Whether service tax is payable by a club on the room charges collected from the guests of the members of the club?

PJ/Case Study/2012-13/68

CASE STUDY

Prepared By: CA Neetu Sukhwani &
Aashish Bohra

Introduction:- M/s Umed Club, Jodhpur (hereinafter referred to as the appellant), are engaged in the business of providing services under the category of ‘Club or Association Services’. They were providing the above mentioned services to their members. The department raised the service tax demand by objecting the huge differences between the details filed in the ST-3 return and the balances stood in the balance sheet of the company. The balances were related to the rent on the rooms, membership fees and miscellaneous receipts. Demand equivalent to the 3216681 was raised. For this the show cause notice was issued dated 8.02.2010 in which the appellant were asked to reconcile the differences. Assessee in turn replied the show cause notice stating that the demand raised was not tenable. Then OIO No. 69/S.T./JP-II/2011-ADC dated 05.05.2011 was passed confirming the allegations levelled in the SCN in respect of sale of cards, fees, other receipts etc. and thereby confirming demand to the extent of Rs. 2,45,191/- along with interest under section 75 of the Finance Act, 1994 by dropping the demand on the renting of cottage by accepting the contention that renting services were provided to the guests of the members of the club and not to the members so as to be leviable to service tax under the club services. The order in original no. 69/S.T./JP-II/2011-ADC dated 05.05.2011 passed by the learned adjudicating authority has dropped the service tax demand on the cottage rent of Rs. 21,36,844/- & Rs. 20,16,430/- for the year 2005-06 & 2006-07 respectively. This portion of the order in original was reviewed by the Commissioner of Central Excise vide order in review no. 24/2011 dated 25.07.2011 by again raising the demand for the rents for rooms. The commissioners (Appeals) vide order in Appeal no. 10 (RND)/ST/JP-II/2013 DT. 09/01/2013 confirmed the demand of service tax on renting services provided by the club and also revised the penalties imposed under section 76 and 78. It is against this order in appeal that the appellant have preferred appeal to the Tribunal along with stay application. This case study covers the stay application allowed by the Tribunal while the final outcome of the appeal is yet to come.

M/s UMED CLUB, JODHPUR V/S COMMISSIONER APPEAL, CENTRAL EXCISE APPEALS, JAIPUR-II
[Order-In-Original no. 69/ST/ST/JP-II/2011, dated: 05/05/2011]

Issue involved in the stay application before the Tribunal: -

Whether service tax is payable by a club on the room charges collected from the guests of the members of the club?

Brief Facts:-

    1.        M/s Umed Club, Jodhpur (hereinafter referred to as the appellant), are engaged in the business of providing services under the category of ‘Club or Association Services’ and having service tax registration no. AAABU0007FST001.

    2.        Show Cause Notice No. V (ST) Adj.-II/JPR-II/427/09/5390 dated 08.02.2010 was issued to the appellant wherein it was alleged that the appellant have not paid service tax amounting to Rs. 32, 16,681/- on various services provided such as sale of liquor and eatables, cottage rent provided to guests of members of the club, club fees etc., during the financial year 2005-06 and 2006-07 on which they are liable to pay service tax along with interest under section 75 and penalty under section 76, 77 & 78 of the Finance Act, 1994.

    3.        The submissions made by the appellant were not considered and the impugned order having OIO No. 69/S.T./JP-II/2011-ADC dated 05.05.2011 was passed confirming the allegations levelled in the SCN in respect of sale of cards, fees, other receipts etc. and thereby confirming demand to the extent of Rs. 2,45,191/- along with interest under section 75 of the Finance Act, 1994. The penalty proposed in the SCN was also imposed under section 76, 77 and 78 of the Finance Act, 1994. However, the demand of service tax on the cottage rent of Rs. 21,36,844/- and Rs. 20,16,430/- for the year 2005-06 and 2006-07 respectively was dropped in this order in original.

