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2015 (9) TMI 1389 - CESTAT MUMBAI

2015 (9) TMI 1389 - CESTAT MUMBAI - 2015 (40) S.T.R. 973 (Tri. - Mumbai) - Refund claim - Unjust enrichment - cum-tax computation - deposit of tax which was not leviable - Service tax was paid as Clubs or associations service on amounts collected as entrance fee for admission of new members - Held that:- Mere capacity to deliver a service cannot be equated with providing or agreeing to provide a service; such service has to reach the recipient in exchange for the consideration or the considerati .....

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l not arise. Contributions for the discharge of liabilities or for meeting common expenses of a group of persons aggregating for identified common objectives will not meet the criteria of taxation under Finance Act, 1994 in the absence of identifiable service that benefits an identified individual or individuals who make the contribution in return for the benefit so derived.

Tax was paid on the entrance fee without collecting the tax amount from the new members. Though the first appel .....

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iable, if any, thereon. For both these reasons, it can be concluded that tax burden has not been transferred to the members from whom entrance fees were collected. Clearly, the service tax so paid does not carry the taint of unjust enrichment. - Decided in favour of assessee. - Appeal No. ST/20/2009 - Final Order No. A/3117/2015-WZB/STB - Dated:- 21-9-2015 - S. S. Garg, Member (J) And C J Mathew, Member (T) For the Appellant : Shri Vipin Kumar Jain & Shri Rashil Nichani, Advs For the Respond .....

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Mumbai in early 2006 consequent upon introduction of levy of tax for rendering of "club or association service" under section 65 (105) (zzze) of Finance Act, 1994 with effect from 16 th June, 2005. Refund of this amount was sought in application dated 7 th June 2006 claiming that the entrance fee was not liable to tax. The Assistant Commissioner of Central Excise, Division II, Service Tax Commissionerate, Mumbai rejected the claim vide order-in-original no. AKS/R02/2008 dated 18 th Ja .....

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orated in 1933 under India Companies Act, 1913; these, till recently, were governed by the provisions of section 25 of the Companies Act, 1956 and now under section 8 of Companies Act, 2013. For this reason it is claimed to be a members club as opposed to the other category of clubs, viz., proprietory clubs. While both accord facilities to its members, the former are run by the members themselves through appropriate management bodies and the latter by promoters in the business of running clubs. .....

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dance with which, club and members being indistinguishable, the scope of transactions between the former and the latter was held to be beyond the scope of taxation. The decision of the Tribunal in Breach Candy Swimming Bath Trust v Commissioner of Central Excise, Mumbai - I [2007(5) STR 146 (Tri-Mumbai)] which relied upon the principle of mutuality as applied to clubs by the Hon'ble Supreme Court in Chelmsford Club vs Commissioner of Income Tax [2000 (243) ITR 89 (SC)], Commissiner of Income .....

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y service rendered by the appellant thereby eliminating it from scope of levy of service tax as held by the Tribunal in Cochin International Airport v. Commissioner of Central Excise Kochi [ 2007 (7) STR 486 (Tri-Bang) and Euro RSCG Advertising Ltd. v. Commissioner of Service Tax Bangalore [2007 (7) STR 277 (Tri-Bang]. Anticipating the resort to "unjust enrichment' for denying the refund claim, the appellant also intimated the lower authorities that no amount over and above the stipulat .....

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licable to M/s Cricket Club of India. Further, it was held that entrance fees was tantamount to advance payment for facilities of the club and that the charging section relating to taxation of "clubs or associations" was extendable beyond subscriptions to include any other amounts collected from members. The same were reiterated in the proceedings before the first appellate authority who has, however, endorsed the findings of the Assistant Commissioner. 4. Ever since "clubs or ass .....

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readbare and articulated in judgments at the highest level in India and other countries with similarly strong traditions of jurisprudence. That such disputes have arisen, and that they attracted juristic attention, is not surprising considering that clubs and clubbing have been culturally ingrained in human life across space and time. Fulfilling as it does the basic human need for socializing, any curbs or restrictions cast on these by tax officials, in particular, have been resisted with fervou .....

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n by learned Counsel for the appellant. The decision of the Hon'ble High Court of Jharkhand in Ranchi Club Ltd v Chief Commissioner of Central Excise & Service Tax [2012 (26) STR 401 (Jhar)] has drawn a distinction between members' clubs and proprietary clubs while holding that, in accordance with the principle of mutuality, the two entities required to complete a taxable transcation are not in existence in relation to the former. Referring to this decision, Hon'ble High Court of .....

