "4. Whereas, the assessee has failed to pay service tax on the gross taxable receipt during the period 2011-2012, they were required to pay Service Tax of Rs. 18,64,18,229/-, but they have only paid Service Tax of Rs. 12,96,79,651/- (Rs. 6,27,82,220/- through GAR-7 and Rs. 6,68,97,431/- through Cenvat Credit). As a result, the assessee has short paid/not paid Service Tax amounting to Rs. 5,67,38,578/- inclu. Edu. Cess & Higher Secondary Edu. Cess in the period 1-7-2011 to 30-6-2012. This notice is being issued for the period Jul-2010 to Jun-2011 and the charges and allegations being in Original Demand cum Show Cause Notice issued vide C. No. DL/ST/AE/Inq./Gr-3(1)/FICCI/27/06/30450 for Rs. 5....
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....table organization and charitable purposes, requires to be deprecated. At Para 27.7 of the order however, in view of the provisions of Section 96J exemption from levy and collection of service tax on partnership fee collected by FICCI for the period 16-6-2005 to 31-3-2008 was allowed; while confirming liability to service tax on other amounts received by FICCI, excluding partnership fee. The Authority also recorded that since FICCI did not provide monthwise details of subscription/partnership fee received for the period 1-7-2005 to 31-3-2008 to enabling exemption benefits, figures derivable from the show cause notice are taken into account accordingly Service Tax demand to the extent of Rs. 1,49,91,366/-, for the period 1-7-2005 to 31-3-2008 was dropped. (ii) The second issue considered in the order is whether the several receipts by FICCI for the several and distinct transactions are all taxable under club or association service. Para 28 of the order deals with this aspect. It is noticed by the Authority that receipts towards museum rent; contribution from allied organisations; by way of facilitation fees; on sale of periodicals; sponsorship amounts; miscellaneous recei....
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....on the burden of service tax the recipients of the services (Para 31). (vi) FICCI's claim for availment of credit of Service Tax remitted on input services was rejected on the ground that neither at the investigation stage nor during adjudication proceedings FICCI submitted details of input services used for providing the output service and no documents are on record to examine admissibility of credit (Para 33). (vii) The order confirmed imposition of penalties under Sections 76, 77 and 78 of the Act for similar reasons as were recorded for justifying invocation of the extended period of limitation (Para 35). 17. Service Tax Appeal No. 55424 of 2013 (ECSEPC Appeal) : (i) As adverted to earlier, this appeal is preferred by the assessee-ECSEPC against the adjudication order dated 18-10-2012. Service Tax demand of Rs. 1,39,32,621/- and Rs. 32,95,542/- stands confirmed for the period 2005-2009 and 2010-2011, covered by show cause notices dated 7-10-2010 and 18-10-2011, respectively, apart from interest and penalties. (ii) ECSEPC is an Export Promotion Council registered under the Societies Registration Act, 1....
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.... or intended for export in foreign countries or in India, as a result of any dispute or difference between the parties to a contract for sale and purchase of electronic goods and computer software; (j) Enquiring and investigating into complaints received from foreign importers of Indian exporters in respect of the quality, description or other particulars of electronic goods and computer software exported from India or the non-performance or non-observance of the terms and conditions of contract relating to such exports and other connected matters and advising the manufacturers or exporters of electronic goods and computer software regarding the methods to be adopted to obviate such complaints of a similar nature in future; (k) Making such recommendations as may be necessary or expedient to Govt. and Public Bodies like Chambers of Commerce where the Council on investigation of a complaint received by it is satisfied about its genuineness and that the same has been caused by the wilful or negligent act or acts of the manufacturers of exporters of electronic goods and computer software, as....
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....idends, bonus, profits or in any manner whatsoever, to the present or past members of the Council or to any person claiming through any one or more of the present or past members, provided that nothing herein contained shall prevail the payment in good faith of reasonable and proper remuneration to any officers, other than members, or employees or other persons in return for any actually rendered to the Council and provided further that no member shall be appointed to any salaried office of the Council or to any office of the Council paid by fees and that no remuneration or other benefit in money or moneys worth shall be given by the Council to any of its members except repayment of out of pocket expenses. Interest on money lent or reasonable and proper rent for premises demised or let to the Council. No member of the Councils shall have any personal claim on any movable or immovable properties of the Council or make any projects, whatsoever, by virtue of his membership". (iv) Clause 46 of the Articles of Association (AOA) set out ECSEPC's functional responsibilities which include obtaining from its members periodical proposals for export and preparation of integrate....
