Whether Service Tax on treatment and recycling of effluents and solid waste by club or association only is exempted

PJ/Case Laws/2012-13/1242

Case:- VAPI WASTE & EFFLUENT MANAGEMENT CO vs CCE, DAMAN

Citation:-2012-TIOL-1104-CESTAT-AHM

Issue:-Whether Service Tax on treatment and recycling of effluents and solid waste by club or association only is exempted

Brief Facts:- The appellant company has been incorporated in the year 1997, consequent upon the order of the Hon'ble High Court of Gujarat for the purpose of Common Effluent Treatment Plant from Gujarat Industrial Development Corporation (GIDC)for the purpose of treating the effluent discharged by the industries located in the GIDC area,Vapi. The industrial units discharging hazardous effluents arecompulsorily required to become a member of the appellant association for the purpose ofgetting their hazardous effluents treated in their plant as per the norms prescribed by GPCB. Appellants charge one time payment for providing the serviceand also charge from industrial units on monthly basis on the estimated cost of operation ofthe effluent treatment facility the appellant is an association of operating units of GIDC Vapi and theappellant association is providing services after charging subscription from the members isliable to pay service tax on the service provided by the appellant to the members under thecategory of club or association services, proceedings were initiated after detailed investigationand inquiry which has resulted in to the impugned order wherein demand of service tax with interest and penalty equal to the amount of service tax demanded.

Appellant Contention:-The appellant submitted that with the introduction of the services provided by club or association in relation to commonfacilities set up for treatment and recycling effluent and solid waste with the financialassistance from the Central or State Government have been given exemption withretrospective effect from 16.06.2005. The period involved in the dispute is covered by theprovision of Financial Act, 2012 and therefore the demand is not sustainable

Respondent Contention:-The Respondent submitted that appellant is not an association but a limited company and therefore is notcovered by the exemption with retrospective effect. Only club or association includingregistered co-operative society is covered. Therefore, he submits that the impugned order hasto be upheld.

Reasoning of Judgement:-We have considered the submissions made by both sides. The demand of service tax hasbeen confirmed on the ground that the appellant is an association of industrial units in Vapiformed for the purpose of setting up and running common facility for treatment and recyclingof effluent and solid waste discharged by the units who are required to become a membercompulsorily and pay one time fee as well as monthly subscription.

In the show-cause notice, a view was also taken that a company or association that areformed for providing services of common facilities on payment of the subscription are liable topay service tax. At the time when the impugned order was passed, there was no exemptionnotification for the services rendered by the appellant. Therefore they had submitted theactivities in question were not covered by the club or association service. Consequent uponamendment made by Notification No.1/2012-S.T., club or association service provided by anassociation in relation to a common facility set up for treatment and recycling effluent or solidwaste is exempted from the service tax. This notification has been given retrospective effectby Section 145 of Finance Act, 2012 from June, 2005.The appellant was an association and was collecting subscription from the members forrunning of common facility for treatment of effluents and solid waste for the benefit of activities undertaken by them is not liable to service tax. It was pointed out by the learned counsel that the appellant is registered underSection 25 of the Companies Act, 1956 which provides that the word "limited" can bedispensed with in respect of an association formed as a limited company for promotingcommerce, art, science, religion, charity or any other object. He submits that the appellant isregistered as company under Section 25 only and the character of the company being anassociation does not change just because they are registered as a company. In any case, wefind that the learned A.R. cannot take up this argument at this stage since the demand onappellant was confirmed on the ground that the appellant is an association of members and itwas collecting subscription. In view of the clear cut stand taken by the Revenue and also inview of the submission about the statute made by the learned counsel, we hold that theappellant is an association for the purpose of liability of service tax and eligible for exemption.Since appellant is eligible for exemption on merits, the appeal and the impugned orderconfirming the demand of duty and imposition of penalty is set aside.

Decision:- Appeal allowed.

Comment:- This issue of rendering service by effluent treatment plant has been matter of dispute between these plants and the department. Even the Gujarat High Court has directed the Central Government to consider their representation for exemption as they are engaged in public welfare activity. Thereafter, the central Government has granted exemption to them and that too with retrospective amendment. But the dispute does not end here. This exemption was given to club or associations but the field formation says that the companies operating in this field are not eligible for exemption. Thanks to the tribunal that they have allowed the appeal. The ratio of this exemption is that when the units are undertaking the public welfare activity and that too with the Central and State Government funds only, then the exemption is granted by the CBEC. But the department is bent upon bringing small variation and tries to disallow the exemption. This attitude of the department is to be changed to reduce litigation.

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PJ/Case Laws/2012-13/1242

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