Century Club vs Commissioner of Service Tax

V. Gopala Gowda, J.—The further submissions of Sri Ravi Shankar is heard on behalf of the appellant.

The correctness of the order of the Customs Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bangalore dated 25-8-2008 passed in appeal No. ST/340/2007 (2009) 16 STJ 82 ] is questioned in this appeal urging various grounds in support of the questions of law framed and prayed to set aside the impugned order by allowing the appeal answering the questions of law in favour of the appellant.

The ground of attack of the impugned order is that the same is contrary to the following decisions of the Apex Court and therefore it is vitiated in law.

(a) Collector v. Sunrise Structural & Engg. (P) Ltd. 2003 (154) E.L.T. A241 (S.C.)

(b) SACI Allied Products Ltd., U.P. Vs. Commissioner of Central Excise, Meerut, .

(c) Collector of Central Excise Vs. Gammon Far Chems Ltd., .

(d) Commissioner v. Goodluck Industries 2000 (120) E.L.T. A66 (S.C).

Hence it is contended that question No. 1 would arise for consideration.

The second ground of attack of the impugned order, by placing strong reliance upon Sections 65(25a) and 65(51) and Section 65(52) that the appellant club does not come within the definition of service rendered under any one of the above referred provisions of the Finance Act, 1994. Therefore it does fall within the definition of health and fitness service and club or association service. Therefore the show-cause notice issued by the Department under the provisions of Section 65(25a) of Finance Act is vitiated in law. Hence second question of law arises for consideration of this Court.

Further third substantial question of law would also arise for consideration of this Court having regard to the facts and circumstances of the case. The entry relating to club or association "Club or Association" service is constitutionally valid between the club and member when (the service is rendered by the members of the club cannot be considered as the service for the purpose of service tax in view of mutuality principle and right to conjunction under Article 29 of the Constitution of India. The learned Counsel further made submission in support of substantial question No. 5 regarding explanation to Section 65 of the Finance Act, 1994. Its Constitutional validity is held to be valid. Whether it could be applied retrospectively for taxing activity relating to club vis a vis its members. Our attention was drawn to the judgment today by the learned Counsel Ravishankar the decision of this Court in the case of Century Club and Ors. v. The State of Mysore and Anr. (1965) 16 STC 38, wherein this Court while examining Section 2(I)(k) and Explanation 1 to Section 2(I)(t) of erstwhile Mysore Sales Tax Act with reference to Article 14 of the Constitution of India, this Court has held the aforesaid provision of Section 2(I)(k) and 2(I)(t) to the extent they attract the supplies made by clubs, registered as well as unregistered to their members to tax under the Act are ultra vires of the powers of the State Legislature and consequently void and inoperative. With reference to the said decision learned Counsel placed strong reliance on the decision of the Supreme Court in 2007 (7) S.T.R. 25 (S.C.) in the case of All India Federation of Tax Practitioners v. Union of India where in the Apex Court had examined the case of the Chartered Accountant, where the Legislative Competence to levy service tax and its Constitutional validity was examined. While answering the question in favour of the revenue it has been held for consumption of goods sales tax is attracted. For rendering service to the customers, the service tax under the Finance Act is applicable. Therefore on the analogy of the said decision the Division Bench of this Court in the case of Century Club and others referred supra wherein it is held charging of sales tax under erstwhile Mysore Sales Tax Act on the basis of the analogy of the decision of the Supreme Court in the case of All India Federation of Tax Practitioners with all fours applicable and therefore requested to set aside the order impugned herein by answering the aforesaid substantial questions of law.

With reference to the rival contentions on behalf of the appellant we have carefully examined each one of the contentions with reference to the provisions of Section 65 of the Finance Act with a view to find out as to whether the questions of law arise for our consideration and the impugned order is vitiated either in law or the question would arise for our consideration in this appeal. Our answer is in the negative for the following reasons:

It is an undisputed fact that the appellant club is registered under the provisions of Karnataka Societies Registration Act, providing various services to its members. It is also registered with the Service ''Tax Department under the category of �Health and Fitness Service��. It is charging, collecting and paying the service Tax for the period from October 2005 to March 2006. But they have filed a refund claim on the ground that they are registered under the Karnataka Societies Registration Act and providing service to its own members. It is mutually consented between the members and the club. Therefore service tax is not applicable to the appellant club is examined by the Assessing Officer. While examining the said contention, the Assessing Officer has held that the service rendered by the club to its members come under the category of ''Health and fitness service'' specified in Section 65(51) of the Finance Act, 1994. The definition of ''Health and fitness service'' with reference to the said conclusion is after interpretation of Section 65(51) of the Act. It would be relevant for us to extract Sub-sections 51 and 52 of Section 65 which read thus :

Section 65(51): ''Health and fitness service'' means service for physical well being such as, sauna and steam bath, Turkish bath, solarium, spas, reducing or slimming salons, gymnasium, Yoga, mediation, massage (excluding therapeutic Massage) or any other like service.

