ST - Club or Association - Applicant charging registration and subscription fee for providing services of guidance on business matters - Since they themselves are paying tax on club service w.e.f. 1.4.2009 there is no prima facie case in their favour: CESTAT
By TIOL News Service
MUMBAI, JAN 09, 2013: THE applicant is providing various services to its members such as general guidance on the various facts of business, representation of members' problems and views at local, state and central govt. level, networking and information sharing opportunities, free access to commercial reference library etc. The applicant is charging the members a one-time registration fee and also recovering annual subscriptions from them for providing the aforesaid services. It is the view of the department that the said "services" are classifiable under category of "Club or Association service" of the Finance Act, 1994 and service tax is leviable on the same.
As the Commissioner of Central Excise, Service Tax, Pune-III confirmed the demand in excess of Rs.20 lakhs and also imposed equivalent penalty and interest, the applicant is before the CESTAT.
It is submitted that the applicant is a company registered under Companies Act and one of the objectives of the chamber is to promote, add, stimulate, advance and protect trade, commerce, industry, agriculture and agricultural business in India; that as per the definition of the club or association service it does not include any person or body of persons engaged in the activities of trade unions, promotion of agriculture, horticulture or animal husbandry; that since the applicant is engaged in promotion of agriculture, therefore, by way of the exclusion clause of the definition of the service, applicant is not liable to service tax as the applicant conducts various programmes and seminars for agricultural and agro-based industry to create awareness and impart knowledge amongst agriculturist; that the applicant has formed a separate Agriculture and Agro-based committee for this purpose; that the applicant is also engaged in the activity having objectives in the nature of public service and as per exclusive definition of the club or association activity of public service is also excluded from the levy of the service tax.
Apart from also raising the bogey of limitation, the appellant also relied on the decisions in Ranchi Club Ltd. Vs. Chief Commr. of C.Ex. & S.T., Ranchi Zone = (2012-TIOL-1031-HC-JHARKHAND-ST) & Ahmedabad Management Association Vs. Commr. of S.T. Ahmedabad = (2009-TIOL-214-CESTAT-AHM).
The Revenue representative submitted that the SCN was issued for the period 16.6.2005 to 31.03.2009 and the adjudicating authority had already dropped the demand for the period 16.1.2005 to 31.3.2008 and the Commissioner has confirmed the demand only for the period 1.4.2008 to 31.3.2009; that there is nothing on record to suggest that any activity for the promotion of agriculture has been initiated by the applicant. It was further submitted that from 1.4.2009 the applicant is already paying the service tax on Club or Association service and on this ground alone, the applicant should be directed to pay the pre-deposit for hearing the appeal.
The Bench observed -
"5. After hearing both the sides, we find that demand in the impugned order pertains to the period 1.4.2008 to 31.3.2009 and this is a fact that the applicants is paying service tax w.e.f. 1.4.2009. Since they themselves are paying service tax on the club or association service w.e.f. 1.4.2009 there is no prima facie case in their favour.
6. The applicant has relied on the decision of the Jharkhand High Court in the case of Ranchi Club Ltd.(supra), we find that the Hon'ble High Court has held that service tax is not liable on the members of the club as the club is giving service to its member and club is formed on the principle of mutuality and, therefore, any transaction by the club with its member is not a transaction between two parties. In a Member's Club when club is disbanded the members of the club have rights on the assets of the club. The applicant has not been able to give any evidence to prove that applicant is a Member's club and there is mutuality between club and the members. Therefore, in the absence of any such evidence the ratio of the Ranchi Club Ltd. (supra) case cannot be applied in the present case.
7. As regards the decision of Tribunal in case of Ahmedabad Management Association (supra), the service tax of Rs.1,91,233/- was demanded for club or association service for the period 16.6.2005 to 31.3.2008 and the Tribunal allowed the appeal on the ground that the Revenue has not shown what are the services or advantages which members received as a result of making subscription or paying any other amount to Ahmedabad Management Association. We find that for the period 16.6.2005 to 31.3.2008 the Commissioner herself has dropped the demand and in the present case the Revenue has been able to provide the detail of services given by the applicant to the members. Therefore, the ratio of this decision also does not support the applicant's case."
Holding so, the CESTAT directed the applicant to make a pre-deposit of Rs.5 lakhs for obtaining Stay in the matter.
(See 2013-TIOL-56-CESTAT-MUM)
