Ramesh Nair, Member (J)
1. The issue involved in the present case is that whether the refund claim of the appellant in respect of Service Tax paid under ‘club or association services’ is hit by mischief of unjust enrichment as provided under Section 11B of Central Excise Act, 1944. In the present case the Adjudicating Authority has sanctioned the refund claim considering the issue of unjust enrichment. Being aggrieved by the orders-in-original, the Revenue filed appeal before the Commissioner (Appeal) who has rejected the revenue’s appeal therefore, present appeal filed by the revenue, appellant.
2. Shri S S Vikal Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the grounds of appeal. He submits that both the lower authorities have not examined the aspects of unjust enrichment which is mandatory for allowing any refund claim in terms of Section 11B of Central Excise Act, 1944. Therefore, without examining the facts regarding the unjust enrichment the sanction of refund claim is not legal and correct.
3. On the other hand Shri Amit Laddha, Learned Counsel appearing on behalf of the Respondent at the outset submits that there is no dispute that the Service Tax paid by the appellant being an association under ‘club or association services’ was held not payable as per the following judgments:-
• Karnavati Club Ltd. Vs. Commissioner of S. T., Ahmedabad- 2013 (31) STR 445 (Tri.-Ahmd.)
• State of West Bengal Vs. Calcutta Club Limited, 2019 (29) GSTL 545 (SC)
• Rajasthan Co-Operative Dairy Federation Limited Vs. Commissioner of C.E , Jaiput, 2022 (5) TMI 482-CESTAT New Delhi (Affirmed in 2022 (11) TMI 344- SC Order]
• Mahindra Holidays and Resorts India Ltd., Vs. The Commissioner of Service Tax, Chennai, 2020 (6) TMI 686- Madras High Court
3.1 He submits that even the various High Courts and Supreme Court decided the club or association service provided by the club or association is not taxable on the ground of doctrine of mutuality. It is his submission that since it was held that there is no provision of service between the club and members as they are not two distinct person. Therefore, on this ground itself the question of passing of incidence of any tax paid by the club or association does not have any ingredient of unjust enrichment. Accordingly, the impugned order is legal and correct.
4. We have carefully considered the submission made by both the sides and perused the records. We find that even the aspects of taxability decided by the Hon’ble Supreme Court is on the principle that due to doctrine of mutuality no service exists between the club or association and its members. When the Hon’ble Supreme Court held that the club or association and its members are not two distinct identity and there is a mutuality of interest between both of them on that basis only it was held that since no service provider or service recipient exists service tax is not payable. On the same principle, if any service tax is paid, it has gone from one hand to other within the same entity it cannot be said that the incidence of the service tax has been passed on. We find that the Learned Commissioner (Appeal) while deciding the unjust enrichment, given the following finding in his order:-
“7. The issue pertains to applicability of unjust enrichment in the refund claims sanctioned by the adjudicating authority. The respondents had filed the claims in view of the decision of Hon'ble High Court of Gujarat in the case of Sports Club of Gujarat vs Union of India. The judgment of the Hon'ble High Court of Gujarat is based on the 'Principles of Mutuality'. I also have the same view that any transaction by the club with its member is not a transaction between two parties. The question of unjust enrichment will arise only when there is the existence of two or more distinctly separate parties. But when the respondents are dealing with their members, we find that they are not separate entities. The Hon'ble High Court proclaimed that;
"The petitioner is giving service to its members but the club is formed on the principle of mutuality and, therefore, any transaction by the club with its member is not a transaction between two parties. However, being a company, it may enter into a transaction with anybody, a 3rd person, not a member, then in that situation, this club becomes a legal entity and can certainly enter into any transaction and such transaction are not on the principle of mutuality and, therefore, may be liable to any tax as a transaction between two parties. However, when the club is dealing with its members, it is not a separate and distinct Individual. It is submitted that in Identical facts and circumstances, however, in the matter of Imposition of sales tax, when the club was expressly included in the statutory definition of 'dealer' under Madras General Sales Tax Act, 1959, so as to bring the club within the purview of taxing statute of the Madras Sales Tax, the Hon'ble Supreme Court, in the case of the Joint Commercial Tax Officer Vs. The Young Mens'Indian Association, considered the definition of the 'dealer' by which the club was declared dealer and after considering the definition of sale as given in the Act of 1959 and explanation-I appended to Section 2(n), specifically declaring the sale or supply or distribution of goods by a club to its members whether or not in the course of business was declared deemed to be a sale for the purpose of the said Act. In that situation, Hon'ble Supreme Court considered the issue that the club is rendering service or selling any commodity to its members for a consideration then whether that amounts to sale or not. Hon'ble Supreme Court held that it is a mutuality which constitutes the club and, therefore, sale by a club to its member and its services rendered to the members, is not a sale by club to the members.
In the case of Commissioner of Income Tax Vs. Ranchi Club Limited, the Hon'ble Patna High Court affirmed that no one can earn profit out of himself on the basis of principle of mutuality and held that income tax cannot be imposed on the transaction of the club with its members.
From the above finding, it can be seen that the Learned Commissioner (Appeals) held that unjust enrichment is not applicable due to principle of mutuality, we completely agree with the finding of the commissioner (Appeals) which is supported by the Hon’ble Gujarat High Court judgment (Supra).
5. Accordingly, the impugned orders are legal and correct which do not require any interference. Hence the impugned order is upheld. The Revenue’s appeal is dismissed.
