Gujarat High Court in Sports Club of Gujarat Limited, as the relevant provisions (namely section 62 (25a), Section 65 (105)(zzze) and Section 66 of the Act), to the extent these provisions purport to levy service tax in respect of services provided by a club of association to its members is declared ultra vires, we hold that there are no operative legislative provisions of the Act legitimising the levy and collection of service tax from the appellants, for providing Club or association service, in so far as these relate to any services provided to members of these appellants.
1. The appellant is in appeal against the impugned order demanding service tax under the category of club or association services.
2. The brief facts of the case are that the appellant is registered with the Service Tax Department and paying service tax under the category of club or association services on the amount collected as non-refundable fee and annual subscription fee. The appellant is also providing services to its members namely: Room Tariff, Tambola Income, Swimming pool usage charges, Tennis Charges, Billiard Income, Squash Charges, Library Charges, Guest Fee, Karate Income, Fax/ Photocopy Charges and Issuance of card to members. All these services, the appellant is charging certain amount from the members of its club. The Revenue is of the view that all these services are under the category of club or association services as per Section 65 (105)(zzze) read with section 65 (25a) of the Finance Act, 1994. In these set of facts, a show cause notice was issued to the appellant to demand service tax which was adjudicated and demand of service tax was confirmed along with interest and penalty was also imposed. Aggrieved from the said order, the appellant is before us.
3. The Ld. Counsel for the appellant submits that it is not in dispute that all these services have been provided by the appellant to its members. Therefore, in the light of the decision of the Honourable High Court of Gujarat in the case of Karnavati Club Limited reported in 2010 (20) STR 169 (Guj.), which has been affirmed by the Honourable Apex Court in SLP (Civil) No. CC 6279/2010 on 09.09.2009 wherein, it has been held that any service provided by the club to its members is not a service, as there is mutuality of interest and the service provider and the service recipient are the same, therefore, they were not liable to pay service tax. Following the said decisions, this Tribunal in the case of DLF GOLF Resorts Limited vide Final Order No. ST/A/53797-53798/2015 dated 20.11.2015 held that service tax is not payable. Further it is submitted that in the case of Sports Club of Gujarat MANU/GJ/0387/2013, the Honourable High Court of Gujarat held that the provisions of section 65 (105) (zzze) read with section 65 (25a) are ultra virus, therefore, the impugned order is to be set aside.
4. Heard both the sides and considered the submissions.
5. We find that in the case of DLF Golf Resorts Limited (Supra) wherein the facts of the case are as under:
2. The assessee M/s DLF Golf Resorts Limited, is holder of service tax registration for providing services of Mandap Keeper, Health Club & Fitness Centre, BAS, Membership of Clubs, maintenance or Repair Services, Manpower Recruitment Services, Renting of immovable property and sponsorship services. On scrutiny of records, it was observed by the department that during the period 16.06.2005 to 31.03.2005 though assessee was collecting charges from members of the club for various services like Green Fees, Academy Revenue, Lessons Fees, Package Horse Riding, Night Charges, Non-member Academy Revenue, Guest Fees, Package Tennis Charges, Tournament Charges, Swimming Gala etc. they were not paying service tax on amount collected for these services. The department entertained the view that such amount collected by assessee would fall within the ambit of any other amount as defined under Section 65(105)(zzze) read with Section 65 (25a) of the Finance Act, 1994. A show cause notice dated 27.07.2005 was issued. After adjudication the original authority confirmed the demand of service tax of Rs. 62,45,399/- for services of Green Fees, Academy Revenue, Lesson Fees, Package horse ride charges, Night Charges, Non-members academy Revenue, guest fees, package tennis charges, Tournament Charges, Swimming gala, caddy fees (manpower recruitment & supply). The service tax for the category of manpower recruitment or supply service for the period 16.06.2005 to 31.03.2007 was already discharged by the appellant along with 25% penalty, and the same was ordered to be appropriated by the Commissioner, vide the impugned order. The Appeal No. ST/629/2009 is filed by assessee challenging the confirmation of demand of service tax on the above services.
4. At the time of hearing the ld. Counsel for assessee, Sh. B.L. Narasimhan submitted that the issue whether the services of a club or association to its members is taxable is now settled by judgements of various High Courts and the Tribunal.
In Ranchi Club Ltd. Vs. CCE, 2012 (26) STR 401 (Jhar.) the Honourable High Court observed as under:-
18. However, learned counsel for the petitioner submits that sale and service are different. It is true that sale and service are two different and distinct transactions. The sale entails transfer of property whereas in service, there is no transfer of property. However, the basic feature common in both transaction requires existence of the two parties; in the matter of sale, the seller and buyer, and in the matter of service, service provider and service receiver. Since the issue whether there are two person or two legal entity in the activities of the members club has been already considered and decided by the Honourable Supreme Court as well as by the full bench of this court in the cases referred above. Therefore, this issue is no more res-integra and issue is to be answered in favour of the writ petitioner and it can be held that in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another in the light of the decisions referred above as foundational facts of existence of two legal entities in such transaction is missing. However, so far as services by the club to other than members, learned counsel for the petitioner submitted that they are paying the tax.
5. The Honble High Court of Gujarat at Ahmedabad in Sports Club of Gujarat Ltd. Vs. UOI-2013 (31) STR 645 (Guj.) has held Section 65(25a), Section 65 (105)(zzze) and Section 66 of the Finance Act, 1994 as incorporated/amended by Finance Act, 2005 to the extent that the said provisions purport to levy service tax in respect of services provided by club to its members to be ultra- vires.
6. The CESTAT in M/s FICCI Vs. Commissioner of Service Tax, Delhi- 2014-TIOL-701-CESTAt-DEL dated 28.04.2014 had occasion to consider the issue and laid as follows:
(f) On the analyses above and on the basis of precedential guidance adverted to, we conclude that in view of the decision in Ranchi Club Limited (supra), on application of the principle of mutuality, services provided by the appellants to their respective members would not fall within the ambit of the taxable club or association service nor the consideration whether by way of subscription/ fee or otherwise received therefore be exigible to service tax. In view of the decision of the Gujarat High Court in Sports Club of Gujarat Limited, as the relevant provisions (namely section 62 (25a), Section 65 (105)(zzze) and Section 66 of the Act), to the extent these provisions purport to levy service tax in respect of services provided by a club of association to its members is declared ultra vires, we hold that there are no operative legislative provisions of the Act legitimising the levy and collection of service tax from the appellants, for providing Club or association service, in so far as these relate to any services provided to members of these appellants.
7. The ratio laid in the above judgements being squarely applicable to the facts of the present case, applying the same we hold that the impugned order is not sustainable. The same is set aside.