Mysore Race Club Ltd. v. Commissioner of Central Excise, Customs & Service Tax

GST Update/ 2026-27/0063

GST Update: CESTAT Gives Partial Relief to Mysore Race Club; Restricts Service Tax Demand
The Bangalore Bench of CESTAT, in the case of Mysore Race Club Ltd. v. Commissioner of Central Excise, Customs & Service Tax (Order dated 29.04.2026), examined whether the race club was liable to pay service tax on different activities such as sharing race telecast rights with other clubs, providing space to bookmakers, restaurant services, sponsorship of sporting events, and services provided to its own members for the period from 01.04.2008 to 30.06.2012. For sake of better understanding and clarity for the readers, the findings of each head is discussed separately.
Club or Association Services – Services Provided to Members
The first issue before the Tribunal was that the demand under Club or Association Services in respect of transactions between the Club and its members. The assessee's principal argument was based upon the doctrine of mutuality. It was held that Club could not provide services to itself through its members because the Club and its members could not be treated as two independent entities. For this purpose, reliance was placed on the decision of Supreme Court in case of State of West Bengal vs. Calcutta Club Limited: 2019 (29) G.S.T.L. 545 (S.C.) that a club cannot provide services to itself through its members. Consequently, transactions between the Club and its members were held not to be liable to service tax.
Sharing of Race Telecast Rights with Other Race Clubs
The second issue concerned was that the amounts received by Mysore Race Club from other race clubs for sharing live telecasts of horse-racing events. The assessee argued that the receipts were merely a sharing of betting revenue pursuant to a reciprocal arrangement between race clubs and that such amounts were already subjected to State betting tax. The Department, however, treated the arrangement as granting commercial rights in respect of the horse-racing event. The Tribunal, however, examined the actual nature of the transaction and noted that the Club was receiving downlinking charges and a share of income from other race clubs for transmitting its live racing events. The downlinking charges were specifically connected with permitting the other race clubs to receive and commercially exhibit the live telecast of the horse-racing event. The Tribunal therefore held that the arrangement amounted to permitting the commercial use or exploitation of an event, which squarely fell within the taxable service category.
The Tribunal ultimately accepted the Department's position and held that permitting other race clubs to telecast the horse-racing events amounted falls under the category of ‘Commercial Use or Exploitation of Event’ under Section 65(105)(zzzzr) of the Finance Act, 1994. Since the relevant category became taxable from 1 July 2010 and the period in dispute was from 01.07.2010 to 30.06.2012, the service tax demand in respect of this activity was upheld.
Case Law Relied Upon

Case Law	Citation
Royal Western India Turf Club Ltd. v. Commissioner of Service Tax, Mumbai	S.T.R. 811 (Tri. – Mumbai).
Royal Western India Turf Club Ltd. vs. Commercial Service Tax, Mumbai	2015 (38) S.T.R. 811 (Tri. - Mumbai)

Amounts Collected from Bookmakers – Renting of Immovable Property
The next issue related to amounts collected from bookmakers. The Department treated these amounts as consideration for allowing the bookmakers to use space within the Club premises and accordingly classified the activity under Renting of Immovable Property Services defined under Section 65(90a) of the Finance Act, 1994. The assessee disputed this classification and held that the same should be classified as the bookmakers' stall fee and submitted that the amounts were connected with betting activities carried out under the Mysore Betting Tax Act and were not consideration for renting or occupation of immovable property. The Tribunal accepted the assessee's contention and set aside the demand under Renting of Immovable Property Service. It held that the payment was linked to betting operations and not to the occupation of the premises.
Restaurant Services
The Tribunal separately examined the taxability of restaurant services provided by the Club. The Department raised service tax demand on the air-conditioned food court/restaurant operated within the premises of Mysore Race Club for the period 01.05.2011 to 30.06.2012. The Department's case was that food and beverages, including alcohol, were being served in the restaurant and that the activity fell within the taxable category of “Restaurant Services” under Section 65(105)(zzzv) of the Finance Act, 1994. The assessee contended that the restaurant was intended only for its members. For this proposition, reliance was placed upon the Kerala High Court judgment in Kerala Classified Hotels and Resorts Association v. Union of India, 2013 (31) S.T.R. 257 (Ker.).
However, the Tribunal did not accept this as a ground and upheld the service tax liability on Restaurant Services by following the decision of the Karnataka High Court in case of Ballal Auto Agency v. Union of India, 2015 (40) S.T.R. 51 (Kar.), holding that the service portion of restaurant activities is taxable. The Karnataka High Court specifically held that Parliament had the legislative competence to levy service tax on the relevant restaurant service provisions under Section 65(105) and disagreed with the reasoning adopted by the Kerala High Court.
Therefore, notwithstanding the fact that the restaurant was operated by the Club and was intended for members, the Tribunal confirmed the taxability of the restaurant activity.

Sponsorship Services
The Tribunal also examined the demand under Sponsorship Services. The Department contended that the Club was liable to service tax because it had sponsored sporting events. The Tribunal upheld the demand, noting that the Club had admittedly sponsored sporting events. The appellant does not dispute the fact that these events are sponsored by them but plead bona fide belief that they were unaware of the fact that the activity fall under reverse charge mechanism. Consequently, the demand under Sponsorship Services was confirmed.
Extended Period of Limitation
With regard to the invocation of the extended period, the Tribunal rejected this contention of the department. It noted that the department had been corresponding with the Club regarding its tax matters for several years. Therefore, the department could not subsequently contend that the assessee had suppressed its activities from the department. As a result, the Tribunal held that the extended period was not available and that any tax liability which survived could be recovered only for the normal period of limitation.

CA Pradeep Jain_

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