[2016-TIOL-661-CESTAT-MUM] Gondwana Club vs. Commissioner of Customs & Central Excise, Nagpur’

Facts
The Appellant received entrance fees and periodical subscriptions from its members. Further, a contract fee was received from the caterers contracted for delivery of food and beverages to members on which service tax was discharged under “club and association” service. The Appellant also recovered amounts from its staff towards accommodation provided by them. A show cause notice was issued for demanding service tax on the entrance fees/ periodical subscriptions, contract fee and accommodation charges under club and association service, business support service and renting of immovable property service respectively.

Held
In respect of entrance fee/subscription charges, the Tribunal observed that a member’s club is a group of individuals who have chosen to be a member for fulfillment of certain human needs. Access to such aggregation is on payment of an entrance fee which does not assure any service but merely allows the individual to claim affiliation to the aggregate. Such aggregates acquire ownership of assets which devolve on them on disaggregation. Accordingly, the entrance fee represents merely the present value of such assets and is not a consideration for any service that a member may obtain from the club. Thus without ascertainment of the receipts as quid pro quo for an identified service the transaction does not meet the test of having rendered a taxable service. Further relying on the decision of Sports Club of Gujarat vs. Union of India [2013 (31) STR 645 (Guj.)] the demand was set aside. In respect of catering fee considering that service tax was paid it was held that payment under an incorrect accounting code is a mere technical flaw and the demand was set aside. Further, in respect of the accommodation charges, it was held that contractual privileges of an employer-employee are outside the purview of service tax.

Note: Readers may note a similar decision of the Mumbai CESTAT in the case of Cricket Club of India Ltd vs. Commissioner of Service Tax [2015 (62) taxmann.com 2] reported in the December 2015 issue of BCAJ. Further, reference can be made to the decision of the High Court of Gujarat in the case of Federation of Surat Textile Traders Association vs. Union of India [2016-TIOL-459-HC-AHM-ST] wherein the Court relying on the decision of Sports Club of Gujarat (supra) held that since the provisions of “club and association” service have been declared ultra vires the Show Cause Notice (SCN) is without authority of law and cannot be sustained.