The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the business of providing Stock Market related tips and advice not covered under taxable service of ‘Banking and other financial Services’.
The appellants are engaged in the business of providing Stock Market related tips and advice based on Technical Analysis of the Stocks of various companies which were traded in stock markets. Appellant was charging a fee for providing such tips/ advice. The advice/tips was given by the appellant to their client either through emails, Phones or SMS. The fee charged by the appellant from clients was to be paid by the clients either through deposits in the Bank Accounts provided by the appellant or through cheque or credit cards.
On the intelligence gathered by DGCEI that the Appellant has not paid appropriate service tax on “Banking and Financial Service’ rendered by them, an investigation was initiated against the appellant, wherein statements of officials of the appellant were recorded and various information relating its business was sought. Pursuant to the aforesaid investigation show cause notices were issued to the appellant, proposing to recover service tax by classifying the services provided by the appellant under the ‘Banking and Other Financial Services’.
The counsel for the appellants submitted that the appellant is not a Banking company or a Financial Institution or a Non-banking financial company. Therefore, appellant is not covered by the definition of ‘Banking and other financial services’ as defined under Section 65(12) of the Finance Act, 1994.
It was further submitted that the activities covered under sub clause (i) to (ix) of Section 65(12) such a leasing, merchant banking, purchase and sale of foreign currency, asset management, corporate restructuring, issue of pay-orders, cheques, letter of credits, drafts, over draft facility, bill discounting facility, are all in the nature of those services which are usually undertaken by a Bank. The Appellant is thus not covered by the services listed at Section 65(12) of the Finance Act.
A Two-Member Bench of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “It can be seen from the above reproduced clarification that CBEC was of the view that any services to fall under the category of banking and financial services, the expression ‘any other person needs to be read “ejusdem generis” with the preceding words and the services are to be provided by any person should be similar to a bank or financial institution. In the case in hand, as recorded by us, it is undisputed that appellant is not a financial institution. Hence their activity of giving tips/information on shares would not fall under the “Banking and other financial services”, consequently not taxable.”
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