The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that club and members are not separate and directed the club to refund the collected Service Tax to the persons or established legal heirs or part time members from whom the money was recovered as levy, as the first step.
The bench of Somesh Arora, (Judicial Member) and Satendra Vikram Singh (Technical Member) has observed that as considerable interest has been earned/will be earned on the amount refunded to the club, the same shall be deposited in an escrow account with no claim of interest by the club. This will curb the tendency to delay, if any of the clubs.
The bench directed the department to examine unjust enrichment angle to adjudge to the extent that after two years, if some amount remains un paid to any member or its legal heirs or not passed including to the temporary members, not being available, then such un-paid amount shall be available for crediting to the Consumer Welfare Fund along with the interest amount if any earned in the escrow account. Endeavor shall be made by the department as well as the club to maximize interest by making appropriate FDRs in Nationalized Bank Account.
The respondent, Rajpath Club Ltd. had filed a refund claim of Service Tax already paid by them against “Club or Association Services”. They were holding Service Tax registration number under the category of “Club or Association Services”, Security/Detection Agency Service, Manpower Recruitment/Supply Agency Service, Works Contract Service, Outdoor Catering Service etc.
The Adjudicating Authority rejected the refund claim. Being aggrieved the club filed appeal before Commissioner (Appeals), Ahmedabad who allowed the appeal by holding that the appellants are eligible for refund under the principles of mutuality.
The department filed the appeal. As per the Department, decision of High Court of Gujarat’s in Order dated 25.03.2013 pertains to the period prior to 01.07.2012 whereas, the legal position has changed from 01.07.2012 which negates the issue of mutuality between the club and its members and they are deemed to be separate persons and hence, the order of High Court is not applicable.
The tribunal held that in no situation, the club can be allowed to unjust enrich itself at the cost of Members which will be nothing but deception and misappropriation, we in the peculiar facts and circumstances of the matter note with satisfaction that considerable amount has been paid back to the Members and is still in progress for the past refunds. Even the legal heirs of the deceased members and also for those who took short term membership have been attempted to be traced.
The court held that the exercise cannot go on endlessly and a certain time bound limit of up to two to complete the exercise needs to be considered while considering various aspects of “unjust enrichment”. While the first right to any refund is of the members from whom it was recovered, in case, same cannot be paid back the amount it cannot be retained by the clubs. We therefore, while allowing the request of the department for remanding the matter to examine the angle of unjust enrichment, allow it on the basis of certain caveats.
The tribunal allowed the appeal.
Case Details
Case Title: Commissioner of Service Tax- Service Tax-Ahmedabad Versus Rajpath Club Ltd.
Case No.: SERVICE TAX APPEAL No.11308 of 2018-DB
Date: 15.04.2025
Counsel For Appellant: Mohit Agarwal
Counsel For Respondent: CA Bishan R Shah
