No service tax on “Club or association service” and “Convention service” if received Amount fully transmitted: CESTAT [Read Order]


While overturning the order passed by the Central GST and Central Excise Commissioner, the Mumbai Chamber of the Excise Tax and Services Tax Appeals Tribunal (CESTAT) ruled that the Department could not levy service tax on amounts received by the appellant for providing “club or association service” and also on “service agreement” when it did not withhold any amount.

The department had issued two notices to M / s Indian Pharmaceutical Association, for the period 2006-07 to 2009-10 and for 2010-11, requesting the recovery of ₹ 46 35,019 and ₹ 7 13,157 respectively, as well as the applicable interest and the imposition of a penalty. The claim was in the nature of a service charge on amounts received from members for the provision of “club or association services” and “convention service”.

Affected by the order granting the above-mentioned request of the Department, the appellant applied to this tribunal.

The Tribunal accepted the Appellant’s arguments and therefore relied on the decision of the Honorable High Court of Jharkhand in Ranchi Club v. Chief Commissioner of Excise Tax and Central Service, Ranchi Zone and Hon’ble High Court of Gujarat in Sports Club of Gujarat Ltd v. Union of India. In these cases, it was held that due to reciprocity and the activities of the club, if the club is rendering a service to its members in any form, it is not a service rendered to the club. one to another since the fundamental facts of the existence of two legal entities in such a transaction is missing.

The Court observed that, therefore, any claim relating to the service tax for the provision of “club or association services” lacks any legal authority.

The CESTAT bench composed of members CJ Mathew and Ajay Sharma also observed that the applicant does not offer “congress services” but has events organized by professionals and that the royalties collected are transmitted in full to these organizers. Thus, the Court ruled that the activity was not subject to tax liability under article 65 (105) (zc) of the 1994 finance law.

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