Ahmedabad Clubs Must Refund Rs 20 Crore in Service Tax to Members: CESTAT Ruling
📅 By Author | April 21, 2025
📂 Category: Service Tax 2025, CESTAT News, GST Compliance
🔑 Keywords: Rajpath Club Service Tax, Karnavati Club Tax Refund, CESTAT Ahmedabad Ruling, Mutuality Principle, Consumer Welfare Fund, Service Tax Refund 2025
In a landmark ruling, the Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) directed Rajpath Club and Karnavati Club to refund over Rs 20 crore in service tax to their members. They must complete this reimbursement within two years. After that, any unclaimed amount, including interest, will go to the Consumer Welfare Fund.
Key Highlights from the CESTAT Order:
- Tribunal Members: Justice Somesh Arora (Judicial) and Satendra Vikram Singh (Technical)
- Total Refunds:
- Rajpath Club: Rs 17.18 crore
- Karnavati Club: Rs 2.66 crore
- Refund Period: April–September 2016
- Legal Basis: Mutuality Principle — Members and their club form a single entity. Therefore, services rendered internally are not liable for service tax.
Tribunal’s Major Findings:
- Rajpath Club did not submit valid proof showing refund payments to members.
- It also failed to specify the exact financial year or tax period linked to these refunds.
- The tribunal ordered the interest earned on refund amounts to be held in an escrow account.
- Furthermore, any amount that remains unclaimed for two years — including interest — must be deposited into the Consumer Welfare Fund.
Reactions from Key Stakeholders:
- Rajpath Club Vice President stated that they had already processed most refunds and are continuing efforts to reach all eligible members.
- Former CGST Commissioner Mohit Agrawal stressed that the refund legally belongs to the members who bore the burden of the tax.
Broader Implications:
This decision sets a significant precedent for member-based institutions. It reinforces that clubs cannot retain refunds meant for their members. More importantly, the tribunal’s emphasis on clear timelines and financial accountability promotes transparency and safeguards consumer rights.
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