By TIOL News Service

MUMBAI, AUG 12, 2015: M/S. Tahnee Heights Co-operative Housing Society formed a society in which all the members are shareholders. The society is registered under the Maharashtra Co-operative Societies Act, 1960. Charges are collected from the members for maintenance, repair, beautification etc. According to the appellant, they offer services to self and, therefore, would not be covered under service tax. In their view, they are covered by the exclusion clause under Section 65(25a) which excludes anybody established or constituted by or under any law from the coverage of ‘club or association'. The appellant had however, paid service tax on persuasion by the department. Later, they filed refund claims.

Revenue took a view that the exclusion clause only refers to bodies which are established or constituted under a Statute and not bodies which are formed and registered under a statute . And, therefore, the refund claims were rejected on merits without going touching upon the aspect of unjust enrichment.

Before the CESTAT the appellant relied on the following decisions in support of their contention that they are not liable to service tax -

(i) Ranchi Club - 2012-TIOL-1031-HC-JHARKHAND-ST

(ii) Sports Club of Gujarat - 2013-TIOL-528-HC-AHM-ST

(iii) M/s. Federation of Indian Chambers of Commerce & Industry - 2014-TIOL-701-CESTAT-DEL.

The Bench adverted to the decisions relied upon by the appellant and observed that in view of the judgments the issue at hand is no more res integra .

Inasmuch as the appellants were not liable to service tax, the CESTAT held, and accordingly set aside the order and allowed the appeal with consequential relief.

There were three other appeals involving common issue and, therefore, a common order was passed. See 2015-TIOL-108-CESTAT-MUM.

But, for the assessee, this was only a job half-done. The refund of Rs.93,00,365/- had yet to come.

Following their success in the Tribunal, the petitioner claimed the amount under the refund claims with interest . After all, interest on 93 lakhs for almost seven years would be a nice amount!

There is correspondence exchanged with the department from 6.1.2015 but apparently the appellant is not fully satisfied.

This is because they have been paid only the principal sum but the claim of interest has been refused, according to them, not for any other reason but only because of a communication of the department dated 22.6.2015.

This communication states that the matter is still under dispute as the Department has not accepted the CESTAT order and is in the process of filing appeal against the said order . Therefore, the request for payment of interest at this juncture is premature and cannot be considered.

Not happy with this communication, the appellant has filed a Writ Petition before the Bombay High Court.

The affidavit by Revenue reiterates the stand taken by the department and mentions that - having received Rs.93,00,365/, the petitioner must wait till the outcome of the proceedings which have been initiated before the Hon'ble Supreme Court.

The High Court was apparently peeved with this reply and made the following observation -

"We do not see how and why the petitioner should go on initiating proceedings as the order of the Tribunal is clear. The order passed on 18.12.2014 determines the dispute and about the recovery of the amount of tax itself. Once the Tribunal holds that the tax is not recoverable and sets aside the order-in-original and order-in-appeal, and allows the petitioner's request as contained in the appeal before the CESTAT with consequential reliefs, then, we do not see why the petitioner should go on litigating and against the order dated 3.6.2015 communicated to them on 9.6.2015 by the Department."

The Counsel for the Revenue, on instructions, stated that the appeal against the order of CESTAT has been lodged by the Department/ Revenue in the Supreme Court of India and is pending before the registry of that Court;that the Department is taking steps to remove all office objections, get that appeal registered and, thereafter, placed before a bench of Supreme Court of India.

The High Court added -

"…we are mindful of the fact that some compliances and in procedural matters before the Supreme Court of India takes time. However, we do not find any justification and when the impugned order of the CESTAT was passed on 18.12.2014 and the appeal is indeed lodged in the Supreme Court of India, in the Revenue not taking any steps to comply with the procedural requirements. This only means that the Revenue having complied with the Tribunal's order and granted refund partially, has withheld the interest claim on a possible realisation that if this is also awarded and paid, the proceedings before the Supreme Court would be rendered infructuous. This cannot be the legal position nor can the understanding of the parties be based on the same. The Revenue had ample time to obtain such interim order from the Supreme Court as is permissible in law so that it is relieved from the obligation to pay interest on the Principal sum. However, it has not taken any such steps and there are no interim prohibitory or restraint orders in Revenue's favour."

The Writ Petition was, therefore, disposed with a direction that the Revenue should take requisite steps in the pending proceedings before the Supreme Court within a period of two months from the date of receipt of copies of this order and if within this period it is unable to obtain any interim stay or restraint order in the aforesaid terms, then, it must release the sums outstanding and towards interest within a period of four weeks from the date of expiry of the above period.

(See 2015-TIOL-1828-HC-MUM-ST)