No Service Tax Leviable on Amount Collected as Advance Fee from Applicants for Membership of Club: CESTAT [Read Order]

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that no service tax can be levied on the amount collected as an advance fee from the applicants for the membership of the club. 

Karnataka Golf Association, the appellant assessee was a society registered under the Mysore Societies Registration Act, 1960, and also registered with the Service Tax department and discharging service tax under the category of Mandap Keeper service and advance admissions/enrolment fees collected from the prospective Members, who apply for club membership. 

The assessee appealed against the order passed by the Commissioner of Service Tax for confirming the service tax demand along with the interest and for the imposition of a penalty against the assessee. 

K. S. Ravi Shankar, the counsel for the assessee contended that the receipt of the application and processing of the same by itself was a ‘service’ for which the advance entrance fee/ admission fee was paid and submitted that the applicants could not be eligible for any service till they become members. 

K. S. Naveen Kumar and Dyamappa Airani, the counsels for the department relied on the decisions made by the lower authorities and contended that the assessee was liable to pay the service tax demand which was raised by the revenue. 

The Bench observed that in the case of the State of West Bengal & Ors. Vs. Calcutta Club Association, the court held that their membership was not automatic but contingent and subject to conditions. Therefore, the definition of ‘Service’ under Section 66B(44) and Finance Act, 1944 was not fulfilled to attract Service Tax. 

The two-member bench comprising D M Misra (Judicial) and Pullela Nageswara Rao (Technical) held that the amount collected as an advance fee from the applicants for membership of the club cannot be subjected to Service Tax levy under the category of ‘Club or Membership Association Service’. 

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