YOUNG MEN'S CHRISTIAN ASSOCIATION vs UNION OF INDIA & ORS.

GST update /2026-27/0041

Hon’ble Court: HIGH COURT OF GUJARAT AT AHMEDABAD

Case Title: YOUNG MEN'S CHRISTIAN ASSOCIATION vs UNION OF INDIA & ORS.

Petition No. & Citation: CIVIL APPLICATION NO. 19303 of 2015

Hon’ble Judge(s) JUSTICE A.S. SUPEHIA & JUSTICE VAIBHAVI D. NANAVATI

Date of Order 10/06/2026

Outcome In favour of the Petitioner

Brief Facts of the Case

The petitioner, Young Men’s Christian Association (YMCA), challenged the refund order dated 09.09.2015 whereby the department rejected its refund claim relating to service tax paid during FY 2009-10 to FY 2012-13 collected on services provided by the club to its members. The refund application was filed after the levy of service tax on club-member transactions had been declared ultra vires by the Supreme Court in State of West Bengal v. Calcutta Club Limited. The said refund was rejected on the ground that the claim was time-barred under Section 11B of the Central Excise Act, 1944. Accordingly, the petitioner filed the writ petition challenging the refund rejection order.

Relevant Section

• Sections 65(25a), 65(105)(zzze) and 66 of the Finance (No.2) Act, 1994

• Section 11B of the Central Excise Act, 1944

Question before Hon’ble Court

• Whether limitation under Section 11B would apply where the levy and collection of service tax itself had been declared ultra vires?

Brief Arguments by Petitioner

• Levy of Service Tax Already Declared Ultra Vires

The petitioner submitted that the issue was squarely covered by the Supreme Court judgment in State of West Bengal v. Calcutta Club Limited, which affirmed the Gujarat High Court judgment in Sports Club of Gujarat Limited v. Union of India. The Gujarat High Court had categorically declared Sections 65(25a), 65(105)(zzze) and 66 of the Finance Act, 1994, insofar as they sought to levy service tax on services provided by clubs to their members, as ultra vires.

• Refund Could Not Be Denied on Limitation

The petitioner contended that once the levy itself was held to be unconstitutional and ultra vires, the refund claim could not be defeated by invoking the limitation provisions under Section 11B.

Brief Arguments by Respondent

The department argued that:

• The refund application was filed only on 29.12.2014 and the Gujarat High Court judgment in Sports Club of Gujarat Limited had been delivered on 25.03.2013. Therefore, the refund claim for FY 2009-10 to FY 2012-13 was filed beyond the limitation period prescribed under Section 11B.

• Reliance was placed upon the Constitution Bench decision in Mafatlal Industries Ltd. v. Union of India, 1997 (89) ELT 247 (SC), to support rejection of the claim as time-barred.

Cases Relied Upon

Petitioner / Appellant Respondent

State of West Bengal Vs. Calcutta Club Limited 2019 (29) GSTL 545 (SC)

Sports Club of Gujarat Limited Vs. Union of India 2013 (31) STR 645 (Guj.)

Mafatlal Industries LTD. Vs. Union of India 1997 (89) ELT 247 (SC)

Abdul Samad Vs. Commissioner of C.Ex and Service Tax, Mangaluru 2019 (367) ELT 189 (Kar.)

vide 3E Infotech Vs. CESTAT, Chennai 2018 (18) GSTL 410 (Mad.)

Findings and Judgement

• Levy of Service Tax on Club-Member Transactions Already Declared Ultra Vires

The Court noted that there was no dispute regarding the legal position that the levy of service tax on services provided by clubs to their members under Sections 65(25a), 65(105)(zzze) and 66 of the Finance Act, 1994 had already been declared ultra vires by the Gujarat High Court in Sports Club of Gujarat Ltd. v. Union of India. The Apex Court affirmed the view taken by the Gujarat High Court and held that from 2005 onwards, the Finance Act, 1994 did not contemplate levy of service tax on incorporated members’ clubs. Therefore, the very foundation for collection of service tax from incorporated clubs stood invalidated.

• Limitation Cannot Defeat Refund of Tax Collected Without Authority of Law

The Court held that once the levy and collection of service tax itself had been declared ultra vires, the refund claim could not be rejected merely on the ground of limitation.

• Refund of Tax Paid Under Mistake of Law Cannot Be Denied

Placing reliance on judicial precedents, the Court reiterated that refund of tax paid under a mistake of law cannot be frustrated on the ground of limitation, as retention of such amount by the State would be contrary to Article 265 of the Constitution of India. The department cannot retain an amount which it had no authority to levy or collect.

Accordingly, the Court remanded the matter to the respondent authorities for adjudication of the refund claim on merits and directed the authorities to also consider the petitioner's claim for interest on the refund amount.

CA PRADEEP JAIN

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