1996 (10) TMI 1 - AT - Service Tax

Service Tax Stock Brokerage (1) Service tax included in the brokerage (2) No proviso for collection of duty (3) Demand and Interest not sustainable

Summary

Issues:
1. Calculation of service tax on brokerage collected by stock brokers.
2. Dispute regarding the inclusion of service tax in brokerage calculations.
3. Justification for short levy charge and interest payment.
4. Examination of contracts in Form A to determine the manner of showing service tax.

Analysis:
1. The appellants, stock brokers, were collecting brokerage on behalf of clients, subject to a 5% Service Tax imposed from 4-7-1994. The assessing officer found discrepancies in the tax deposits, leading to a demand for short levy. The Commissioner upheld this order, including the requirement for interest payment on the short-paid tax.

2. The appellants argued that the brokerage collected already included the service tax, as explicitly mentioned in the contracts with clients. They contended that the contracts and summaries were computer-generated, with the software designed to reflect brokerage inclusive of service tax. The absence of specific instructions from regulatory bodies further supported their position. The stock exchange's subsequent advice to show service tax separately was noted, but the prescribed contract format did not provide a separate column for the tax amount.

3. The Tribunal analyzed the provisions of the Finance Bill, 1994, which governed the imposition of service tax on brokerage. It was observed that while the Act did not prohibit showing the tax inclusive of brokerage, the Commissioner maintained that such inclusion was incorrect. The Tribunal found no legal requirement mandating a specific display of tax in returns. Given the lack of clarity and the absence of excess tax collection allegations, the charge for short levy and interest payment were deemed unjustified.

4. In response to the Revenue's request for a reassessment based on the contract details, the Tribunal decided to remit the case back to the assessing officer. The officer was directed to review the contracts in Form A from the relevant period to verify the manner in which service tax information was presented. This step was deemed necessary to ensure a thorough assessment based on the actual contract terms.

In conclusion, the Tribunal set aside the previous orders, emphasizing the need for a detailed examination of the contract terms before reassessment.