    4.        The appellant had gone in appeal for the confirmed demand of Rs. 2,45,191/- and penalty imposed under section 76, 77 and 78 of the Finance Act, 1994. This appeal as filed with Commissioner (Appeals) by them has been disposed off vide order-in-appeal No. 18 (AKJ) ST/JPR-II/2012 dt. 29.03.2012. In this order in appeal, the learned Commissioner (Appeals) has dropped the demand of Rs. 187132/- and confirmed the demand of Rs. 58059/- alongwith interest. The interest has also been demanded on the dropped demand of Rs. 134304/-. Further, simultaneous imposition of penalties under section 76 and 78 has been affirmed in the order in appeal dated 29.03.2012. The appellant has also filed the appeal with hon’ble Tribunal against this order in appeal dated 29.03.2012 which is also pending.

    5.        The order in original no. 69/S.T./JP-II/2011-ADC dated 05.05.2011 passed by the learned adjudicating authority has dropped the service tax demand on the cottage rent of Rs. 21,36,844/- & Rs. 20,16,430/- for the year 2005-06 & 2006-07 respectively. This portion of the order in original was reviewed by the Commissioner of Central Excise vide order in review no. 24/2011 dated 25.07.2011.

    6.        As per directions given in this order in review, the learned Additional Commissioner has filed the appeal on behalf of Revenue against the above referred portion of the impugned order in original with Commissioner (Appeals). In the appeal, it was requested to confirm the demand of service tax on the amount of cottage rent alongwith interest. The appellant had filed the cross objections against this departmental appeal under section 35B of the Act.

    7.        However, the submissions made in the cross objections were not accepted by the learned Commissioner Appeals, wherein the contention of the revenue that service tax on room charges collected from the guests of the members is leviable was accepted. Consequently, impugned order in appeal no. 10(RDN)ST/JPR-II/2013 dated 9.1.2013 has been passed to confirm the demand of service tax with interest on the value of cottage rent of Rs. 21,36,844/- & Rs. 20,16,430/- for the year 2005-06 & 2006-07 respectively. It is also ordered in the impugned order in appeal to revise the penalties imposed under section 76 and 78 of the impugned order in original.

    8.        Aggrieved by the said order in appeal no. 10(RDN)ST/JPR-II/2013 dated 9.1.2013, the appellant preferred appeal to the Tribunal along with stay application on the grounds as discussed below. The stay application is the subject matter of this case study while the main appeal is still pending with the Tribunal.

Appellant’s Contentions:-

1.            The appellant submits that the impugned Order in Appeal passed by the learned Commissioner Appeals confirming the demand of service tax along with interest and penalty is wholly and totally erroneous and is liable to be quashed.

2.            The appellant submits that the impugned order has held that the cottage rented by the appellant was limited to its members and to member guests only and not open to general public, as in case of renting of rooms on commercial basis by hotels. It is therefore contended that the appellant’s submission that the letting out of rooms is taxable w.e.f. 1.5.2011 is not sustainable. In other words, the impugned order has held that letting out of rooms by a club and other commercial concerns are different and service tax has been levied on accommodation services provided by the commercial concerns like hotels w.e.f. 1.5.2011. It is therefore alleged that that due to this reason, it cannot be said that the cottages rented out by the appellant club were not taxable prior to this date.

In this respect, the appellant submit that the allegation of impugned order (that the renting out of cottages by the club is different than the renting out of rooms by hotels) is void ab initio. The renting of rooms for accommodation (whether by the hotels, club or any other concern) has been treated as same under the service tax law. This is clear by the fact that the service tax on all types of short term accommodation facilities provided by all types of persons (including the clubs), has been levied w.e.f. 1.5.2011 only. The fact that this levy included the accommodation facility provided by the clubs is strengthened by the definition of taxable service of short term accommodation which is given in section 65(105)(zzzzw)as reproduced follows:-

“Taxable services means any service provided or to be provided, to any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months.”

