CESTAT Delhi, in a recent ruling, granted relief to Federation of Indian Export Organization (FIEO) by quashing a Service Tax demand of Rs. 2.72 crores.
As per the Foreign Trade Policy of the Government, every exporter to become member of appellant organization or any specific export promotion council in order to avail various incentives as per the policy.
Accordingly, the appellant, FIEO an Apex Federation body for promotion and development of exports in the country collected membership fee from the members. it is a society registered under Society Registration Act, 1965. There are various other considerations like subscription, national or international meeting fee, seller meetings’ fee etc.
The department took a stand that the appellant is liable to service tax on the consideration received by them from their members under tax entry “Club or Association Service” in terms of Section 65(25a) read with sub-clause (zzze) of Clause (105) of Section 65 of Finance Act, 1994.
Adv. Rakesh Chitkara, the counsel appeared for the appellant-society, vehemently contented that their activities are mainly with reference to promotion of export from India. He also pointed out that the relationship with the members cannot be considered as that of service provider with service recipient. The body of the appellant was constituted by the members and there is no separate identity for members and the body. Based on the principle of ‘mutuality’, the counsel argued that there is no service in the activities of the appellant body as the same is nothing but the composition of member and hence, there can be tax liability for such activity which is service to the self. He further relied on a plethora of decisions in support of the above contentions.
The bench noted that in a similar case relating to Indian Chambers of Commerce and Industry, the Tribunal, considering the fact that the appellants are engaged in activities having objectives which amounts to public service and are of a charitable nature, held that levy of service tax under the head club or association service is constitutionally invalid.
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