The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, recently ruled that the services provided by a Club to its Members are not subject to Service Tax.
The appellant, DLF Recreational Foundation Ltd, is paying service tax under the category of club or association services on the amount collected as non-refundable fee and annual subscription fee. The Department found that the appellant is also providing services such as 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 etc.It was held that the appellant is liable to pay service tax for such services since they are charging certain amount from the members of its club.
The first appellate authority confirmed the above order and therefore, the appellant filed a second appeal against the order demanding service tax under the category of club or association services.
The Revenue contended that all the above services are squarely covered under the category of club or association services as per Section 65 (105)(zzze) read with section 65 (25a) of the Finance Act, 1994.
The appellant relied on the Gujarat High Court decision, as confirmed by the Apex Court in Karnavati Club Limited wherein the Court 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. They further submitted that in the case of Sports Club of Gujarat MANU/GJ/0387/2013, the Honble 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.
The bench noticed that in the case of s DLF Golf Resorts Limited, the Tribunal had concluded the matter in favour of the assessee by following the above cited decisions.
Applying the above decisions to the present case, the division bench held that the levy of service tax on the service provided by a club to its members has been purported ultra-virus under the category of club or association services. Accordingly, the impugned order was quashed.
Read the full text of the Order below.
