Delhi High Court
Commissioner Of Service Tax vs M/S. Delhi Gymkhana Club Ltd. on 28 August, 2009
Author: A.K.Sikri
Reportable
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CEAC No. 5 of 2009
and
CEAC No. 17 of 2007
% Reserved on : July 24, 2009
Pronounced on : August 28, 2009
1. CEAC No. 5/2009
Commissioner of Service Tax . . . Appellant
through : Mr. Mukesh Anand with
Mr. RCS Bhadoria, Mr. Sumit
Batra and Mr. Shailesh Tiwari,
Advocates
VERSUS
M/s. Delhi Gymkhana Club Ltd. . . . Respondent
through : Mr. P.K. Sahu with Mr. Prashant
Shukla, Advocates
2. CEAC No. 17/2007
Commissioner of Service Tax . . . Appellant
through : Mr. Mukesh Anand with
Mr. RCS Bhadoria, Mr. Sumit
Batra and Mr. Shailesh Tiwari,
Advocates
VERSUS
India International Centre . . . Respondent
through : NEMO
CORAM :-
THE HON‟BLE MR. JUSTICE A.K. SIKRI
THE HON‟BLE MR. JUSTICE VALMIKI J. MEHTA
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
CEAC Nos. 5/2009 & 17/2007 nsk Page 1 of 13
3. Whether the Judgment should be reported in the Digest?
A.K. SIKRI, J.
1. The appellant, namely, Commissioner of Service Tax, has preferred
this appeal under Section 35 of the Central Excise Act, 1944
(hereinafter referred to as the „Act‟). 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. However, for
the sake of convenience, we will take note of facts as they appear in
CEAC No. 5/2009.
2. The respondent in this case is Delhi Gymkhana Club Limited. 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. Penalty under Sections 75A, 76, 77 and 78
of the Act was also proposed. 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. 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.
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."
3. 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'.
4. As mentioned above, the present appeal is preferred under Section
35 of the Act. This section reads as under :-
"35. Appeals to Commissioner (Appeals) - (1) Any person
aggrieved by any decision or order passed under this Act by a
Central Excise Officer lower in rank than Commissioner of
Central Excise may appeal to the Commissioner of Central
Excise (Appeals) (hereafter in this Chapter referred to as the
Commissioner (Appeals)) within sixty days from the date of the
communication to him of such decision or order:
Provided that the Commissioner (Appeals) may, if he is
satisfied that the appellant was prevented by sufficient cause
from presenting the appeal within the aforesaid period of sixty
days, allow it to be presented within a further period of thirty
days.
(1A) The Commissioner (Appeals) may, if sufficient cause is
shown, at any stage of hearing of an appeal, grant time, from
time to time, to the parties or any of them and adjourn the
hearing of the appeal for reasons to be recorded in writing:
Provided that no such adjournment shall be granted more than
three times to a party during hearing of the appeal.
(2) Every appeal under this section shall be in the prescribed
form and shall be verified in the prescribed manner."
5. Other provisions of the Act, which are relevant for our purposes,
may first be taken note of.
6. Section 35E deals with powers of the Board or Commissioner of
Central Excise to pass certain orders. We are concerned with sub-
section (5) and explanation thereto, which is in the following terms :-
"35E. Powers of Board or Commissioner of Central Excise to
pass certain orders. -
xx xx xx
(5) The provisions of this section shall not apply to any
decision or order in which the determination of any question
having a relation to the rate of duty or excise or to the value
of goods for the purposes of assessment of any duty is in issue
or is one of the points in issue.
Explanation. - For the purposes of this sub-section, the
determination of a rate of duty in relation to any goods or
valuation of any goods for the purposes of assessment of duty
includes the determination of a question -
(a) relating to the rate of duty of excise for the time being in
force, whether under the Central Excise Tariff Act, 1985
(5 of 1986), or under any other Central Act providing
for the levy and collection of any duty of excise, in
relation to any goods on or after the 28th day of
February, 1986; or
(b) relating to the value of goods for the purposes of
assessment of any duty of excise in cases where the
assessment is made on or after the 28th day of February,
1986; or
(c) whether any goods are excisable goods or whether the
rate of duty of excise on any goods is nil; or
(d) whether any goods fall under a particular heading or
sub-heading of the First Schedule and the Second
Schedule to the Central Excise Tariff Act, 1985 (5 of
1986), or the Additional Duties of Excise (Goods of
Special Importance) Act, 1957 (58 of 1957), or the
Additional Duties of Excise (Textiles and Textile Articles)
Act, 1978 (40 of 1978), or that any goods are or not
covered by a particular notification or order issued by
the Central Government or the Board, as the case may
be, granting total or partial exemption from duty; or
(e) whether the value of any goods for the purposes of
assessment of duty of excise shall be enhanced or
reduced by the addition or reduction of the amounts in
respect of such matters as are specifically provided in this
Act."
7. Section 35G was introduced by the Finance Act, 1999 with effect
from 11.5.1999 and Finance Act, 2003 with effect from 14.5.2003.
We are concerned mainly with sub-section (1) and (2) thereof, which
read as under :-
"35G. Appeal to High Court. - (1) An appeal shall lie to the
High Court from every order passed in appeal by the Appellate
Tribunal on or after the 1st day of July, 2003 (not being an
order relating, among other things, to the determination of
any question having a relation to the rate of duty of excise or
to the value of goods for the purposes of assessment), if the
High Court is satisfied that the case involves a substantial
question of law.
