ST - Petitioner society, engaged in maintaining common ETP and providing facility to members - s.65(25a) was declared unconstitutional by HC - notification also gives retro exemption - Demand of Rs 71 lakhs set aside: HC
By TIOL News Service
AHMEDABAD, DECEMBER 25, 2014: THE petitioner is a society registered under the Gujarat Cooperative Societies Act and is engaged in the activity of maintaining a common effluent treatment plant at Vatva Industrial Estate, Ahmedabad. They provide the facility of common effluent treatment to its members through the medium of cooperative society.
For the said services provided by the society, the department has raised and confirmed a Service Tax demand of Rs.71.43 lakhs and also added penalties and interest in good measure. The SCN dated 28.02.2007 covers the period 16-06-2005 to 31-03-2006.
Before the High Court, the petitioner has challenged the vires of Section 65(25a) and also 65 (105) ( zzze ) of the FA, 1994 as amended by FA, 2005 and the order-in-original passed. The petition has been filed in the year 2007 and has been decided recently.
The case of the petitioners is that such society was created solely with a purpose of providing effluent treatment facility commonly to its members who were the industrial establishments located at Vatva . Any service provided by them, therefore, could not be made taxable since it was merely a service provided by the members to themselves. There was no element of any commercial service provided by the service provider to its consumers.
Before the High Court, the petitioner submitted that the provision of Section 65(25a) of FA, 1994 insofar as it pertains to the service provided by a society to its members, came to be declared as unconstitutional by a Division Bench of the Gujarat High Court in the case of Sports Club of Gujarat Ltd. v. Union of India and Others 2013-TIOL-528-HC-AHM-ST .
The High Court held -
++ The issue being covered by the said decision and the ratio laid down therein and such provision having been declared unconstitutional to the extent noted above, impugned order dated 9.10.2007 passed by the Commissioner of Service Tax is required to be set aside.
Interestingly, the counsel for the Revenue pointed out that by a notification giving retrospective effect such services have been exempted from payment of service tax.
To this submission, the High Court observed - In our opinion, this would be one of the additional ground for setting aside the impugned order of adjudication.
In fine, the order dated 9.10.2007 passed by the Commissioner of Service Tax confirming the ST demand of Rs.71.43 lakhs and imposing penalties and interest was set aside.
In passing - reference : Finance Act, 2011 enacted on 08.04.2011 -
SECTION 96J. Special exemption from service tax in certain cases.
(1) Notwithstanding anything contained in section 66, no service tax shall be levied or collected in respect of membership fee collected by a club or association formed for representing industry or commerce, during the period on and from the 16th day of June, 2005 to the 31st day of March, 2008 (both days inclusive).
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(See 2014-TIOL-2355-HC-AHM-ST)