Remedy for appellant is to file appeal u/s 35L, which lies to SC.

Facts in Brief:

1. The appellant, namely, Commissioner of Service Tax, under Section 35 of the Central Excise Act, 1944.

2. The impugned orders are passed by the Custom Excise & Service Tax Appellate Tribunal (for short, CESTAT). Learned counsel, who appeared for the respondents in CEAC No. 5/2007 challenged the maintainability of this appeal. Though nobody appeared for the respondents in the other appeal, since the question is about the maintainability of the appeal and the issue involved is the same, which is common to both the appeals, we took up both the appeals together.

3. The respondent in this case is Delhi Gymkhana Club Limited.

4. It was served with three show-cause cum demand notices dated 24.6.2002, 3.7.2003 and 18.5.2004 respectively. Service tax in the sum of Rs.22,93,564/-, along with interest payable till the date of its demand under Sections 73 and 75 of the Act, was demanded by these show-cause notices.

5. Penalty under Sections 75A, 76, 77 and 78 of the Act was also proposed.

6. The respondent submitted reply to these show-cause notices challenging the proposed move on the ground that no such service tax was payable by the respondent club as it is the members of the club who were using the facility and there was no such question of providing services by the members to themselves.

7. The Assistant Commissioner, Service Tax Division - I, New Delhi, however, did not agree with the aforesaid contention of the respondent and passed orders dated 18.5.2005 confirming the demand of Rs.22,93,564/- with interest and also imposed penalties. Being aggrieved with the aforesaid order in original, the respondent preferred appeal to the Commissioner (Appeals), Delhi - I. The appellate authority accepted the contention of the respondent and set aside the order in original by allowing the appeal of the respondent vide orders dated 25.8.2006. The appellant herein did not accept this order and challenged the same before the CESTAT.

8. However, it has remained unsuccessful in its challenge as CESTAT has dismissed the appeal of the appellant on 13.6.2008. The Tribunal has noted in the impugned order that the Commissioner (Appeals) followed the judgment of the Calcutta High Court in the case of Dalhousie Institute v. Asstt. Commissioner, Service Tax Cell reported in 2006 (3) STR 311 as well as in the case of Saturday Club Ltd. v. Asstt. Commissioner, Service Tax Cell, (2006) 3 STR 305. The Tribunal was of the opinion that the Commissioner (Appeals) rightly held that when the service is provided by a club to its members, it does not attract service tax, as held by the Calcutta High Court in Dalhousie Institute (supra) as under :-

"The principle of mutuality in this case is also squarely applicable, as going by the definitions of mandap, mandap keeper and the taxable service, in this case the facility of use of the premises to the members by its club cannot be termed to be a letting out nor the members of the club using the facility of any portion of the premises for any function can be termed to be a client. The services rendered by any person to his client presupposes the element of commerciality and obviously this transaction must be involved with the third parties, as opposed to the members of the club."

9. The Tribunal also took note of the following observations of the Calcutta High Court in Saturday Club Ltd. (supra) :-

"So far as the merit is concerned, law is well settled by now that in between the principal and agent when there is no transfer of property available question of imposition of service tax cannot be made available. It is true to say that there is a clear distinction between the members club and proprietary club. No argument has been put forward by the respondents to indicate that the club is a proprietary club. Therefore, if the club space is allowed to be occupied by any member or his family members or by his guest for a function by constructing a mandap, the club cannot be called as mandap keeper, because the club is allowing his own member to do so who is, by virtue of his position, principal of the club. If any outside agency is called upon to do the needful it may raise a bill along with the service tax upon the club and the club as an agent of the members, is supposed to pay the same. The authority cannot impose service tax twice once upon the people carrying out the business of 'mandap keeper' as well as the members' club for the purpose of using the space for constructing or using it as 'mandap'.

Therefore, apart from any other question possibility of double taxation cannot be ruled out. If I explain my first query as above it will be crystal clear that if a person being an owner of the house allows another to occupy the house for the purpose of carrying out any function in that house it will not be construed as transfer of property. But if such person calls upon a third party 'mandap keeper' to construct a 'mandap' in such house then in that case such 'mandap keeper' can be able to raise bill upon the user of the premises along with the service tax.