(2) The Commissioner of Central Excise or the other party
aggrieved by any order passed by the Appellate Tribunal may
file an appeal to the High court and such appeal under this sub-
section shall be -
(a) file within one hundred and eighty days from the date
on which the order appealed against is received by the
Commissioner of Central Excise or the other party.
(b) accompanied by a fee of two hundred rupees where
such appeal is filed by the other party;
(c) in the form of a memorandum of appeal precisely stating
therein the substantial question of law involved.
xx xx xx"
8. Section 35L provides appeal to the Supreme Court and is couched in
the following nature :-
"35L. An appeal shall lie to the Supreme Court from -
(a) any judgment of the High Court delivered on a reference
made under section 35G or section 35H in any case which, on
its own motion or on an oral application made by or on behalf
of the party aggrieved, immediately after the passing of the
judgment, the High Court certifies to be a fit one for appeal to
the Supreme Court; or
(b) any order passed by the Appellate Tribunal relating,
among other things, to the determination of any question
having a relation to the rate of duty of excise or to the value of
goods for purposes of assessment.
9. It is clear from the above that against certain orders appeal is
provided to the High Court, whereas in respect of certain other
orders passed by the appellate tribunal, direct appeal to the Supreme
Court is provided. Section 35L(a) deals with the appeals which are
carried from the orders of the High Court. However, clause (b)
stipulates the nature of orders passed by the appellate tribunal,
against which appeal is to be preferred to the Supreme Court.
Where order passed by the appellate tribunal relates to the
determination of any question having a relation to the rate of duty
of excise or to the value of goods for the purpose of assessment, the
aggrieved party is to approach the Supreme Court directly by filing
appeal under Section 35L(b). This is made clear even by the
provisions of Section 35G which provides for appeal to the High
Court, as it specifically excludes the orders relating, among other
things, determination of any question having relation to the rate of
duty of excise or to the value of goods for the purpose of assessment.
10. The Supreme Court in the case of Navin Chemicals Mfg. & Trading
Co. Ltd. v. Collector of Customs, 1993 (68) ELT 3 (SC) had an
occasion to deal with the expression "determination of any question
having a relation to the rate of duty of customs or to the value of
goods for the purposes of assessment". Though that was a case
under the Customs Act, the provisions of the Central Excise Act were
also taken note of, which are in pari materia with that of the
Customs Act. The Apex Court specifically took note of sub-section
(5) to Section 129D of the Customs Act and noted that this provision
was simultaneously introduced in the Customs Act as well as the
Central Excise Act by Custom and Central Excise Laws (Amendment)
Act, 1988. Thus, Section 129D(5) is identical to Section 35E(5) of the
present Act. This provision was interpreted by the Court in the
following manner :-
"11. It will be seen that sub-section (5) uses the said
expression „determination of any question having a relation to
the rate of duty or to the value of goods for the purposes of
assessment‟ and the Explanation thereto provides a definition
of it „for the purposes of this sub-section‟. The Explanation
says that the expression includes the determination of a
question relating to the rate of duty; to the valuation of goods
for purposes of assessment; to the classification of goods under
the Tariff and whether or not they are covered by an
exemption notification; and whether the value of goods for
purposes of assessment should be enhanced or reduced having
regard to certain matters that the said Act provides for.
Although this Explanation expressly confines the definition of
the said expression to Sub-section 5 of Section 129-D, it is
proper that the said expression used in the other parts of the
said Act should be interpreted similarly. The statutory
definition accords with the meaning we have, given to the said
expression above. Questions relating to the rate of duty and to
the value of goods for purposes of assessment are questions
that squarely fall within the meaning of the said expression. A
dispute as to the classification of goods and as to whether or
not they are covered by an exemption notification relates
directly and proximately to the rate of duty applicable thereto
for purposes of assessment. Whether the value of goods for
purposes of assessment is required to be increased or decreased
is a question that relates directly and proximately to the value
of goods for purposes of assessment. The statutory definition of
the said expression indicates that it has to be read to limit its
application to cases where, for the purposes of assessment,
questions arise directly and proximately as to the rate of duty
or the value of the goods."
11. 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.
12. 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. 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.
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.
14. 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. 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.
15. We are, therefore, of the opinion that these appeals are not
maintainable for want of jurisdiction and are, thus, dismissed on this
ground.
(A.K. SIKRI)
JUDGE
(VALMIKI J. MEHTA)
JUDGE
August , 2009
nsk
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CEAC No. 17 of 2007
% Reserved on : July 24, 2009
Pronounced on : August 28, 2009
Commissioner of Service Tax . . . Appellant
through : Mr. Mukesh Anand with
Mr. RCS Bhadoria, Mr. Sumit
Batra and Mr. Shailesh Tiwari,
Advocates
VERSUS
India International Centre . . . Respondent
through : NEMO
CORAM :-
THE HON‟BLE MR. JUSTICE A.K. SIKRI
THE HON‟BLE MR. JUSTICE VALMIKI J. MEHTA
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the Digest?
A.K. SIKRI, J.
For orders, see CEAC No. 5/2009.
(A.K. SIKRI)
JUDGE
(VALMIKI J. MEHTA)
JUDGE
August 28, 2009
nsk
