Incorporated associations are exempt from service tax due to the mutuality principle, as they do not engage in commercial transactions with their members.

[Order per: ANIL CHOUDHARY]

The issue in these Appeals is whether the Appellant, which is an association of house owners (in group residential houses), registered under the Andhra Pradesh Societies Registration Act, 2001, are liable to pay service tax (2) on the amount of the contributions made by their members for their mutual benefit in the nature of maintenance charges, etc., during the period 01.04.2011 to 31.03.2016 under the category of “Club or Association services” as defined in Sec 65(25a) read with Sec 65(105)(zzze) of the Finance Act.

2. The Appellant was issued SCN dt.14.10.2016 by the Addl. Commissioner of Central Excise, Customs & Service Tax, Hyderabad invoking extended period of limitation, wherein it was, inter alia, alleged that:

i) The Appellant has been providing services as an association, to its members for a subscription or other amounts, which are the receipts of the Appellant during the relevant period;

ii) All receipts of the Appellant are towards the provision of services as an association to its members, and the same is reflected as incomes in the Income and Expenditure Statements in each financial year;

iii) In terms of Circular No.175/01/2014-ST dt.10.01.2014, all the amounts collected by the Appellant are liable to service tax, since the Appellant has collected amounts beyond the threshold prescribed in the Mega Exemption notifications, per member, per month.

3. Based on the above allegations, the Appellant was directed to show cause as to why an amount of Rs.53,25,891/- being the service tax amount for the period from 2011-12 to 2015-16 should not be demanded in terms of proviso to Sec 73(1) of the Finance Act with interest and further penalty was proposed under Sec 76, 78, 70, 77(2) of the Act.

4. The SCN was contested by the Appellant on various grounds by filing reply and thereafter, the Adjudicating Authority passed Order-in-Original No.38/2016-Adjn (ADC) Hyd-II dt.30.12.2016 confirming demand of Rs.53,25,891/- as proposed in the SCN under Sec 73(1) along with interest under Sec 75 and also imposing penalties of Rs.53,25,891/- under Sec 78, Rs.10,000/- under Sec 77(2) and late fee under Sec 70 read with Rule 7C.

5. Aggrieved, the Appellant preferred an Appeal before the Commissioner (Appeals), which was disposed of vide impugned Order-in-Appeal No.34/2017- 18 dt.28.03.2018 dropping a part of the demand of tax and while confirming some part of tax demand and remanded the case back for de novo consideration and re-quantification of the tax to be demanded.

6. Aggrieved, the Appellant had filed an Appeal No.ST/30994/2018 before this Tribunal.

7. In the mean time, the Addl. Commissioner of Central Tax, Rangareddy GST Commissionerate, Hyderabad, took up the de novo proceedings and following the remand directions, passed OIO No.14/2018-19-Adjn (ADC) ST, confirming a truncated demand of Rs.16,65,507/- under proviso to Sec 73(1) of the Act read with Sec 174(2) of CGST Act, 2017 along with interest under Sec 75 of the Act read with Sec 174(2) of CGST Act and also imposing penalty of Rs.16,65,507/- under Sec 78 of the Act read with Sec 174(2) of CGST Act.

8. Against the above denovo OIO dt.08.02.2019, the Appellant preferred Appeal before the Commissioner (Appeals-I), Hyderabad, who disposed of the Appeal vide impugned OIA dt.25.11.2019 rejecting the contentions of the Appellant and confirming the adjudication levies as indicated above.

9. Hence the present Appeal No.ST/30045/2021.

10. As both the Appeals arise from common SCN with respect to the same matter, they have been taken up together for Hearing and disposal.

11. It is not under dispute that the Appellant is a ‘Resident welfare association’ formed by the owners of the villas themselves, and duly registered as a societ