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.... promotional events such as marketing development schemes (introduced by the Commerce Department of Central Government and aided by the Government); (b) Fairs and Trade Fairs including "India Soft", within and outside India, where participation fee is charged from member companies for putting up stalls; on the participation fee received for fairs organized within India, the assessee is remitting service tax, under the taxable "business exhibition service"; (c) setting up of business incubation centres since outside India. The assessee sets up facilitation centres overseas under the market access initiative scheme promoted by the Department of Commerce, to enable participating member companies to enter overseas markets. This initiative is approved by the Department of Commerce and is funded by 50% contribution from the Department of Commerce and matching contribution borne by participating Indian companies; (d) subscriptions received towards periodicals and mailings. Assessee publishes a monthly journal, providing information regarding export of electronics and IT industry and receives subscriptions constituting sale consideration from member companies; (e) Assessee also provides in....
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....es and from non-members as well, the order records reasons similar to those recorded in the FICCI's adjudication order. ECSEPC was however granted benefit of exemption from service tax for the period 16-6-2005 to 31-3-2008 in view of Section 96J of the Act and cum-tax benefit for 2005-2009 and 2010-2011. 18. In view of the competing claims, contentions and assertions, the following Issues require to be considered : ISSUES : (a) Whether the assessee/appellants (FICCI and ECSEPC) are engaged in activities having objectives which amount to public service and of a charitable nature and consequently fall outside the ambit of "Club or Association"; (b) Whether services provided by the appellants to their respective members and the consideration received therefor is exigible to tax, in view of the principle of mutuality declared in several judgments including in Ranchi Club Limited v. Chief Commissioner of Central Excise & Service Tax - 2012 (26) S.T.R. 401 (Jhar.); (c) Whether service tax is leviable under the taxable category "Club or Association" service, in the light of the judgment of the Gujarat High Court in Sports Club of Gujarat Ltd. v. Union of....
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....the activity being a valid charity, as pointed out by the Supreme Court in Commissioner of Income Tax, Madras v. Andhra Chamber of Commerce - [1965] 55 ITR 722 (S.C.). This principle is reiterated in Additional Commissioner of Income Tax v. Surat Art Silk Cloth Manufacturers Association, Surat - AIR 1980 SC 387. These binding precedents have referred to and quoted with approval English curial authorities, in Commissioner of Inland Revenue v. Yorkshire Agricultural Society - (1928) 1 KB 611 and Institution of Civil Engineers v. Commr. of Inland Revenue - (1931) 16 Tax Cas 156. (c) In FICCI's own case, the Supreme Court in CIT, New Delhi v. Federation of Indian Chambers of Commerce and Industries, New Delhi - AIR 1981 SC 1408 ruled that it is a charitable trust. The Court analysed FICCI's charter and objectives and concluded that its dominant object is charitable in nature and other functions like framing pension scheme and establishing and support of associations, institutions and funds are ancillary functions. The Court pointed out the distinction between the purpose of a trust and powers conferred upon the Trustees as incidental to the carrying out of th....
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.... Association - [1979] 116 ITR 793 (Mad.); Addl. CIT v. Delhi Brick Kiln Owners' Association - [1981] 130 ITR 55 (Del.); and CIT v. Western India Chambers of Commerce and Industry Ltd. - [1982] 136 ITR 67 (Bom.). The analyses of the respective facts and characteristics of several organizations, considered in the several judgments guide us to the singular conclusion that FICCI and ECSEPC are institutions having public service objectives and of a charitable nature. (f) The analysis in the impugned adjudication order(s) leading to the conclusion that FICCI (and ECSEPC) is not engaged in activities having objectives which are in the nature of public service and of a charitable nature (para 27), is fundamentally misconceived. Despite noticing the several precedents cited on behalf of the assessee (earlier in the order), the Authority records an ipse dixit at para 27.4, that there remains "no iota of doubt" that the services FICCI provided and various activities performed by it are squarely covered within the ambit of "Club or Association" service. (g) Curiously, the Authority omitted to set out reasons for distinguishing the Sup....
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.... Commercial Tax Officer v. The Young Men's Indian Association - 1970 (1) SCC 462, to hold that income tax could be imposed on transactions of a club with its members. The Supreme Court in Young Men's Indian Association considered the issue whether supply of various preparations by each club to its members involved a transaction of sale within the meaning of the Sales of Goods Act, 1930 and provisions of the Madras General Sales Tax Act, 1959. The Court held that despite the definition of sale set out in Section 2(n) of the Madras Act read with Explanation 1 thereof, there was no occurrence of transfer of property from one to another, as a club even though a distinct legal entity is only acting as an agent for its members in the matter of supply of various preparations and no sale would be involved, as the element of transfer would be completely absent. Relying on these decisions, the Jharkhand High Court in Ranchi Club Ltd. (supra) ruled that on application of the principle of mutuality, where a club provides any service to its members in any form including as a mandap keeper, there occurs no rendition of a service by one entity to another. Dealing with the contention that sale and....
