The Delhi bench of Custom, Excise & Service Tax Appellate Tribunal (CESTAT) comprising Justice Dilip Gupta (President) and technical member P.V. Subba Rao has held that no service tax is payable on the service charges collected by the Rajasthan Cooperative Dairy Federation from the milk unions or district cooperative societies for the services rendered to them.
The division bench was hearing an appeal filed by the Federation where the department imposed service tax observing that it charges an amount @ 1.25% of the annual turnover of milk unions to manage their finances and other services and this amount is called by the appellant as Rajasthan Cooperative Dairy Federation Cess (RCDF Cess).
The Tribunal bench held that although the Rajasthan Cooperative Dairy Federation and the milk unions/district cooperative societies are registered under the Rajasthan Cooperative Societies Act, 2001 and are thus distinct legal entities, the nature of the relationship between them continues to be that of a club and its members.
It was observed that “any amount paid by the members to the club and the services rendered by the club to its members are self-service and cannot be taxed. The fact that the club is incorporated as a separate legal entity makes no difference. We find no good reason not to apply the same principle to the appellant, which is also a cooperative federation of milk unions who are its members. Although the milk unions (district cooperative societies) and the appellant (apex society) are registered under the Cooperative Societies Act of the State and are, therefore, distinct legal entities, the nature of relationship between the appellant and the milk unions continues to that of club to its members. Therefore, no service tax is payable on the services rendered by the appellant to the milk unions.”
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