- (1.) This writ petition has been preferred by Ranchi Club Limited for declaration that the Ranchi Club Limited is not covered under the Chapter V of the Bihar Finance Act, 1994 and, therefore, is not liable to pay service tax under "Mandap Keeper's Services" or under the 'Club or Association Services" categories. The petitioner also prayed for order of prohibition against respondents, Central Excise Division, Ranchi from enforcing any of the provisions of the Service Tax Act i.e. chapter V of the Finance Act, 1994. This writ petition was heard and decided on 13.08.2007 by the Division Bench and, on the basis of the admissions of the learned counsel for both the parties, it has been held in the order dated 13.08.2007 that the petitioner is not liable to pay service tax under the provisions of Section 65(66)(67) of the Finance Act, 1994 when the services are utilized by the members of the club. However, it has also been held that the service provided by the petitioner-club to anyone other than the members, is liable for service tax. This order dated 13.08.2007 was challenged before the Hon'ble Supreme Court as well as by filing the review petition before this Court. During the pendency of Special Leave to Appeal (Civil) CC 4926 of 2008 before the Hon'ble Supreme Court, the Review Petition No. 51 of 2008, preferred by the Revenue, was allowed by the Division Bench of this Court (in which one of us Justice Prakash Tatia was member) vide order dated 21.04.2011 and the order dated 13.08.2007 was set aside. In view of setting aside of the order dated 13.08.2007 by this Court itself, the Hon'ble Supreme Court disposed of the Revenue's Special Leave to Appeal (Civil) CC 4926 of 2008, as nothing remained before the Supreme Court to be decided after setting aside of the order referred above. Now the matter has come up before this Court for hearing again the same issue.
(2.) As we have noticed that petitioner's contention is that petitioner is a club and also registered company under the Companies Act, 1956. 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 v. 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 sum and substance, the ratio is that for a transaction of sale, there must be two persons in view of this judgement as well as in view of the Full Bench Judgement of this Court delivered in the petitioner's own case i.e., Commissioner of Income Tax v. Ranchi Club Limited, 1992 1 PLJR 252. The Full Bench of this Court while considering the identical issue in the matter of imposition of income tax, observed 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.
(3.) With the help of these two judgements, learned counsel for the writ petitioner submitted that the petitioner is a club and is rendering services to its members and the same principle of mutuality applies to the facts of the case in view of the reason that the language in the provisions of the Madras General Sales Tax Act, 1959 and the provisions under the Income Tax Act are para materia with the provisions which are sought to be applied against writ petitioner for levy of service tax.;