Thus, the service tax was levied on the short term accommodation services by inserting the above referred clause w.e.f. 1.5.2011. An analysis of the definition of taxable service makes it clear that the service tax on short term accommodation services provided by any person including the club have been made taxable herein. This definition is clear and unambiguous specifically including the term “club”, thus, service tax on the rental income received by club is taxable under this head only w.e.f. 1.5.2011 and contention of impugned order that it was taxable under the head of club or association services is not tenable. This is because the language of levy of service tax on these services is plain and unambiguous and where the language of any provision is clear, no other meaning is to be taken out from it. It has been held by the highest court of India in the case of Truetuf Safety Glass Industries vs Commissioner of Sales Tax, UP [2007 (215) ELT 14 (SC)] that it is a settled principle of law that the Court cannot read anything into a statutory provision which is plain and unambiguous. Similar decision has been given in the case of TATA CONSULTANCY SERVICES VersusSTATE OF ANDHRA PRADESH [2004 (178) E.L.T. 22 (S.C.)] by holding the view that Courts should not be over zealous in searching ambiguities or obscurities in words which are plain. Thus, in view of above referred decisions, when the language of taxable service of short term accommodation services is clear and unambiguous, it is certain that the service tax was levied on the cottage services provided by club w.e.f. 1.5.2011; thus, it cannot be said that prior to this date these services were taxable under the head of club or association services. As such, the impugned order in appeal is not tenable and is liable to be quashed.

3.            It is further submitted that since the accommodation services by club is generally provided to non-members (which are relatives of the members), the service tax was not levied on these services under the head of club or association. Therefore, service tax on these services which are commonly provided by the clubs to non-members and which was not chargeable to service tax were brought in the purview of service tax w.e.f. 1.5.2011 along with the similar services provided by hotels, guest houses, etc. It is further submitted that even if it is accepted for the sake of argument also that the service tax was already leviable on accommodation services provided by a club prior to 1.5.2011, then there was no need to include the term “club” while framing the definition of taxable service of “short term accommodation” service applicable w.e.f. 1.5.2011. Thus, if the contention of impugned order is accepted, it will make the use of term “club” in the definition of “taxable service” of short term accommodation” as useless and redundant. It has been held by the hon’ble Supreme Court that any interpretation which results in rendering any portion of rule or legislation redundant should be avoided. This has been decided in the case of Amrit Paper vs. CCE, Ludhiana [2006 (200) ELT 365]and also in the case of Rajesh Kumar Sharma vs. UO [2007(209)ELT 0003(SC).]. In both of these cases, the highest court of India has decided that the interpretation which results in rendering any portion of rule or legislation redundant should be avoided. Therefore, in the light of these two decisions, the contention of impugned order [that service tax was already leviable on accommodation services provided by a club prior to 1.5.2011] is making the use of word “club” in the definition of taxable service of short term accommodation services as redundant. Such an interpretation is not justified in the light of above referred Supreme Court decisions and thus, the impugned order is not sustainable and is liable to be quashed.

4.            Aligning with the above submission [that the service tax was not leviable on accommodation services provided by a club to non-members prior to 1.5.2011], it is worth mentioning that the definition of taxable services of ‘club or association service’, which is reproduced as follows:-

‘taxable service’ means any service provided to its members by any club or association in relation to provision of services, facilities or advantages for a subscription or any other amount.

The analysis of above definition makes it clear that only those services which are provided by a club to its members are covered under this category. However, the impugned order has brought even the services provided to the guests of the members of the club within the ambit of the club or association services which is totally illegal and baseless. When the language itself is clear then it is not open for the revenue to add or delete words to mould it according their will to make any other service taxable under this service of ‘club or association service’.

5.            It is further submitted that if the contention of the impugned order that the rooms given on rent to the guests of the members of the club will be leviable to service tax under the category of ‘club or association service’, is accepted for the sake of argument also, then words of this definition – “provided to its members” will loose its relevance. If any service provided to any person by a club is classifiable under the ‘club or association service’ then what will be use of adding the above words. It has been held by hon’ble Supreme Court that legislature never waste its words and where language of any provision is plain and unambiguous, no other meaning is to be taken. It has been held in the following case:–

·         British Airways PLC vs Union of India [2002 (139) ELT 6 (S.C.)]:-

“8.While interpreting a statute the court should try to sustain its validity and give such meaning to the provisions which advance the object sought to be achieved by the enactment. The court cannot approach the enactment with a view to pick holes or to search for defects of drafting which make its working impossible. It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well-known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute. It is the duty of the court to make such construction of a statute which shall suppress the mischief and advance the remedy. While interpreting a statute the courts are required to keep in mind the consequences which are likely to flow upon the intended interpretation.”

