The Bangalore bench of the Customs Excise and Service Tax Appellate Tribunal, in a recent decision, held that service tax cannot be levied on a Members Club in respect of services rendered to its members. The Department vehemently contended that the members and the Club are two different entities, and therefore, service tax is leviable. While rejecting this contention, the Tribunal upheld the order of the first appellate authority and opined that both are same entity.
In the instant case, the Revenue approached the Appellate Tribunal against order of the first appellate authority, alleging that the assessee, M/s. National club is a Members Club is liable to pay service tax on the gross value of service provided to the members of the club. The first appellate authority, based on various judicial pronouncements,took a view that service tax cannot be imposed on the assessee since is a Members club and not a Proprietary Club and in a members club there is no question of two sides i.e. Members and Club, both are same entity.
The Tribunal, while concurring with the findings of the first appellate authority, observed that“M/s. National club is a Members Club and not a Proprietary Club. In a Members club there is no question of two sides; Members and club, both are same entity. There should be existence of two sides/entities for having transaction as against consideration. In a members club there is no question of two sides.”
The Tribunal noticed the decision in Sports Club of Gujarat Ltd. V. UOI in which it was held that the provisions which purport to levy service tax in respect of services purportedly provided by the petitioner club to its members is to be ultra vires.
The Tribunal further relied upon the Apex Court decision in Joint Commercial Tax officer V. Young Mens Indian Association {1970 (1) SCC (462)}, in which it was held that If the club even though a distinct legal entity is only acting as an agent for its members in matter of supply of various preparations to them no sale would be involved as the element of transfer would be completely absent, the supply of various preparations by each club to its members does not involve a transaction of sale within the meaning of Sales of Goods Act, 1930.
Read the full text of the order below.
