Case Law Details
Punjab Cricket Association Vs Commissioner of Central Excise (CESTAT Chandigarh)
The Customs Excise and Service Tax Appellate Tribunal (CESTAT) Chandigarh recently addressed a case involving the service tax demand on the Punjab Cricket Association (PCA) for providing “Club or Association Services” to its members. The tribunal’s decision centered on whether PCA’s activities fell within the ambit of taxable services and the applicability of service tax.
1. Background of the Case
The case pertains to the Punjab Cricket Association (PCA) and its service tax liability for offering “Club or Association Services” to its members. The PCA was registered as a service tax assessee.
2. Service Tax Demand
During an audit, it was discovered that PCA had received payments such as registration fees, entrance fees, annual subscriptions, and charges for additional facilities from its members. The Department contended that PCA had not discharged its service tax liability on these payments. A show-cause notice was issued on October 14, 2008, leading to a demand of Rs. 15,65,652, along with interest. The original authority imposed penalties under Sections 76 and 78 of the Finance Act, 1994.
3. Appeal to Commissioner (Appeals)
PCA appealed the decision, leading to the Commissioner (Appeals) confirming the duty of Rs. 8,09,168 and upholding the penalties under Sections 76 and 78. This appeal arises from that decision.
4. Appellant’s Defense
PCA argued that it was not liable to pay service tax as it did not fall under the definition of a “Club or Association” offering taxable services, as defined in Section 65(25a) of the Finance Act, 1994. PCA contended that only associate members were charged a fee, while other members were not. It relied on a judgment from the Hon’ble Supreme Court in the case of Calcutta Club Limited to support its position.
5. Department’s Position
The Department’s representatives reiterated the findings of the impugned order, supporting the service tax demand and penalties.
6. Tribunal’s Decision
Upon thorough consideration of the arguments and case details, the CESTAT Chandigarh referred to the judgment in the Calcutta Club case. It highlighted that the definition of “club or association” includes entities established or constituted under any law in force. Companies and cooperative societies registered under their respective Acts could be considered as constituted under those Acts.
7. Absence of Evidence
The tribunal noted that the Revenue failed to provide evidence that PCA collected charges for providing taxable services to its members. PCA clarified that only a few “associated members” were charged. Given this absence of evidence and PCA’s registration under the Society Registration Act, the tribunal found that PCA was not liable to pay service tax under the category of “Club or Association Service.”
8. Conclusion
Based on the findings and in line with the judgment in the Calcutta Club case, the CESTAT Chandigarh concluded that the service tax demand against PCA was not justified. The impugned order was set aside. The case of Punjab Cricket Association vs. Commissioner of Central Excise, adjudicated by CESTAT Chandigarh, underscores the importance of concrete evidence in service tax disputes. In this instance, PCA’s activities did not meet the criteria for taxable services, and the absence of proof regarding the collection of charges played a pivotal role in the tribunal’s decision to quash the service tax demand.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The appellants, M/s Punjab Cricket Association, assails the Order-in-Appeal dated 14.12.2010 passed by the Commissioner (Appeals), Central Excise, Chandigarh.
2. Brief facts of the case are that M/s Punjab Cricket Association are registered as service tax assessee for providing “Club or Association Services”; on conduct of an audit, the Department noticed that the appellants have been receiving payments like registration fees, entrance fees, annual subscription and charges for provision of additional facilities like billiards, swimming pool, lawn tennis, accommodation from its members and have not discharged the applicable service tax liability. A show-cause notice dated 14.10.2008 was issued; the original authority vide order dated 15.05.2009 confirmed the demand of service tax of Rs.15,65,652/- along with interest while appropriating an amount of Rs.4,31,344/- paid by the appellants; imposed penalty under Section 76 and Section 78 of the Finance Act, 1994. On an appeal filed by the appellants, Commissioner (Appeals) passed the impugned order confirming the duty of Rs.8,09,168/- along with penalty under Sections 76 & 78. Hence, this appeal.