An analysis of this decision makes it clear that the various provisions of an enactment should be so interpreted that every provision is effective and if there is any conflict, the harmonious interpretation should be given effect. Similar decision has been given by larger bench of Mumbai Tribunal in the case of CCE, Mumbai -V Vs M/s GTC Industries Ltd [2008-TIOL-1634-CESTAT-MUM-LB.]. The verdicts of hon’ble Tribunal are produced as follows:-

“It is well settled that every clause of the Statute should be construed with reference to the context in which it is issued. A bare mechanical interpretation of words and application of legislative intent is devoid of concept and purpose will reduce most of the remedial and beneficial legislations to futility. To be literal in meaning is to see the skin and miss the soul.

The legislature never wastes its words or says anything in vain and a construction which attributes redundancy to legislation will not be accepted, as has been observed by the Supreme Court in the case of Union of India vs. Hansoli Devi 2002 7 SCC 273”

Therefore, it is clear that any interpretation which leads to redundancy is to be avoided. In the light of above decisions, the contention of the impugned order that rooms let out to the guests of the members will be liable to service tax under ‘club or association service’ will lead to redundancy of use of words “provided to its members”. This view is also strengthened by the fact that the service tax was specifically levied on these services w.e.f. 1.5.2011 under the head of “short term accommodation” services. A detailed discussion in this regard has already been made in the forgoing paras. Therefore, the contention of the impugned order while raising the demand is void ab initio and is liable to be quashed.

6.            The impugned order is further alleging that the short term accommodation services provided by a club exclusively to its members, whether directly or indirectly, was already taxable prior to 1.5.2011. In this regard, it is worthwhile to mention that to avail the services of club, it is necessary to have its membership. In other words, services of a club are always open exclusively to its members against a fee. The amount recovered from members against provision of such services to them is taxable under the head of club or association. However, there are cases where the accommodation services were also provide to the guests of members, however, these services were not taxable under the head of club or association services as no portion of services is being availed by the members. Mere fact that the people availing the cottage services by the appellant were having some connection with the members cannot be ground to levy the service tax under the head of club or association services by saying that these services were indirectly provided to the members. Though, it is a matter of fact that to avail the accommodation services in the club, one should have some reference of any member, but its consideration cannot be subject to service tax under this head as definition of taxable services of club or association is clear and unambiguous that only the “services provided to the members” is taxable. In this regard, it is reiterated that the service tax on services provided by a club to any person (other than member) have been brought under service tax net w.e.f. 1.5.2011. If these services were already taxable under the head of club or association as per allegation of impugned order, there was no need to insert the term ‘club’ in the definition of taxable service of short term accommodation as these services are always provided at the reference of members. Therefore, the contention of impugned order is not tenable and is liable to be quashed.

7.            It is further submitted that the appellant have got themselves registered for paying the service tax on cottage charges under the above referred category of short term accommodation w.e.f. 1.5.2011. As from the date of this levy, they are duly paying the service tax on the same and filing the return thereof. This shows the bonafides of their case. Since the service tax on room charges was brought into force w.e.f. 1.5.2011 under the category of “Short Term Accommodation” services, it cannot be contended that the service tax was payable on the same services under some other head prior to this date. Reliance is placed on the following decisions in this regard:-

·         Sap India Private Limited v/s CCE, Bangalore [2010-TIOL-1569-CESTAT-BANG]

Service Tax – maintenance and Repair of Software – taxable only from 16.05.2008, when IT Software Service was introduced – The maintenance charges collected by the appellant from their customers during the period from 09.07.2004 to 31.01.2006 are not liable to be subjected to levy of Service Tax under the head ‘maintenance or repair service’ under Section 65 (105) (zzg) read with Section 65 (64) of the Finance Act, 1994. The services rendered by the appellant to their customers are in the nature of information technology software service, which was made taxable w.e.f. 16.05.2008 only. Such service is not to be subjected to levy of Service Tax under any other entry. Therefore, the demand of Service tax and the connected penalties are only liable to be set aside.