Section 65(52) : ''Health club and fitness Centre'' means any establishment, including a hotel or a resort, providing health and fitness service.

A bare perusal of Sub-section 52 of Section 65 of the Finance Act after defining ''health club and fitness centre'' in establishments including hotel, private health and fitness service, the phrase establishment used under the above said sub-section is very important for the purpose of examining the legal contention urged on behalf of the Appellant. It is an undisputed fact that the appellant club is running a "Health club and fitness centre" and it is an establishment registered under the provisions of Mysore Societies Regulation No. III of 1904 must necessarily be registered under the Karnataka Shops and Establishments Act, 1963. The phrase any establishment has no relevance. It does not include the health club which is being established and running for the benefit of its members. The definition of commercial establishment in the Karnataka Shops and Commercial Establishments Act reads thus:

2(e) ''Commercial Establishment'' means a commercial or trading or banking or insurance establishment, an establishment or administrative service in which persons employed or mainly engaged in office work, a hotel, restaurant, boarding or eating house, a cafe or any other refreshment house, a theatre or any other place of public amusement or entertainment and includes such establishments as the State Government may by notification declare to be a commercial establishment for the purpose of this Act.

Strictly the definition of establishment may not be applicable for the limited purpose of establishment. The word used under Sub-section (52) of Section 65 of the Finance Act has to be borrowed for the limited purpose of its employees. Persons who render the health service to the members of the club and they are all employees of the club. They are required to be paid a salary. There will be revision of the salary and terminal benefits. They all would be included in the salary. But they are subjected to disciplinary action of the Management of the club, if they have not employed on contract basis the competent persons to man the "Health and fitness service" of Century Club to render service. They must be employed for the purpose of rendering service, for their remuneration would be paid collecting from the members. Therefore there is a relationship of such person and club to render service to its members and under no stretch of imagination, it cannot be said that it is not an establishment. The moment an establishment is running "Health club and fitness centre" u/s 65(52) of the Finance Act, 1994 service tax is applicable as there is no explanation of the word club u/s 65(52) and its inclusive definition including the appellant club and other similarly placed clubs and therefore the club is registered under the Service Tax Department charging and collecting from its members and therefore refund claim is not tenable. Further reliance placed on the decision of the Calcutta High Court in the case of Saturday Club Ltd. Vs. Asstt. Commr., Service Tax Cell, is also considered by the Tribunal. The Tribunal rightly not applied the said case to the facts of the present case in view of the fact that the respondent Commissioner in his order referred to the definition of ''club'' and held that the exclusive clause specified in 65(25a)(i) of the Finance Act and rejected the said contention and further on the reference to the legal ground in paragraph 11 of the appeal memo, the Tribunal has rightly referred to the provisions of Section 65(51), (52), 65(105)(zw) and the same are extracted. After careful examination of the said definition provision, the Tribunal having regard to the undisputed fact that the club providing the facilities in its health club to its members. Therefore with reference to the definition of health club and fitness service it is for the physical well being of its members and the definition including a hotel or resort providing health and fitness service, the Tribunal has rightly came to the conclusion and held that the "Health and fitness Centre" is there in the club. Therefore, the contention that it is excluded from the definition, is rightly rejected by the Tribunal and therefore it has rightly concurred with the finding of fact recorded by the Commissioner by holding that appellant is rendering health and fitness service to its members. Therefore the order of the Commissioner respondent is not beyond the scope of the show-cause notice issued and he has upheld the order of the authority and therefore the contention that the appellant club is excluded under Clause a(i) of Sub-section (25a) of Section 65 of the Finance Act, is rejected. In our considered view the conclusions and findings and reasons recorded by the Assessing Authority and the Appellate Authority are perfectly legal and valid.

In view of the statutory provisions and admitted facts that the appellant is running a health club and service center is established for rendering service to its members which is a physical fitness service rendered to its members and therefore reliance placed upon the Mysore Sales Tax referred to supra in the Century club case and on the basis of the All India Federation of Tax v. Union of India to draw the decisions with the Sales Tax Act is not attracted to the goods sold in the club. As a matter of equivalence as held by the Supreme Court in the case of All India Federation of Tax Practitioners with reference to paragraph 18 and 19 is misconceived and the same do not apply to the facts of the case, in view of the definition ''any establishment'' occurred in Section 65(52) of the Finance Act. Therefore the legal contentions are untenable. None of the questions raised in this appeal by the appellant urged on behalf of the appellant would arise for our consideration in view of the finding of fact recorded by the fact finding authority affirmed by the first Appellate Authority and Second Tribunal, by recording valid and cogent reasons. Accordingly, we affirm the order of the Tribunal and dismiss the appeal.