2018 (10) TMI 901 – CESTAT MUMBAI – TMI – Refund claim – duty paid under protest – interpretation of statute – 'Distinct Person' – Club or Association service – grounds assigned for claim of refund were that there are no distinct persons viz, service provider and service receiver and since the person contributing and benefiting are the same, as per the principles of mutuality, the activities should not be subjected to levy of service tax.
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Whether the ld. Commissioner (Appeals) has correctly interpreted the statutory provisions to conclude that the appellant's society and its members are distinct persons due to Explanation 3(a) to Section 65B(44) of the Finance Act, 1994 and therefore, should not be entitled to the benefit of refund of service tax paid on charges recovered from its members?
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Held that:- There is no much of difference for recognition of the taxable service in dispute, for levy of service tax, under both the un-amended and amended provisions of the service tax
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pon registration of the society, the same is legally accepted as a body corporate and thereafter, its function and operation are strictly guided as per the laid down bye laws, provided for the purpose. In this case, it is no doubt, a fact that the appellant is a co-operative society and is duly incorporated under the Act of 1960. The appellant also do not provide any service to its members, who pay the amount towards their share of contribution, for occupation of the units in their respective possession – the purpose for which the appellant's society was incorporated, clearly demonstrate that it is not at all provides any service to its members and the share of contribution is to meet various purposes – the case of the appellant is not confirming to the requirement of 'service', as per the definition contained in Section 65B(44) of the Act.
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The activities undertaken by the appellant should not fall within the scope and ambit of taxable service, for payment of service tax – Refund
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er and spends the same for the common benefits of all those, who have made the contribution. 1.2 For the period July' 2015 to January' 2017, the appellant had paid service tax amount of ₹ 20,77,586/- under the category of "Club or Association service", in respect of the contributions received from its members. Such amount was paid 'under protest'. Subsequently, the appellant had filed six nos. of refund applications before the jurisdictional Service tax authorities, claiming refund of service tax paid on such service. The grounds assigned for claim of refund were that there are no distinct persons viz, service provider and service receiver and since the person contributing and benefiting are the same, as per the principles of mutuality, the activities should not be subjected to levy of service tax. It was further contended that the appellant being a body corporate, its case will not be governed by explanation 3(a) appended to Section 65B(44) of the Finan
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consideration inasmuch as the appellant only recovers contribution from the members and its apportionment is pre-decided in accordance with the bye-laws of the society. Thus, he submitted that due to the principle of mutuality, there are no distinct persons and therefore, the transaction does not fall within the ambit of first part of the definition of "service". The ld. Advocate further submitted that due to the incorporated status of the appellant, the explanation 3 (a) of Section 65B(44) of the Finance Act, 1994 does not apply for levy of service tax. The ld. Advocate has relied on the decisions of this Tribunal in the case of Federation of Indian Chambers of Commerce & Industry -Vs.- C.ST., Delhi [2015 (38) STR 529 (Tri.-Del.)], Matunga Gymkhana -Vs.- Commissioner of Service Tax, Mumbai [2015 (38) STR 407 (Tri.-Mumbai)] and order dated 26.04.2018 of the Tribunal passed in Appeal No. ST/11732/2017, in the case of Commissioner of Service Tax, -Vs.- Rajpath Club Ltd., t
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n 65B(44) of the Finance Act, 1994 and therefore, should not be entitled to the benefit of refund of service tax paid on charges recovered from its members. 6. The relevant statutory provisions of the Finance Act, 1994, both prior to and after amendment (w.e.f. 01.07.2012) are extracted herein below :- Period prior to 01.07.2012 Section 65 (25aa) : "club or association" means 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 any body established or constituted by or under any law for the time being in force. Section 65(105)(zzze) : "taxable service means any service provided or to be provided to its members or any other person by any club or association in relation to provisions of services, facilities or advantages for a subscription or any other amount. Explanation – For the purposes of this section, taxable service includes any taxable service provided or t
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members is concerned, it is an undisputed fact that such incorporated association is a distinct legal entity. However, since the association was formed or constituted and existed for the exclusive purpose of catering/meeting to the requirements of its members, as per the laid down policy in the bye law, it cannot be said that there is involvement of two persons, one to be termed as the service provider and the other as the service receiver. Thus, the incorporated association and its member being one and the same, the activities undertaken or the services provided by the former will not be considered as a service, exigible to service tax under the principle of mutuality. 8. Considering various judgments delivered by Hon'ble Supreme Court and the Hon'ble High Courts on the issue of principle of mutuality vis-a-vis leviability of tax on the club or association service, this Tribunal in the case of Federation of Indian Chambers of Commerce & Industry (supra) has held that on ap
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ascertaining the status of the appellant, whether an incorporated body or otherwise, for the purpose of consideration of applicability of explanation 3(a) appended to Section 65B of the Act, I have examined the relevant provisions of the Act of 1960 and the model bye laws provided therein. Under Section 36 in the Act of 1960, it has been provided that "the registration of a society shall render it a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to ………………………………… and to do such other things as are necessary for the purpose for which it is constituted". Further, clause 67 of Maharashtra Co-operative Housing Society Bye Laws, formulated under the Act of 1960 earmarked the charges, in the form of contribution to be collected from the members of the society, which relates inter alia, for payment of property taxes, water charges, common electricity charges, contribution to repair and mai
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appellant cannot be termed as an unincorporated association or a body of persons, for the purpose of consideration as a 'distinct person'. Accordingly, the explanation furnished under clause 3(a) in Section 65B of the Act will not designate the appellant as an entity, separate from its members. Furthermore, the purpose for which the appellant's society was incorporated, clearly demonstrate that it is not at all provides any service to its members and the share of contribution is to meet various purposes as stated above. Therefore, I am of the considered view that the case of the appellant is not confirming to the requirement of 'service', as per the definition contained in Section 65B(44) of the Act. 11. In view of the foregoing discussion and analysis, it is concluded that the activities undertaken by the appellant should not fall within the scope and ambit of taxable service, for payment of service tax. Therefore, service tax amount paid by the appellant should be
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