·         M/s Prince Foundations (P) Ltd v/s CST, Chennai [2009-TIOL-1103-CESTAT-MAD]

“No tax on ‘works contract’ priorto 1.6.2007 - Appellants carried out the construction activity, finishing work etc., in respect of which demands have been raised, in execution of works contracts. ‘Works contract service’ was brought under tax net on 1.6.2007, after the impugned activities were undertaken by PFL. As rightly argued by the appellants, the Tribunal had held in Diebold Systems case that activity such as erection/commissioning forming part of a works contract could not be taxed under erection/commissioning service prior to 1.6.2007. The contracts basic to the construction of commercial premises/residential premises were indivisible and involved a service element. In view of the ratio of the decision of the Tribunal, prima facie, the impugned demand is not sustainable”.

·         M/s Kaveri Coal Suppliers & Another v/s CCE, Kanpur [2011-TIOL-1593-CESTAT-DEL]

Service Tax – Appellants engaged in financing clients for purchase of coal and also arranging for transportation of coal – Liability to pay service tax under C & F Agents service for the period from 2000-01 to 2003-04 – Appellants registered and paying tax under BAS from 2004 – Tax paid under protest and penalties levied under Section 75A, 76, 77 & 78 – When appellants are currently registered under BAS, Revenue cannot contend that for the prior period they were providing services of Clearing & Forwarding Agents – SCN also time barred – Impugned orders set aside.
The above decisions strengthen the view of appellant that since the cottage services provided to non-members by a club has been made taxable w.e.f. 1.5.2011; these cannot be taxed under some other head prior to this date. Thus, the ratio of above referred decisions as cited in their cross objections was ought to be extended to them. But their relevance has been brushed aside by saying that these decisions are not relevant in the given case. But this is not correct and the setting aside the submissions without discussing them makes the impugned order as non-est and liable to be quashed.

8.            Without prejudice to above, it is submitted that the department itself has a doubt regarding the taxability of cottage rent received by the appellant club. In this regard, it is submitted that the appellant have been providing these services right from its inception. However, the demand of service tax has been raised only for the financial year 2005-06 and 2006-07. No demand has been raised on these services for any subsequent periods. This shows the uncertainties and doubts at the end of department. On the other hand, the appellant has been consistently following all the provisions and have been discharging their liabilities in accordance with prevalent rules. They have got themselves registered for provision of accommodation services w.e.f. 1.5.2011 when the service tax was introduced on the same. Further, they have been depositing the tax dues on time and regularly filing the returns thereof. The impugned order being a successor of uncertain approach of department is liable to be quashed.

9.            The appellant further submit that the impugned order in appeal has held that the penalties under section 76 and 78 should be modified accordingly. In this regard, it is submitted that the “penalties” were not subject matter of the appeal. The departmental appeal was against the demand of service tax on cottage rent and interest thereupon. The Revenue has not gone in the appeal against the penal provisions imposed by the impugned order in original. This is clarified by the fact that in the order in review no. 24/2011 dated 25.7. passed by the learned Commissioner, it was directed to file the appeal against that portion of impugned order in original which set aside the demand of service tax on cottage rent and interest thereupon. Further, grounds of appeal in the appeal memorandum filed by the department also enumerated the submission in respect of levy of service tax on the cottage rent and interest only. Neither any reference nor any submissions have been given in the appeal memorandum filed by the department regarding the imposition of penalties under section 76 and 78 of the Finance Act, 1994. This proves that the penalties were not the subject matter of the appeal, therefore, the allegation of the impugned order to revise the penalties suo motu is void ab initio and is liable to be set aside.

10.          It is further submitted that the impugned order has not quantified the demand of service tax and penalties under section 76 and 78. It has been an order simplicitor which has been passed by taking an easy approach without calculating the demand of service tax. At various places wherever the amount of quantified demand has to be mentioned, the impugned order has used the words “service tax on the value of cottage rent of Rs. 21,36,844/- & Rs. 20,16,430/- for the year 2005-06 & 2006-07”. Further, though the penalties were not the subject matter of appeal, yet the impugned order has dealt with it, and that too, in a simple approach by writing that the penalties will stand modified accordingly. This shows that the impugned order has been passed without taking due care of quantifying the demand and penalties confirmed. Such an approach is not justified and the impugned order deserves to be quashed.