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.... - [1973] 90 ITR 116 (Mad.) had held that Section 140A(3) of the Income Tax Act, 1961 was held to be unconstitutional, being violative of the provisions of Article 19(1)(f) of the Constitution, the Income Tax Tribunal acting anywhere in the country must respect the law declared down by a High Court though of a different State, so long as there is no contrary decision of any other High Court on that question; and that being the position the Income Tax Tribunal at Mumbai was required to decide on the basis of the law pronounced by Madras High Court, namely on the footing that Section 140A(3) was non-existent. In All India Lakshmi Commercial Bank Officers' Association v. Union of India, the Delhi High Court reiterated this position by observing that income tax Authorities acting anywhere in the country, must respect the law laid down by the High Court, whether of the State in which they are functioning or of a different State, in the absence of any contrary decision of any other High Court. A full Bench of this Tribunal in Madura Coats v. CCE, Bangalore - 1996 (82) E.L.T. 512 (Tribunal) spelt out the same principle by observing that since adjudication of vires of a provision of a Stat....
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....d by these appellants for a variety of services provided, whether to their members or others; and covering different facets, all fall within "Club or Association" service. In the FICCI adjudication order (as noticed in our analyses at Para 16(ii) supra), the adjudication order had concluded that the consideration received towards museum rent, contribution from allied organisation, by way of facilitation fees, on sale of its periodicals, sponsorship amount, miscellaneous receipts, other income and Government grants, all form part of the gross consideration received for rendition of "Club or Association" service. The Authority predicated this conclusion on provisions of Section 65A, a provision which provides guidance for classification of services and not for classification of the services provider. We noticed earlier that the show cause notice dated 28-12-2012 (issued to FICCI), clearly asserted in para 4 thereof that FICCI's liability to service tax arises on the basis of charges and allegations set out in an earlier show cause notice dated 19-10-2010 (the first show cause notice); and that the attributions/allegations in that show cause notice are applicable mutatis mutandis for ....
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....against a reasonable opportunity of asserting his objections against the proposed charges, indicated in the notice. Though a show cause notice should not be read hyper-technically, the notice must clearly indicate and provide an impression to the noticee on the basis of which liability is alleged, so as to provide him an opportunity of contesting the assertion and submitting his defence, if any. A show cause notice is not an empty formality or a ritual without a purpose. Learned DR has contended that mere mention of a wrong provision of a law (in the show cause notice) would not be fatal when the power exercised is available though under a different provision and such omission by itself would not vitiate the proceedings. Reliance is placed on the decision in Collector of Central Excise, Calcutta v. Pradyumna Steel Ltd. - 1996 (82) E.L.T. 441 (S.C.). This decision, in our considered view, offers no assistance to Revenue in the present lis. In the present case the infirmity is not on account of mere mention of a wrong provision of the Act. The 2011 amendments expanded the scope of taxable service to cover services provided to non-members of a "Club or Association", as well. The expan....
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....omotion Council constituted qua provisions of the Export-Import Policy. Its MOA and AOA enumerate its aims, objectives and functional responsibilities and clearly stipulate that provisions of its AOA shall be subject to provisions of the Foreign Trade Policy, as notified by the Central Government from time to time. We also noticed the basic objectives of Export Promotion Council as set out in the FTP; that the Handbook of FT procedure states that EPCs are non-profit organizations who are to be autonomous, competent to regulate their own affairs but subject to provisions of uniform bye-laws to be framed by the Central Government periodically for constitution and/or transaction or business by EPCs; and that EPCs are required to adopt such bye-laws with such modifications as the Central Government may approve, having regard to the special nature or functioning of such EPC. We also noticed that a list and product category of EPCs including Commodity Boards is set out in the Appendix to the FTP, stipulating EPC to be an Authority for issuing RCMC; and that ECSEPC is listed and recognized as an EPC, in the Appendix. In Dr. Indramani Pyarelal Gupta v. W. R. Nathu and Ors. - AIR 1963 SC....
