whether service tax liability arise on an amount collected for conducting aerobics and yoga classes?

PJ/CASE LAW/2015-16/2996

Case:-MALABAR HILL CITIZENS FORUM VersusCOMMISSIONER OF C. EX., MUMBAI

Citation:-2015 (40) S.T.R. 493 (Tri. - Mumbai)

Brief Facts:-Relevant facts that arise for consideration are on scrutiny of ST-3 returns filed by the appellant for half yearly period ending March, 2006, it was noticed that an amount of Rs. 38,67,671/- was shown as bill for exempted services but no tax was indicated under which exemption was availed. Revenue authorities sought details regarding such services. Appellant did not provide any information or data or produce documents hence show cause notice dated 16-4-2007 was issued demanding service tax of Rs. 3,94,502/- under the provisions of Section 68 of the Finance Act, 1994 and also sought to impose interest and penalties. Subsequently, further reminders were issued calling for the information for the past period, i.e., 16-8-2002 to 30-9-2005. Copies of annual accounts for the years ending March, 2003 to the year ending March, 2006 was handed over by the appellant belatedly and from the scrutiny of documents it was noticed that appellant had not discharged the service tax liability on the amounts received by them for the entire period for the services of aerobics and yoga. As the said amount was not indicated in the return, another show cause notice dated 19-10-2007 was issued by invoking extended period for demand of service tax, interest thereon and for imposition of penalties for the period 16-8-2002 to 30-9-2005. The adjudicating authority after considering the submissions made by the appellant before him, adjudicated both the show cause notices and confirmed the demand of service tax with interest and imposed penalties on the appellant. Aggrieved by such an order, an appeal was preferred before the first appellate authority. The first appellate authority after considering the submissions made by the appellant confirmed the demands, interest thereof and also penalty.

Appellant’s contention:-Learned Chartered Accountant appearing on behalf of the appellant would take us through the allegations made in both the show cause notice and the replies submitted by them. It is his submission that as regards the service tax liability on an amount received by them for providing aerobics and yoga classes he would submit that these services are not for physical well-being of any individual and accordingly could not fall under the category of “Health and Fitness Centre”. He would submit that the first show cause notice dated 16-4-2007 was issued for the demand of service tax within the limitation period while the 2nd show cause notice was issued on 19-10-2007 invoking extended period, which is incorrect. He would submit that Revenue authorities were aware of the issue of show cause notice dated 16-4-2007. He would submit that appellant is a charitable institution and hence will not fall under the category of definition of “Health and Fitness Centre”. He would draw our attention to the form ST 3, prior and post 1-3-2006 and submit that for the prior period there is no requirement of declaring the exempted services rendered by the appellant and the appellant had bona fide impression that the amounts collected by them for aerobics and yoga are not taxable. He would rely upon the judgments in the case of M.N. Dastur Co. Ltd.v. UOI - 2006 (4)S.T.R.3 (Cal.)and Nizam Sugar Factory- 2006 (197)E.L.T.465 (S.C.) = 2008 (9)S.T.R.314 (S.C.).

Respondent’s contention:- Learned DR on the other hand would submit that the claim of the appellant that aerobics and yoga will not be covered under the Health and Fitness Service is incorrect. He would submit this Bench in the case of Osha International Foundation Neo Sannyas Foundation- 2015-TIOL-1081-CESTAT-MUM = 2015 (40)S.T.R.537 (Tri. - Mum)has held that meditation course and yoga will fall under the category of “Health and Fitness Services”. He produced a copy of the said judgment. He would submit that the appellant herein did not produce documents which were asked by the department for arriving at correct service tax liability, hence the first show cause notice issued in order to cover the period within limitation and the 2nd show cause notice was issued within two months of the receipt of the documents and details from the appellant. Hence invocation of the extended period was correct.
In rejoinder the learned Counsel would submit that in case of Osha International Foundation Neo Sannyas Foundation (supra) this Bench has set aside the demand of the service tax liability on the extended period and the same ratio will apply in this case also.

