TaxTMI 
TaxTMI 
2015 (9) TMI 1389
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....ne 2006 claiming that the entrance fee was not liable to tax. The Assistant Commissioner of Central Excise, Division II, Service Tax Commissionerate, Mumbai rejected the claim vide order-in-original no. AKS/R02/2008 dated 18 th January 2008 and the Commissioner of Central Excise (Appeals), Mumbai Zone -I in order-in-appeal YG(19)/STC/2008 dated 29 th October 2008, upheld the rejection of claim while modifying the tax levy to the extent Rs. 9,34,244 on the ground that the taxable value was to be reduced as service tax had not been collected from members. Aggrieved by the rejection of their refund claim the appellant is before us. 2. The appellant is a company limited by guarantee having no share capital and was incorporated in 1933 under India Companies Act, 1913; these, till recently, were governed by the provisions of section 25 of the Companies Act, 1956 and now under section 8 of Companies Act, 2013. For this reason it is claimed to be a members club as opposed to the other category of clubs, viz., proprietory clubs. While both accord facilities to its members, the former are run by the members themselves through appropriate management bodies and the latter by promoters in the ....
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.... other taxes, could not be extended to service tax and that the decision in re Breach Candy Swimming Bath Trust was not applicable to M/s Cricket Club of India. Further, it was held that entrance fees was tantamount to advance payment for facilities of the club and that the charging section relating to taxation of "clubs or associations" was extendable beyond subscriptions to include any other amounts collected from members. The same were reiterated in the proceedings before the first appellate authority who has, however, endorsed the findings of the Assistant Commissioner. 4. Ever since "clubs or associations" were brought under the ambit of section 65 (105) (zzze) of Finance Act, 1994, the extent and reach of the levy has been the subject of dispute on various counts at different forums. Geographically, such disputes have not been restricted to our borders having received juridical response in England and elsewhere and, historically, the dispute in India dates further back in time to the 1950s under other tax laws. The distinctive features of clubs have, thus, been deliberated upon threadbare and articulated in judgments at the highest level in India and other countries with sim....
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....ervice and, even if deemed to be a consideration, it is not taxable being a transaction with members who are not distinguishable from the club itself. The latter flows from the fundamental premise that transactions with or restricted to oneself is beyond the ambit of taxability as enunciated by the Hon'ble Supreme Court in Joint Commercial Tax Officer v Young Men's Indian Association [AIR 1970 SC 1212]. It was also brought to our notice that attention of the lower authorities had been drawn to the decisions of the Tribunal in India International Centre v Commissioner of Service Tax [2007 (7) STR 235 (Tri-Del)] and Dehradun Club Ltd v Commissioner of Central Excise, Meerut-I [2007 (7) STR 519 (Tri-Del)] all of which uniformly relied on the principle of mutuality to set aside the taxes demanded and that these arguments and the judicial pronouncements did not appear to find favour at the adjudication and first appellate stages despite the ruling of the Hon'ble High Court of Bombay in Commissioner of Income Tax v Smt Godavaridevi Saraf, Tumsar [1978 (2) ELT (J 624)(Bom)] about the binding nature of judicial pronouncements. 7. The learned Authorized Representative submits t....
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....d the transaction that is intended to be taxed. Plainly expressed, only services can be taxed. Habituated to tax on tangible goods, the concept of tax on services may not be easily appreciated for the very reason of its intangibility. The form of the transaction not being apparent until its benefit is perceived in the hands of the recipient and signified by readiness to recompense the provider, the tendency to seize upon the tangibility of the flow of compensation to presume the existence of a service becomes irresistible. And that is when the tax determination exceeds legislative intent. 11. Owing to its inherent intangibility, a service transaction becomes recognizable only if a benefit accrues to a recipient and that explains the use of the phrase "provided or agreed to be provided" to determine taxability. It is taxable only if and when any, or a particular, service is rendered to a recipient. Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. Without an identified recipient who compe....
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....nstinct of human beings. The formality of the structure assumed by this aggregation is not relevant. Such an aggregation may have the wherewithal to provide services- and some of them taxable - but such capacity does not render the "club or association" liable to tax merely for that reason. Neither can monetary contribution of the individuals that is not attributable to an identifiable activity be deemed to be a consideration that is liable to be taxed merely because a "cub or association" is the recipient of that contribution. The definition of "taxable service" in section 65 (105), in relation to every appurtenant thereto is preceded by the phrase "services provided or to be provided" which when read, in the context of the appellant, at (zzze) i.e. "to its members, or any other person, by any club or association in relation to provision of services, facilities or advantages for a subscription or any other amount" and with section 65 (25a) defining "club or association" i.e. "any person or body of persons providing services, facilities or advantages, primarily to its members, for a subscription or any other amount, but does not include......" precludes any alternative interpretati....
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....explanation for the charging of entrance fee and we, therefore, conclude the service tax is not leviable on such entrance fees. 16. "Clubs or associations" and entities that need funds to exist in the form that they have assumed or evolved. Wages of employees and costs of running the establishment, such as energy charges, maintenance and repairs etc., are necessary expenses for such sustenance. Implicit in membership of clubs and associations is the obligation to share in such expenses. These are required for maintaining the assets of the club or association for which a service provider may or may not be contracted but the contributing members are not the direct beneficiaries of such services. Contribution to expenses cannot, by any stretch, be deemed to be consideration for any identified service rendered to individual members by access to the facilities or advantage that is within the wherewithal of the "club or association". However, to the extent that it is possible to identify the facilities, advantage or services of the "club or association" utilized without further payments specifically attributable to such facility, advantage or service, the subscription will be taxable. ....