+ Fulfilling as it does the basic human need for socializing, any curbs or restrictions cast on these by tax officials, in particular, have been resisted with fervour by recourse to judicial intervention. All these disputes have arisen because of presumption of legislative intent. Most often, this presumption emanates from ignorance, compulsion, ideology or philosophy; none of which should ever have crept into the discharge of statutory duties on the part of tax administrators.
+ Besides seeking the application of this decision (supra) in their dispute with the service tax authorities, it is also canvassed on behalf of the appellant that the entrance fee is not a consideration for any service; that it is a fee paid for acquiring membership which is not only not a service but does not, of itself, assure any other facility without further payment. This is a fundamental issue raised on behalf of the appellant that goes beyond the principle of mutuality.
+ According to them, the amount collected as entrance fee was not a consideration for rendering of any service and, even if deemed to be a consideration, it is not taxable being a transaction with members who are not distinguishable from the club itself. The latter flows from the fundamental premise that transactions with or restricted to oneself is beyond the ambit of taxability as enunciated by the Hon'ble Supreme Court in Joint Commercial Tax Officer v Young Men's Indian Association [AIR 1970 SC 1212].
+ These arguments and the judicial pronouncements did not appear to find favour at the adjudication and first appellate stages despite the ruling of the Hon'ble High Court of Bombay in Commissioner of Income Tax v Smt Godavaridevi Saraf, Tumsar [1978 (2) ELT (J 624)(Bom)] about the binding nature of judicial pronouncements.
+ Nevertheless, the fundamental question raised by the appellant calls for a response from this Tribunal for two reasons; firstly, the pendency of the appeals before the Hon'ble Supreme Court is likely to be construed as sufficient cause for continuing to not only demand service tax on clubs and associations but also to adjudicate thereon without acknowledging the mutuality principle and secondly, the incorporation of Explanation 3 in section 65B (44) of Finance Act, 1994 is likely to be interpreted as extending latitude to overcome the impediment of mutuality.
+ Our jurisdiction to entertain this plea exists only in a limited sphere in the context of the general supposition that legislation will not ever stray beyond the bounds of constitutionality (Principles of Statutory Interpretation - Justice GP Singh pp 44-45, Thirteenth Edition 2012) and is derived from that supposition. This does not, however, rule out the possibility of the tax administrator assuming a jurisdiction beyond legislative intent; all too often, this is the outcome of ignorance of or the assumption that the statute administered by them is not bound by the limits embodied in the present statute - the Constitution - to circumscribe legislative and executive authority. While Chapter V of Finance Act, 1994 is unambiguously clear about the objectives and scope of the tax, the provisions therein often resorted to without regard to the nature of the tax. This occurs when provisions of the statute are selectively read.
+ Chapter V of Finance Act, 1994 is intended to tax services. The relevant charging section, therefore, cannot and should not be read beyond the transaction that is intended to be taxed. Plainly expressed, only services can be taxed. Habituated to tax on tangible goods, the concept of tax on services may not be easily appreciated for the very reason of its intangibility. The form of the transaction not being apparent until its benefit is perceived in the hands of the recipient and signified by readiness to recompense the provider, the tendency to seize upon the tangibility of the flow of compensation to presume the existence of a service becomes irresistible. And that is when the tax determination exceeds legislative intent.
+ Owing to its inherent intangibility, a service transaction becomes recognizable only if a benefit accrues to a recipient and that explains the use of the phrase "provided or agreed to be provided" to determine taxability. It is taxable only if and when any, or a particular, service is rendered to a recipient. Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow.
+ Without an identified recipient who compensates the identified provider with appropriate consideration, a service cannot be held to have been provided. In a taxation scheme that specifies the particular targets of taxation, tax liability will arise when a provider conforming to the relevant description in the charging section performs an activity that conforms to the relevant description in the charging section on the request, and for the benefit, of a recipient conforming to the relevant description in the charging section.
+ Mere capacity to deliver a service cannot be equated with providing or agreeing to provide a service; such service has to reach the recipient in exchange for the consideration or the consideration is made over in exchange for a schedule of delivery of the service.
+ Unless the existence of provision of a service can be established, the question of taxing an attendant monetary transactions will not arise. Contributions for the discharge of liabilities or for meeting common expenses of a group of persons aggregating for identified common objectives will not meet the criteria of taxation under Finance Act, 1994 in the absence of identifiable service that benefits an identified individual or individuals who make the contribution in return for the benefit so derived.
+ A "club or association" is the aggregation of a group of individuals for fulfilment of social instinct of human beings. The formality of the structure assumed by this aggregation is not relevant. Such an aggregation may have the wherewithal to provide services- and some of them taxable - but such capacity does not render the "club or association" liable to tax merely for that reason. Neither can monetary contribution of the individuals that is not attributable to an identifiable activity be deemed to be a consideration that is liable to be taxed merely because a "cub or association" is the recipient of that contribution. Accodingly, every fee or charge payable by members to a "club or association" does not, ipso facto, become taxable.
+ "Clubs or associations" generally charge entrance fees as well as periodical subscriptions. They may and, often do, provide facilities for recreational, social and victualling requirements of its members. Such facilities may or may not entail an identifiable charge but, most often, do - certainly they do so for the latter two facilities. To the extent that any of these collections are directly attributable to an identified activity, such fees or charges will conform to the charging section for taxability and, to the extent that they are not so attributable, provision of a taxable service cannot be imagined or presumed. Recovery of service tax should hang on that very nail. Each category of fee or charge, therefore, needs to be examined severally to determine whether payments are indeed recompense for a service before ascertaining whether that identified service is taxable.
+ The entrance fee is a one-time payment that is visited upon members of "clubs or association". It affords their inclusion into the restricted group that constitutes membership of the club or association. Such entrance fees do not usually confer access to services, facilities or advantages for which membership of the club or association is keenly sought. Membership is contingent upon tendering prescribed subscription at prescribed intervals. Therefore, a provision of service is not perceptible as a quid pro quo for payment of entrance fees. Unless access to services, facilities or advantages offered by the club or association is solely dependent on the entrance fee, there is no logical reason to assume that such fees can be considered as "other amount" as defined in section 65 (105) (zzze) of Finance Act, 1994.
+ "Clubs or associations" and entities that need funds to exist in the form that they have assumed or evolved. Wages of employees and costs of running the establishment, such as energy charges, maintenance and repairs etc., are necessary expenses for such sustenance. Implicit in membership of clubs and associations is the obligation to share in such expenses. These are required for maintaining the assets of the club or association for which a service provider may or may not be contracted but the contributing members are not the direct beneficiaries of such services. Contribution to expenses cannot, by any stretch, be deemed to be consideration for any identified service rendered to individual members by access to the facilities or advantage that is within the wherewithal of the "club or association". However, to the extent that it is possible to identify the facilities, advantage or services of the "club or association" utilized without further payments specifically attributable to such facility, advantage or service, the subscription will be taxable.
+ In the instant case of the appellant, the principle of mutuality laid down in the cited decisions supra and the findings above on the entrance fee would render the rejection of their contention of non-taxability by the lower authorities to be contrary to law. The appellant is, therefore, eligible for refund of such tax collected without authority of law.