11.          The appellant also submits that most of the submissions made by them have not been considered while passing the impugned order in appeal by the learned Commissioner Appeal. Moreover, the case laws relied upon by them have also been rejected without discussing or distinguishing them or assigning the reasons for their non-applicability. As, such, the impugned order in appeal turns out to be a non-speaking and a non-reasoned order that has no relevance in the eyes of law. The submissions that have not been considered are summarized as follows:

Ø It was submitted that this appeal has been filed by the department solely by relying upon the para 10.5 of Circular F. no. B1/6/2005-TRU dated 27.7.2005. In this para it is held that any amount recovered from the member for the facilities or advantages provided to them will be liable to service tax. In this regard, it is submitted that it is beyond any doubt that the amount recovered from the members is chargeable to serviceprovided it falls in the definition of taxable service of club or association. This definition is given in Section 65 (105) (zzze) of the Finance Act, 1994 which reads as follows:-

“Taxable Service”means any service provided or to be provided to its members, by any club or association in relation to provision of services, facilities or advantages for a subscription or any other amount;”

The analysis of above definition of taxable service for club and association services makes it ample clear that only the services provided/to be provided TO ITS MEMBERS by any club is liable to service tax. In the instant case, the actual service recipients, i.e. the persons acquiring the cottages were not the members themselves, they were the non-members, as such, these services do not fall under the purview of taxable services provided by club and association. As such, the services provided to persons other than members fall outside the ambit of definition of taxable service under the category of “club and association services”. Therefore, the contention of the impugned appeal filed by the department is not justified and is liable to be set aside.

Ø Without prejudice to above para, even if it is accepted for the sake of argument also, that the contention of the above referred circular is correct, then too, the circulars are not binding on the assessees and they have liberty to challenge the same. This has been held in the case of Birla Jute and Industries             Ltd. v/s Assistant Collector of C. Ex. [1992 (57) E.L.T. 674 (Cal.)]. In this case it was held that Board Circulars are not binding on the assessees and they may opt not to follow these Circulars. Thus, even if they accept the clarification of Board, then too, the same cannot be held as binding on them in the light of above referred decisions.

Ø It was further submitted that the room rent is not chargeable to service tax under the category of club or association services during the period in issue. In this respect the respondents submit that the service tax on room rent was implemented w.e.f. 1.5.2011 by inserting a new sub clause no. (zzzzw) to the sub section 105 of section 65 of Finance Act, 1994. The sub clause reads as follows:-

Taxable services means any service provided or to be provided, (zzzzw) to any person by a hotel, inn, guest house, club or campsite, by whatever name called, for providing of accommodation for a continuous period of less than three months;"

The analysis of above clause of taxable service of short term accommodation makes it clear that w.e.f. 1.5.2011, if any club provides room facility to any person for a period less than three months, it will be chargeable to service tax. Thus, the service tax on room rent collected by the club has been imposed w.e.f. 1.5.2011; as such, this service was not taxable prior to this date. Since the period in issue is much before this date, the service tax cannot be levied on room rent collected by a club in absence of any specific provision in this regard.

Ø In continuation to above, when this levy of short term accommodation was proposed in budget, 2011, the TRU letter - D.O.F.No.334/3/2011-TRU has analyzed this levy as follows:-

“Short-term accommodation

2.1 Short term accommodation is provided by hotels, inns, guest houses, clubs and others and at camp-sites. This service is proposed to be taxed where the continuous period of stay is less than 3 months.

2.2 Actual levy will be restricted to accommodation with declared tariff of Rs 1,000 per day or higher by an exemption notification. Once this requirement is met, tax will be chargeable irrespective of the fact that actually the amount charged from a particular customer is less than Rs 1,000. The tax will also be charged on the gross amount paid or payable for the value of the service.

2.3 Finance Minister has announced 50% abatement from the value of service. Details of the exemption will be announced at the time when the levy is operationalized after the enactment of the Finance Bill.

Hence the above TRU letter issued at the time of budget, 2011 makes it clear that the service tax is proposed on the room rent charged or chargeable by the clubs from any person if the rent collected is more than Rs. 1000 per day. The last para also makes it clear that the levy so proposed was to be operationalized after the enactment of Finance bill, 2011 and the levy was effective as from 1.5.2011. Hence it is clear that the service tax was not leviable prior to this proposal. So the contention of impugned appeal of department demanding service tax on cottage rent is not sustainable and is liable to be quashed.

