2007 (2) TMI 83 - AT - Service Tax

Stock Broker Service - Department contended that appellant liable to pays service tax on the commission received by him under Stock broker service - Held that appellant is not liable to pay service tax

Summary

Issues:
Service tax liability of sub-brokers for commissions received from main broker.

Analysis:
The appellants, acting as sub-brokers for a main broker, received commissions in connection with brokerage services. The service tax demands were confirmed against the sub-brokers on the basis that their commission is considered liable to service tax as 'stock broker service'. The main contention raised by the sub-brokers was that since the main broker had already paid service tax on the gross amount of commission received, there was no justification to impose a separate tax on the sub-brokers. It was also highlighted that in a similar case in another Commissionerate, a decision was made stating that sub-brokers' commission does not attract service tax.

The learned SDR argued that sub-brokers are explicitly mentioned in the definition of Brokers/Stock brokers, indicating that the commission of sub-brokers is also subject to levy. However, upon reviewing the record and considering the arguments from both sides, the Tribunal found that the appeals needed to be addressed without requiring pre-deposits.

The Tribunal analyzed the definition of the levy, emphasizing that it is related to the sale and purchase of securities. It was noted that in the present case, the main broker exclusively handled the sale and purchase of securities in the Stock Exchange, while the sub-brokers merely directed interested buyers to the main broker. Therefore, the levy was determined to apply only to the main brokers actively involved in the transactions at the stock exchange. Sub-brokers were deemed to be functioning more like commission agents rather than brokers in connection with the sale and purchase of securities. Consequently, the levy under consideration was deemed to be limited to stock brokers and not applicable to commission agents in general. As a result, the impugned orders were set aside, and the appeals of the sub-brokers were allowed with any consequential relief granted to them.