By TIOL News Service

MUMBAI, OCT 29, 2015: THE assessee is a Co-operative Society and is engaged in accepting deposits, lending and operation of the accounts.

The Revenue noticed that the appellant had not discharged the service tax liability on the various fees collected by them from the members in respect of the functioning of the Society.

SCN was followed by adjudication and confirmation of tax demand and interest and penal liabilities.

The Commissioner(A) agreed with the o-in-o in the matter of tax liability and interest but concurred with the view of the appellant that the tax liability needs to be re-worked. So also, while upholding penalties imposed u/ss 77 & 78 he set aside the penalty imposed u/s 76 of the FA, 1994.

Both, the assessee and Revenue are before the Tribunal. Another appeal by assessee involving similar facts was also taken up together.

The appellant submitted that the appellant is a Co-operative Society formed for the welfare of its members; they accept deposits from its own members and distribute the said amount as a loan to its own members and is not extending loan to outsiders and not functioning as a financial institution engaged in financial activities towards general public; being a Co-operative Society run by members, question of service tax on any charges collected from their members does not arise. Reliance is placed on the following decisions in support - Green Environment Services Co-op. Soc. Ltd. - 2014-TIOL-2355-HC-AHM-ST, Punjab State Federation of Co-operative Sugar Mills Ltd - 2014-TIOL-1358-CESTAT-DEL.

The AR supported the order of the adjudicating/appellate authority to the extent it was favourable to the Revenue.

The Bench observed -

"6.2 Undisputed facts that transpires from the records are that appellant assessee is a society of members formed for the welfare of its members; they are accepting deposits from their members and interest is paid on the said deposits; members are given loan to tide over their financial difficulty; charged interest from the members. In order to process such loan applications, appellant assessee charges amounts as incurred for stationery, other expenses. These amounts, according to revenue, are collected by the appellant, according to revenue in the course of rendering the services under the category of banking and other financial services.

6.3 From the factual matrix as reproduced hereinabove, it transpires that the appellant assessee is functioning as a co-operative Society for their members and welfare of their members only. They do not extend any loan or accept any deposits from public at large. The services rendered by the appellant assessee, if any, is to their own members is undisputed. We find that the learned Counsel was correct in placing reliance on the judgment of the Honourable High Court of Gujarat in the case of Green Environment Services Co-op. Soc. Ltd. (supra). …"

The impugned orders were set aside and the appeals filed by appellant assessee were allowed with consequential relief, if any. The Revenue appeal was consequently rejected.

(See 2015-TIOL-2315-CESTAT-MUM)