The Delhi bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that delayed payment charges ( DPC ) is not a commission/brokerage for sale/purchase of securities and no Service Tax Chargeable.
M/s Almondz Global Securities Ltd, the appellant has challenged the order whereby the Commissioner ( Appeals ) affirmed the demand of service tax on transaction charges and delayed payment charges under the category of “Stock Broker’s Services” and “Banking & Other Financial Services”.
The appellant is engaged in trading of securities and is a registered member of Bombay Stock Exchange and National Stock Exchange. The appellant is registered with the service tax department for rendering “Stock Broker’s Services” and “Banking & Other Financial Services”. Based on the intelligence gathered by the service tax department, show cause notice was issued to the appellant raising demand of Rs. 32,21,550/- along with interest and penalty for not discharging the service tax liability on transaction charges and delayed payment charges received from the clients.
On adjudication, the entire demand was confirmed by order in original on the ground that service of a broker gets completed only when the terms and conditions of the contract note entered with the client for sale or purchase of securities are completely accomplished and the payment of outstanding amount to the Stock Exchange on behalf of the clients is part of the service relating to the Broker. The appeal filed by the appellant was rejected by the impugned order.
The law was specifically interpreted to include only the commission or brokerage charged by the stock broker and any other receipts stockbroker makes were held to be irrelevant for determination of the assessable value of taxable service provided by him. The test laid down was whether a receipt of stock broker is in the nature of commission or brokerage to levy service tax.
The Tribunal concluded that DPC is not a commission/brokerage for sale/purchase of securities and hence there is no justification for inclusion of the same in the value of the services.
In a recent decision in VSE Stock Services Ltd Vs. CCE & ST, Vadodara, the Tribunal considering the issue of whether the transaction/administrative charges collected from sub-broker is liable to service tax under the head of stock broker service, observed that all the charges on which service tax was demanded by the revenue are statutory charges which are collected from the sub-broker but the same was deposited to the stock exchange and therefore these charges were not collected as service charges by the appellant but only as reimbursement which was paid to the stock exchange and hence these charges cannot be considered as service charge of any services provided by the appellant.
A two member bench comprising of Ms Binu Tamta, Member ( Judicial ) and Ms Hemambika R Priya, Member ( Technical ) observed that there persisted several confusion between the revenue and the appellants in respect to determination of accessible value of taxable service provided by the stock brokers and therefore there was a bona fide belief that there was no levy on receipts other than commission or brokerage received by the stock broker and consequently, no suppression of material facts can be attributed on the appellant with intent to evade payment of duty.
no demand of service tax both can be raised on the appellant on account of transaction charges and delayed payment charges. The impugned order deserves to be set aside and the appeal is, accordingly allowed.
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