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....n and which is gatherable from its express language or by necessary implication therefrom. The words "under the Act" would, in that context, signify what is not directly to be found in the statute itself but is conferred or imposed by virtue of powers enabling this to be done; in other words, by laws made by a subordinate law-making authority which is empowered to do so by the parent Act. This distinction is thus between what is directly done by the enactment and what is done indirectly by rule-making authorities which are vested with powers in that behalf by the Act. (vide Hubli Electricity Company Ltd. v. Province of Bombay, and Narayanaswami Naidu v. Krishnamurthi.) That in such a sense bye-laws would be subordinate- legislation "under the Act" is clear from terms of Sections 11 and 12 themselves. Section 11(1) enacts : "11. (1) Any recognized association may, subject to the previous approval of the Central Government make bye-laws for the regulation and control of forward contracts', and sub-section (2) enumerates the matters in respect of which bye-laws might make provision. Sub-section (3) refers to the bye-laws as these made under this section and the provisions of s....
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....rence to powers gatherable by necessary implication from the provisions of the Act. As an instance learned Counsel referred us to the power of the Central Government to direct the Commission to inspect the accounts and other documents of any recognized association or of any of its members and submit its report thereon to the Central Government under Section 8(2)(c) and suggested that this would be a case of power of duty which would be covered by the words "under the Act". We find ourselves wholly unable to accept this. If without the reference to the phrase "as may be prescribed" the words "under the Act" would comprehend powers which might be conferred under "bye-law" as well as those under "rules" we are unable to appreciate the line of reasoning by which powers conferred by bye-laws have to be excluded, because of the specific reference to powers conferred by "rules". Undoubtedly, there is some little tautology in other use of the expression "as may be prescribed" after the comprehensive reference to the powers conferred "under the Act", but in order merely to avoid redundancy you cannot adopt a rule of construction which cuts down the amplitude of the words used except, of cou....
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....Section 4A(2) of the Companies Act alternatively authorized the Central Government to specify an institution as a public financial institution if not less than fifty-one per cent of the paid-up capital of such institution is held or controlled by the Central Government. It was not in dispute that the requirements of Section 4A(ii) of the Companies Act were not satisfied by IFCI Limited, namely majority holding of the share capital or control by the Central Government. The issue therefore was whether the requirements of clause (i) of Section 4A(2) of the Companies Act, namely of IFCI Limited being established or constituted by or under any Central Act, were satisfied. The High Court explained that the expression "established" or "constituted under" has a different connotation from the expression "established" or "constituted by"; that the word "under" is wider in its sweep than the word "by". Drawing guidance from the principles postulated by the Supreme Court in R.C. Mitter & Sons v. CIT - AIR 1959 SC 868, the High Court ruled that the expression "constituted under any Central Act would have reference to institutions conceived or contemplated under a Central Act though subsequently....
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.... or Notification issued by the appropriate Government can result in its constitution as an "authority" or "institution of self-Government" and conferring upon the said body, the status of an 'authority' or an 'institution of self-Government'. The word "constituted" must be liberally interpreted to include cases where an organisation or a body is already set up by virtue of a Notification or order passed by an appropriate Government or a statutory body is conferred and given status of 'authority' or an "institution of self-government"; the words "established" or "constituted" have to be so read as to effectuate the legislative intent in Section 2(h) of the Act, observed the Court. The Court went on to explain that the word "under" would include establishment or constitution under power or authority conferred on an authority/body by an enactment, Notification/order; that a Notification or order could also be issued in exercise of Executive power and be a result of power conferred by legislation or even by subordinate legislation on an authority/body. As earlier noticed, the definition of "Club or Association" excludes from its ambit any body established or constituted by or under ....
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....iability to tax is proof of its bona fide belief that such is the case. Further the essential information and material which would have enabled initiation of proceedings by Revenue was available at any rate by the middle of 2007, when FICCI submitted its financial records, MOA and AOA. On a holistic consideration and analyses of these facts and circumstances we find no justification for invocation of the extended period of limitation under the proviso to Section 73(1) of the Act, for initiation of proceedings against FICCI. For reasons alike as in the case of invocation of the extended period, levy of penalties under Sections 76, 77 and/or 78, as the case may be, on FICCI is unjustified and arbitrary. The facts and circumstances legitimize invocation of the discretion under Section 80 of the Act to eschew penalties. This conclusion is recorded without prejudice and alternative to our conclusions on the substantive aspects covered by issues (a) to (d), in the case of FICCI. Invocation of the extended period of limitation and imposition of penalties on the other appellant-ECSEPC is equally illegal and unsustainable, for similar reasons as recorded by us in the case of FICCI, na....