Reasoning of judgment:- They have considered the submissions made by both sides and perused the records.
On perusal of the records, they find that the issue involved in this case is whether the appellant is required to discharge the service tax liability on an amount collected by them for conducting aerobics and yoga classes and whether extended period can be invoked. At the outset they find that the merits as to the claim of the learned CA for the appellant that the amounts collected for rendering aerobics and yoga classes are not covered under Health and Fitness services is incorrect and is to be rejected and this Bench in the case of Osha International Foundation Neo Sannyas Foundation (supra) has held that meditation course and yoga classes would fall under Health and Fitness services. They find no reason to deviate from such a view already taken by the Tribunal. Accordingly, on merits they find appellant has no case.
As regards the extended period of limitation invoked by show cause notice dated 19-10-2007, they find that appellant had not co-operated with the lower authorities and did not produce any documents in order to arrive at the correct service tax liability. The appellant had been claiming that they had indicated the amount in their audited balance sheet which were produced before the lower authorities is also incorrect as they are not in a position to produce the acknowledgement copy of the letters vide which the balance sheets were handed over to the department. On limitation, the findings of the first appellate authority are reproduced herein below :-
“(c)(i)   It has been contended by the appellants that there was no suppression by them since they had filed the returns regularly and also submitted the copies of Balance Sheets. They had received a notice for coverage under ‘Mandap Keeper’ dated 20-1-2002 in reply to which they had filed copies of ills, balance sheets for the period 1998-99 to 2000-2001. Thereafter, vide letter 23-4-2003, they furnished copy of audited accounts for the year ending 31-3-2002. However, I find that they have not produced or submitted copies of acknowledgement receipts for the submission of balance sheets by them. Further, I find that these balance sheets were for the period prior to the period covered in two show cause notice, i.e., 16-8-2002 to 30-9-2005, & 1-10-2005 to 31-3-2006 and therefore, would be of no relevance to the impugned case. I find that vide letter dated 18-12-2006, the department requested the appellants to submit copies of balance sheets for the F.Y. 2002-03 to 2005-06. I also find that the contention of the appellants that they filed returns is not sufficient to support their stand that there was no suppression on their part, because the figures related to the disputed activities, i.e., Yoga and Aerobics were not shown as taxable/misdeclared as exempted. Only after the department called for additional information, like balance sheets and the details of so called ‘exempted services’, this fact has come to light. There has been also no correspondence seeking clarification by the appellants from Service Tax authority in this connection.”
They find that the above findings of the first appellate authority for invoking extended period is correct and cannot be dislodged by the appellant herein as there is nothing on record that the appellant had informed the lower authorities about the service rendered by them in respect of aerobics and yoga.
Yet another point which was raised by the learned Counsel on limitation that the appellant could have carried bona fide impression as ST-3 form which requires indicating the amount for exempted services was introduced on 1-3-2006 will also not carry their case any further inasmuch as they are covered under “Health and Fitness Centre” was never in doubt as they themselves registered under the same category and discharged the service tax liability on the amounts received by them for Gymnasium used by their members. It would be incorrect to say that they were not aware the services rendered by them would not fall under the category of “Health and Fitness Service”.
Another point which was raised by the learned Counsel on merits that they are a charitable institution and were not liable for service tax, they need to look at the definition of “Health and Fitness Centre” as provided under Section 65(43) and the services under Section 65(42) which are reproduced :-
Section 65
(42)      “health and fitness service’ means service for physical well-being such as, sauna and steam bath, Turkish bath, solarium, spas, reducing or slimming saloons, gymnasium, yoga, meditation, massage (excluding therapeutic massage or any other like service;
(43)      “health club and fitness centre” means any establishment, including a hotel or resort, providing health and fitness service :”
It can be seen from the above reproduced provisions the “health and fitness centre” is including a hotel or resort providing health and fitness service”. Undoubtedly the appellant is a charitable institution and are establishment and they would fall under the category having all the facilities providing health and fitness Centre.
In view of the foregoing they find no merits in the appeal. They find that the impugned order is correct and legal and does not suffer from any infirmity and needs to be upheld. Impugned order is upheld and the appeal is rejected.

Decision:- Appeal rejected.

Comment:-The analogy of the case is thatService Tax liability arise on amount collected for conducting aerobics and yoga classes. Relied in view of Osha International Foundation, meditation course and yoga classes are covered under Health and Fitness services. Assessee is charitable institution and establishment, covered under category having all facilities providing health and fitness Centre. Assessee is registered under Health and Fitness services category discharging Service Tax liability on amounts received for Gymnasium used by members. Assessee’s contention of bona fide impression of no Service Tax liability on service rendered incorrect.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2996

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