IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: ST/85823 to 85827/2018 & ST/85829/2018
[Arising out of Order-in-Appeal No: IM/CGST A-I/MUM/109-114/17-18 dated 27.12.2017 passed by the Commissioner of Central Tax (Appeals-I), Mumbai]
Tahnee Heights Co-operative Housing Society Limited
Commissioner of CGST, Mumbai South
Shri Prasad Paranjape, Advocate with Shri Mohit Raval, CA for appellant
Shri M.K.Sarangi, Joint Commissioner (AR) for respondent
Hon’ble Mr. S.K. Mohanty, Member (Judicial)
Date of hearing: 01/06/2018
Date of decision: 12/10/2018
ORDER NO: A/87626-87631/2018
Per: S.K. Mohanty
Brief facts of the case, leading to this appeal, are as under:-
1.1 The appellant is a co-operative housing society, registered under the Maharashtra Co-operative Act, 1960 (for short, "the Act of 1960"). The appellant is the owner of the building, known as "Tahnee Heights", in which members of such society owns their residential flats. The members of the appellant's society contribute towards maintenance and up-keep of the building and common expenses, as per the bye-laws adopted by the society under the Act of 1960. The appellant collects the contribution in the proportion decided by the Management Committee for each member and spends the same for the common benefits of all those, who have made the contribution.
1.2 For the period July' 2015 to January' 2017, the appellant had paid service tax amount of Rs. 20,77,586/- under the category of "Club or Association service", in respect of the contributions received from its members. Such amount was paid 'under protest'. Subsequently, the appellant had filed six nos. of refund applications before the jurisdictional Service tax authorities, claiming refund of service tax paid on such service. The grounds assigned for claim of refund were that there are no distinct persons viz, service provider and service receiver and since the person contributing and benefiting are the same, as per the principles of mutuality, the activities should not be subjected to levy of service tax. It was further contended that the appellant being a body corporate, its case will not be governed by explanation 3(a) appended to Section 65B(44) of the Finance Act, 1944 (effective from 01.07.2012).
1.3 The department initiated show cause proceedings against the appellant, seeking for rejection of the refund applications. The matter was adjudicated against the appellant, in rejecting the refund applications. The appellant had preferred separate appeals before the ld. Commissioner (Appeals), Mumbai against different adjudication orders passed by the original authority. All the appeals filed by the appellant were disposed of by the lower appellate authority vide the common impugned order dated 27.12.2017. The appeals were rejected inter alia, on the ground that in the light of explanation 3(a) to Section 65B(44) ibid, the appellant and its members are to be treated as distinct entities and therefore, the appellant has correctly paid service tax.
1.4 Feeling aggrieved with the impugned order, the appellant has filed these appeals before the Tribunal.
2. The ld. Advocate appearing for the appellant submitted that there is no involvement of any consideration inasmuch as the appellant only recovers contribution from the members and its apportionment is pre-decided in accordance with the bye-laws of the society. Thus, he submitted that due to the principle of mutuality, there are no distinct persons and therefore, the transaction does not fall within the ambit of first part of the definition of "service". The ld. Advocate further submitted that due to the incorporated status of the appellant, the explanation 3 (a) of Section 65B(44) of the Finance Act, 1994 does not apply for levy of service tax. The ld. Advocate has relied on the decisions of this Tribunal in the case of Federation of Indian Chambers of Commerce & Industry -Vs.- C.ST., Delhi [2015 (38) STR 529 (Tri.-Del.)], Matunga Gymkhana -Vs.- Commissioner of Service Tax, Mumbai [2015 (38) STR 407 (Tri.-Mumbai)] and order dated 26.04.2018 of the Tribunal passed in Appeal No. ST/11732/2017, in the case of Commissioner of Service Tax, -Vs.- Rajpath Club Ltd., to state that both under the un-amended and amended provisions of Finance Act, 1994, service provided by the society/club to its members shall not be leviable to service tax, in view of mutuality.
3. On the other hand, the ld. AR appearing for the revenue reiterated the findings recorded in the impugned order. He further submitted that as per the concept of "negative list" of services defined under Section 66D ibid (w.e.f. 01.07.2012), any service if not categorized there under or specifically exempted under any notification, shall be considered as a taxable service, for the purpose of levy of service tax.
4. Heard the rival contentions and perused the records, including the written submissions filed by both sides.
5. The issue involved in these appeals for consideration is, whether the ld. Commissioner (Appeals) has correctly interpreted the statutory provisions to conclude that the appellant's society and its members are distinct persons due to Explanation 3(a) to Section 65B(44) of the Finance Act, 1994 and therefore, should not be entitled to the benefit of refund of service tax paid on charges recovered from its members.
6. The relevant statutory provisions of the Finance Act, 1994, both prior to and after amendment (w.e.f. 01.07.2012) are extracted herein below :-
Period prior to 01.07.2012
Section 65 (25aa) : "club or association" means any person or body of persons providing services, facilities or advantages, primarily to its members, for a subscription or any other amount, but does not include any body established or constituted by or under any law for the time being in force.