Therefore, I cannot hold it good that members' club is covered by the Finance Act, 1994 for imposition of service tax to use its space as 'mandap'. So far as the other point is concerned whether the ratio of the judgments can be acceptable herein or not I like to say 'yes it is applicable'. Income-tax is applicable if there is an income. Sales tax is applicable if there is a sale.

Service tax is applicable if there is a service. All three will be applicable in a case of transaction between, two parties. Therefore, principally there should be existence of two sides /entities for having transaction as against consideration. In a members' club there is no question of two sides. 'Members' and 'club' both are same entity. One may be called as principal when the other may be called as agent, therefore, such transaction in between themselves cannot be recorded as income, sale or service as per applicability of the revenue tax of the country. Hence, I do not find it is prudent to say that members' club is liable to pay service tax in allowing its members to use its space as 'mandap'.

On appeal HC held as under,

10. In view thereof, it is clear that determination of any question in relation to rate of duty or to the value of goods for the purpose of assessment and when it is decided by the CESTAT, appeal thereagainst is provided to the Supreme Court under Section 35L(b) and no such appeal is permissible to the High Court.

11. It would be of interest to note at this stage that in the case of Perfect Electric Concern Pvt. Ltd. v. Asst. Collector/Commissioner, Central Excise, 2000 (118) ELT 578 (Del), a writ petition was filed against such an order without availing the statutory remedy of appeal to the Supreme Court provided under Section 35D of the Act. Argument by the petitioner therein, based on the judgment of the Supreme Court in L. Chandra Kumar v. Union of India, (1997) 3 SCC 261 was that the remedy of writ was always available.

12. This contention was turned down and writ petition was dismissed by this Court observing that the judgment in L.Chandra Kumar (supra) nowhere suggests that the petitioner should file petitions under Articles 226/227 of the Constitution of India even bypassing the statutory remedy of an appeal to the Supreme Court provided by an enactment. In this backdrop, it cannot be disputed that if the question of determination relates to the rate of duty or excise or the value of goods "for the purposes of assessment", appeal lies to the Supreme Court. It also cannot be disputed that in the present case that the question of rate of duty of service tax for the purpose of assessment arose for consideration and has been decided and, therefore, normally an appeal to this Court would not be maintainable.

13. The submission of Mr. Mukesh Anand, learned counsel appearing for the appellant, however, is that such an appeal is maintainable and to substantiate his contention, he has relied upon the provisions of the Finance Act, 1994 vide which service tax was introduced. His submission was that the question of law raised in this appeal is as to whether the respondent club is liable to pay service tax in allowing its members to use its space as Mandap which is a taxable service in view of Section 65 read with Section 67 and 105 of the Finance Act, 1994.

14. He submitted that though the present appeal has been filed under Section 35G of the Act but the dispute relates to the levy of the service tax against the respondent under the Finance Act, 1994 which is defined under Section 65 (66 & 67) of the said Act. The classification of the taxable service is defined in Section 65A of the Finance Act, 1994. The charge of service tax within India and outside India is provided under Section 66 and 66A of the said Act. According to him, what will be the valuation of taxable service for charging service tax is well-defined under Section 67 as well as the Service Tax (Determination of Value) Rules, 2006 vide Notification No. 12/2006-ST dated 19.4.2006. Thus, he argued that in the present appeal there is no question regarding any right of duty or value of goods for the purpose of assessment of any duty. The only question is as to whether the respondent is liable to pay service tax for the services rendered by it in view of Section 65 read with Sections 67 and 105 of the Finance Act.

15. This argument needs outright rejection. Appeal provision is Section 35G, under which these appeals are filed. Therefore, that provision, along with Section 35L, is to be considered (as already done) to decide the issue of maintainability. Moreover, the aforesaid argument will not change the character of the dispute. As is clear from the order of the Appellate Tribunal, in essence, the question that is decided relates to rate of duty.

16. Whether nomenclature thereof is given as service tax, it is the rate of duty of that tax which would essentially fall for consideration. Against such a decision, appeal is filed by the appellant under Section 35G of the Act which would not be maintainable in view of the decision of the Supreme Court in Naveen Chemicals (supra), as discussed in detail above. The remedy for the appellant is to file appeal under Section 35L of the Act, which lies to the Supreme Court.

Case Reference - Commissioner Of Service Tax vs M/S. Delhi Gymkhana Club Ltd.