3. Shri Sudeep Singh Bhangoo, learned Counsel for the appellants, submits that the PCA is in associate with BCCI and enrolls eight categories of people as members; the broad categories being A and B; only associate members are charged a fee for enrolling as members; other members are not charged any fee; therefore, the PCA is not a Club or Association for the purpose of Section 65(25a) of the Finance Act, 1994 and therefore, no service tax is leviable as held by the Hon‟ble Supreme Court in the case of Calcutta Club Limited- 2019 (29) GSTL 545 (SC). He further submits that, out of the total demand confirmed, Rs.4,31,334/-was already paid before issuance of show-cause notice and therefore, benefit of Section 80 is admissible.
4. Shivani, assisted by Shri Ravinder Jangu, learned Authorized Representatives for the Department, reiterates the findings of the impugned order.
5. Having heard the rival contentions and after the perusal of the records of the case, we find that Hon‟ble Apex Court in the case of Calcutta Club (supra) held as follows:
72. The definition of “club or association” contained in Section 65(25a) makes it plain that any person or body of persons providing services for a subscription or any other amount to its members would be within the tax net. However, what is of importance is that anybody “established or constituted” by or under any law for the time being in force, is not included. Shri Dhruv Agarwal laid great emphasis on the judgments in DALCO Engineering Private Limited v. Satish Prabhakar Padhye and Ors. Etc., (2010) 4 SCC 378 (in particular paragraphs 10, 14 and 32 thereof) and CIT, Kanpur and Anr. v. Canara Bank, (2018) 9 SCC 322 (in particular paragraphs 12 and 17 therein), to the effect that a company incorporated under the Companies Act cannot be said to be “established” by that Act. What is missed, however, is the fact that a Company incorporated under the Companies Act or a cooperative society registered as a cooperative society under a State Act can certainly be said to be “constituted” under any law for the time being in force. In R.C. Mitter & Sons, Calcutta v. CIT, West Bengal, Calcutta, (1959) Supp. 2 SCR 641, this Court had occasion to construe what is meant by “constituted” under an instrument of partnership, which words occurred in Section 26A of the Income Tax Act, 1922. The Court held:
“The word “constituted” does not necessarily mean “created” or “set up”, though it may mean that also. It also includes the idea of clothing the agreement in a legal form. In the Oxford English Dictionary, Vol. II, at pp. 875 & 876, the word “constitute” is said to mean, inter alia, “to set up, establish, found (an institution, etc.)” and also “to give legal or official form or shape to (an assembly, etc.)”. Thus the word in its wider significance would include both, the idea of creating or establishing, and the idea of giving a legal form to, a partnership. The Bench of the Calcutta High Court in the case of R.C. Mitter and Sons v. CIT [(1955) 28 ITR 698, 704, 705] under examination now, was not, therefore, right in restricting the word “constitute” to mean only “to create”, when clearly it could also mean putting a thing in a legal shape. The Bombay High Court, therefore, in the case of Dwarkadas Khetan and Co. v. CIT [(1956) 29 ITR 903, 907], was right in holding that the section could not be restricted in its application only to a firm which had been created by an instrument of partnership, and that it could reasonably and in conformity with commercial practice, be held to apply to a firm which may have come into existence earlier by an oral agreement, but the terms and conditions of the partnership have subsequently been reduced to the form of a document. If we construe the word “constitute” in the larger sense, as indicated above, the difficulty in which the Learned Chief Justice of the Calcutta High Court found himself, would be obviated inasmuch as the section would take in cases both of firms coming into existence by virtue of written documents as also those which may have initially come into existence by oral agreements, but which had subsequently been constituted under written deeds.”
73. It is, thus, clear that companies and cooperative societies which are registered under the respective Acts, can certainly be said to be constituted under those Acts. This being the case, we accept the argument on behalf of the respondents that incorporated clubs or associations or prior to 1st July, 2012 were not included in the Service Tax net.
6. We find that the Revenue has not adduced any evidence to demonstrate that the appellants have collected the charges for providing any services to the members. They have submitted that only a few members, who are in the category of „associated members‟ are only charged. In the facts and circumstances of the case, we find that it is not established with evidence that the appellants are rendering any particular service that is taxable. In view of this above judgment and in view of the fact that PCA are registered under the Society Registration Act, the appellants are not liable to pay service tax under the heading “Club or Association Service”. Therefore, we find considerable merit in the submissions of the learned counsel for the appellants. The impugned order cannot be sustained and is liable to be set aside.
7. Accordingly, the appeal is allowed.
(Pronounced on 30/08/2023)
