Service Tax Cannot Be Levied On Membership & Participation Fees Paid To Foreign Associations Before 01.07.2012: CESTAT Chennai

P. Dinesha (Judicial Member) and Vasa Seshagiri (Technical Member) stated that the demand for the period prior to 1.7.2012 on IPG/IFPN is unsustainable as there was no evidence that these bodies are mere association of persons and not imported neither have rendered any services to the appellant and the condition of relationship of service recipient with the service provider is absent.

In the case at hand, the assessee/appellant is engaged in the printing and packaging business. Between April 2005 and March 2009, Oct 2011 to March 2012, July 2012 to March 2013, & April 2013 to Sep 2014, the assessee made outward remittances in foreign currency towards annual membership fees/renewals, participation fees to the IPG, IFPN and BSC; and pre-shipment inspection fees to Intertek.

Department issued various show cause notices/SOD's alleging that the payments constituted taxable imported services for which the assessee was liable under the import/reverse-charge provisions introduced in 2006 and proposed recovery of service tax, interest and imposition of penalties.

The Adjudicating Authority confirmed the demand along with interest and imposed penalties. Aggrieved, the assessee filed Appeals before the Commissioner (Appeals), which were dismissed.

The assessee submitted that IPG and IFPN are world-wide Associations in which the assessee is a member. They are associations in which technical know-how and the latest developments in paperboard manufacturing are shared. The payment made by the assessee is a part of the collective contributions required for running the Association, for achieving the shared objective and mutual benefit of the members.

The assessee argued that remittances made to each of the aforesaid organisations are governed by the doctrine of mutuality, as there is no service being rendered and Service Tax is not attracted on Members' contribution to the club, as principles of mutuality will apply.

The bench noted that participation fees and technical meeting charges paid to IPG/IFPN were, on the basis of the documents placed before the bench, for attendance at periodic technical meetings held outside India.

The Tribunal observed that the Department has not produced any tangible material to demonstrate that International Packaging Group (IPG) or International Packaging Forum Network (IPFN) were engaged in providing continuous or structured technical consultancy, data analysis, or knowledge-transfer services which were received or consumed within the taxable territory.

The payments made by the assessee are in the nature of membership renewals and participation fees in international forums held abroad, added the bench.

The Tribunal held that the FOREX payments made to IPG/IFPN are exempt from payment of service Tax for the period prior to 01.07.2012 (Positive Tax Regime).

The bench set aside the demand of service tax in respect of payments to IPG/IFPN and participation fees in respect of BSC for the period prior to 01.07.2012 and after 01.07.2012 in respect of IPG/IFPN.

In view of the above, the Tribunal partly allowed the appeal and confirmed the demand in respect of Intertek Testing.

Case Title: M/s. ITC Ltd. v. Commissioner of GST and Central Excise

Case Number: Service Tax Appeal No. 42458 of 2015

Counsel for Appellant/ Assessee: M. Mythili

Counsel for Respondent/ Department: N. Satyanarayana