The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), held that Service Tax is not leviable on deposit from customers as security deposit to trading of shares.
The issue involved in the present case is that whether the appellant, Marwadi Shares & Finance Ltd is liable to pay Service Tax on the deposit taken by the appellant from their customers as security deposit against towards trading of shares which is subsequently refunded without utilizing the same.
Sudhansu Bissa, Counsel appearing on behalf of the appellant submitted that in the appellant’s own case this tribunal vide order No. A/10338-10339/2022 dated 12.04.2022 held that the deposit taken by the appellant as a security deposit is not liable to Service Tax. Therefore, the issue is no longer res integra, as the present case is for different period only whereas facts and legal issue is common.
G. Kirupanandan, Learned Superintendent (Authorized Representative) appearing on behalf of the revenue reiterated the finding of the impugned order.
The Tribunal relied on the judgment of the appellant own case wherein it was observed that “The deposit amount was kept with the Appellant as security deposit to adjust the amount in case of any default in making payment by the client. The said deposit amount also refundable to client. We find that in the present matter Appellant also produced Certificate issued by the Chartered Accountant who certify that Appellant have not used the amount collected by them as “Interest Free Security Deposit” from client for any financial operations or for earning any interest and shown the said amount in Balance Sheet as Current Liability.”
Hence the Tribunal in the above-mentioned case held that the amount collected by the Appellant from the clients is in fact an interest free refundable deposit and is not towards any advance for a service hence it is not taxable.
A Bench consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “We find that the revenue has demanded the Service Tax on the security deposit taken by the appellant from their customer towards operating of the trading account of shares. From the above decision of this tribunal, the issue is no longer res integra and following the same, the impugned order is not sustainable. Hence, the same is set aside”
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