Ø They further submitted that they have got themselves registered for paying the service tax on cottage charges under the above referred category of short term accommodation w.e.f. 1.5.2011. As from the date of this levy, they are duly paying the service tax on the same and filing the return thereof. Since the service tax on room charges was brought into force w.e.f. 1.5.2011 under the category of “Short Term Accommodation” services, it cannot be contended that the service tax was payable on the same services under some other head prior to this date. Reliance is placed on the following decisions in this regard:-

·         Sap India Private Limited v/s CCE, Bangalore [2010-TIOL-1569-CESTAT-BANG]

·         M/s Prince Foundations (P) Ltd v/s CST, Chennai [2009-TIOL-1103-CESTAT-MAD]

·         M/s Kaveri Coal Suppliers & Another v/s CCE, Kanpur [2011-TIOL-1593-CESTAT-DEL]

In the above decisions it was held that when service tax is specifically levied on a service as from a particular date, it cannot be alleged that the service tax on the same service was levied under some another head prior to the date of specific levy. This is exactly the case of respondents. The service tax on the short term accommodation services has been enacted w.e.f. 1.5.2011 and the respondents have started paying the same. As such, it cannot be alleged that the service tax on the same cottage rent was leviable under club and association services prior to 1.5.2011. Therefore, in the light of above decisions, the impugned appeal filed by the department is not sustainable and is liable to be rejected.

12.          Aligning with the above, the appellant submit that in view of the fact that most of the submissions made by them have not been considered while passing the impugned order, the said order turns out to be a non-speaking and non-reasoned order which has no relevance in the eyes of law and is liable to be quashed. The appellant also wishes to place reliance on the following cases:

o    Commissioner of Central Excise, Bangalore versus Srikumar Agencies [2008 (232) E.L.T. 577 (S.C.)

o    CC Vs Essar Oil Limited [2010-TIOL-560-HC-AHM-CUS]

o    State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS]

The analysis of these decisions makes it clear that the order passed without giving reasons for the same is not justified in the eyes of law. In the case of appellant also, no reasons has not also been assigned why the above referred submissions and case laws cited by them are not applicable and why their benefit has not been extended to them. As such, the impugned order passed without assigning the reasons is not justified and is liable to be quashed. The appeal should therefore be allowed.

13.      Furthermore, during the course of personal hearing for the stay application, reliance was also placed on the High Court judgement delivered in the case of Sports Club of Gujarat Ltd. [2013-TIOL-528-HC-AHM-ST] wherein it was held that levy of service tax on service rendered by a club to its members was held to be ultra vires. Accordingly, it was prayed that the stay application should be allowed as service tax is not leviable on the services provided by the club to its members.

Reasoning of the Judgement:- Prima facie, the adjudication order dated. 05/05/2011 to the extent modified by the Commissioner (Appeals) Jaipur-II dated 09/01/2013 regarding determination of service tax liability in relation to amounts received by the appellant from renting of its cottages in the appellant club to its members, is unsustainable in view of the decision of the HIGH COURT OF GUJARAT DATED 25/03/2013 (2013-TIOL-528-HC-AHM-ST) and the decision of the JHARKHAND HIGH COURT DATED 15/03/2012 (2012-TIOL-1031-HC-JHARKHAND). In these circumstances, we grant waiver of pre deposit and stay all further proceedings pursuant to the impugned order in appeal, pending disposal of the appeal. This application is disposed off accordingly.

Decision:- The stay application was allowed.

Conclusion:- The gist of this case was that when the levy of service tax on the services provided by a club to its members was held as ultra vires then directing the appellant to pre-deposit the demand of service tax confirmed along with interest was not feasible. Moreover, in this case the renting services were being provided to the guests of the members of the club that is prima facie not liable to service tax under club services as for classifying the services under club, the services should be provided by the club to its members, which was not the case.

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PJ/Case Study/2013-14/68
31 August 2013

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PJ/Case Study/2013-14/68 31 August 2013

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PJ/Case Study/2013-14/68
31 August 2013