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ation for any service; that it is a fee paid for acquiring membership which is not only not a service but does not, of itself, assure any other facility without further payment. This is a fundamental issue raised on behalf of the appellant that goes beyond the principle of mutuality. 6. The contention of the appellant in this case is that they were made to deposit a tax which is not leviable. According to them, the amount collected as entrance fee was not a consideration for rendering of any ser .....

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n to the decisions of the Tribunal in India International Centre v Commissioner of Service Tax [2007 (7) STR 235 (Tri-Del)] and Dehradun Club Ltd v Commissioner of Central Excise, Meerut-I [2007 (7) STR 519 (Tri-Del)] all of which uniformly relied on the principle of mutuality to set aside the taxes demanded and that these arguments and the judicial pronouncements did not appear to find favour at the adjudication and first appellate stages despite the ruling of the Hon'ble High Court of Bomb .....

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65 (25aa) of Finance Act, 1994. 8. The principal of mutuality applies squarely to the appellant as a members' club and the ruling of the Hon'ble High Court of Gujarat would settle the case in favour of the appellant. Nevertheless, the fundamental question raised by the appellant calls for a response from this Tribunal for two reasons; firstly, the pendency of the appeals before the Hon'ble Supreme Court is likely to be construed as sufficient cause for continuing to not only demand .....

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ociation" from its members. 9. Our jurisdiction to entertain this plea exists only in a limited sphere in the context of the general supposition that legislation will not ever stray beyond the bounds of constitutionality (Principles of Statutory Interpretation - Justice GP Singh pp 44-45, Thirteenth Edition 2012) and is derived from that supposition. This does not, however, rule out the possibility of the tax administrator assuming a jurisdiction beyond legislative intent; all too often, th .....

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t, 1994 is intended to tax services. The relevant charging section, therefore, cannot and should not be read beyond the transaction that is intended to be taxed. Plainly expressed, only services can be taxed. Habituated to tax on tangible goods, the concept of tax on services may not be easily appreciated for the very reason of its intangibility. The form of the transaction not being apparent until its benefit is perceived in the hands of the recipient and signified by readiness to recompense th .....

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ervice is rendered to a recipient. Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. Without an identified recipient who compensates the identified provider with appropriate consideration, a service cannot be held to have been provided. In a taxation scheme that specifies the particular targets of taxa .....

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em tax will be levied. This fundamental will not alter in the scheme of the negative list too; a service that is clearly identifiable has to be provided or agreed to be provided before it can be taxed. The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow cannot be moulded by tax authorities into a taxable event without identifying the specific activity that links the provider to the recipient. 12. For that very reason, mere capacity to de .....

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dentified provider to an identified recipient. Unless the existence of provision of a service can be established, the question of taxing an attendant monetary transactions will not arise. Contributions for the discharge of liabilities or for meeting common expenses of a group of persons aggregating for identified common objectives will not meet the criteria of taxation under Finance Act, 1994 in the absence of identifiable service that benefits an identified individual or individuals who make th .....

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e to tax merely for that reason. Neither can monetary contribution of the individuals that is not attributable to an identifiable activity be deemed to be a consideration that is liable to be taxed merely because a "cub or association" is the recipient of that contribution. The definition of "taxable service" in section 65 (105), in relation to every appurtenant thereto is preceded by the phrase "services provided or to be provided" which when read, in the context o .....

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nterpretation of legislative intent. Accodingly, every fee or charge payable by members to a "club or association" does not, ipso facto, become taxable. 14. "Clubs or associations" generally charge entrance fees as well as periodical subscriptions. They may and, often do, provide facilities for recreational, social and victualling requirements of its members. Such facilities may or may not entail an identifiable charge but, most often, do - certainly they do so for the latter .....

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efore ascertaining whether that identified service is taxable. 15. The entrance fee is a one-time payment that is visited upon members of "clubs or association". It affords their inclusion into the restricted group that constitutes membership of the club or association. Such entrance fees do not usually confer access to services, facilities or advantages for which membership of the club or association is keenly sought. Membership is contingent upon tendering prescribed subscription at .....

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acquired by the appellant since its establishment and that a proportional share of the value of the asset would devolve on members should the establishment be wound up. Being the present value of a future distribution of sale proceeds and bringing naught other than acknowledgement as a member of the club or association, it is not attributable to a service rendered by the appellant. This contention is convincing in the absence of an alternative explanation for the charging of entrance fee and we .....

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the club or association for which a service provider may or may not be contracted but the contributing members are not the direct beneficiaries of such services. Contribution to expenses cannot, by any stretch, be deemed to be consideration for any identified service rendered to individual members by access to the facilities or advantage that is within the wherewithal of the "club or association". However, to the extent that it is possible to identify the facilities, advantage or servi .....

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