Section 65(105)(zzze) : "taxable service means any service provided or to be provided to its members or any other person by any club or association in relation to provisions of services, facilities or advantages for a subscription or any other amount.
Explanation - For the purposes of this section, taxable service includes any taxable service provided or to be provided by any unincorporated association or body of persons to a member thereof, for cash, deferred payment or any other valuable consideration.
Period after 01.07.2012 (Negative list)
Section 65B(44) : "service" means any activity carried out by a person for another for consideration, and includes a declared service.
Explanation 3(a) : For the purposes of this chapter, an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons.
7. On reading of the above statutory provisions, it transpires that there is no much of difference for recognition of the taxable service in dispute, for levy of service tax, under both the un-amended and amended provisions of the service tax statute. In order to be categorized as a "taxable service", there must be existence of two parties i.e. the service provider and the service receiver. As far as the relationship between an incorporated society or club and its members is concerned, it is an undisputed fact that such incorporated association is a distinct legal entity. However, since the association was formed or constituted and existed for the exclusive purpose of catering/meeting to the requirements of its members, as per the laid down policy in the bye law, it cannot be said that there is involvement of two persons, one to be termed as the service provider and the other as the service receiver. Thus, the incorporated association and its member being one and the same, the activities undertaken or the services provided by the former will not be considered as a service, exigible to service tax under the principle of mutuality.
8. Considering various judgments delivered by Hon'ble Supreme Court and the Hon'ble High Courts on the issue of principle of mutuality vis-a-vis leviability of tax on the club or association service, this Tribunal in the case of Federation of Indian Chambers of Commerce & Industry (supra) has held that on application of the principle of mutuality, services provided by clubs/associations to their respective members would not fall within the ambit of the taxable "club or association" service. Further, in the case of Matunga Gymkhana (supra), this Tribunal has also taken the similar view. Though the said decisions were rendered under the un-amended definition of taxable service (effective up to 30.06.2012), but the ratio laid down therein is squarely applicable to the post amended definition of "service' contained in the negative list regime (w.e.f. 01.07.2012), inasmuch as, in absence of presence of both service provider and service receiver, the transaction cannot be statutorily terms as taxable service and will not be exigible to service tax. Even under the negative list regime, for the period from 01.10.2015 to 31.03.2016, this Tribunal in the case of Rajpath Club Ltd. (supra) has concurred with the earlier referred decisions of the Tribunal.
9. Coming to the issue of ascertaining the status of the appellant, whether an incorporated body or otherwise, for the purpose of consideration of applicability of explanation 3(a) appended to Section 65B of the Act, I have examined the relevant provisions of the Act of 1960 and the model bye laws provided therein. Under Section 36 in the Act of 1960, it has been provided that "the registration of a society shall render it a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to ....................................... and to do such other things as are necessary for the purpose for which it is constituted". Further, clause 67 of Maharashtra Co-operative Housing Society Bye Laws, formulated under the Act of 1960 earmarked the charges, in the form of contribution to be collected from the members of the society, which relates inter alia, for payment of property taxes, water charges, common electricity charges, contribution to repair and maintenance fund, contribution to sinking fund, service charges etc. Clause 69 of the said Bye law also provides that the committee shall apportion the share of each member towards the charges of the society on the basis mentioned therein.
10. On perusal of the above statutory provisions, it reveals that upon registration of the society, the same is legally accepted as a body corporate and thereafter, its function and operation are strictly guided as per the laid down bye laws, provided for the purpose. In this case, it is no doubt, a fact that the appellant is a co-operative society and is duly incorporated under the Act of 1960. The appellant also do not provide any service to its members, who pay the amount towards their share of contribution, for occupation of the units in their respective possession. Further, the fact is also not under dispute that the appellant do not provide any facilities or advantages for subscription or any other amount paid. Thus, under such circumstances, the appellant cannot be termed as an unincorporated association or a body of persons, for the purpose of consideration as a 'distinct person'. Accordingly, the explanation furnished under clause 3(a) in Section 65B of the Act will not designate the appellant as an entity, separate from its members. Furthermore, the purpose for which the appellant's society was incorporated, clearly demonstrate that it is not at all provides any service to its members and the share of contribution is to meet various purposes as stated above. Therefore, I am of the considered view that the case of the appellant is not confirming to the requirement of 'service', as per the definition contained in Section 65B(44) of the Act.
11. In view of the foregoing discussion and analysis, it is concluded that the activities undertaken by the appellant should not fall within the scope and ambit of taxable service, for payment of service tax. Therefore, service tax amount paid by the appellant should be eligible for refund. Accordingly, the impugned order is set aside and the appeals are allowed in favour of the appellant.
(Pronounced in Court on 12/10/2018 )