2011 (2) TMI 337 - AT - Service Tax

Service tax liability - It is true that there is no provision under Finance Act 1994 for double taxation - The scheme of service tax law suggest that it is a single point tax law without being a multiple taxation legislation - If the main stock broker is subjected to levy of service tax on the self same taxable service provided by sub-broker to the stock broker and the sub-broker has paid service tax on such service the stock broker shall be entitled to the credit of service tax - Such a proposition finds support from the basic rule of Cenvat credit and service of a sub-broker may be input service provided for a stock-broker if there is integrity between the services. Therefore tax paid by a sub-broker may not be denied to be set off against ultimate service tax liability of the stock broker if the stock broker is made liable to service tax for the self same transaction - Such set off depends on the facts and circumstances of each case and subject to verification of evidence as well as rules made under the law w.e.f. 10-9-2004. No set off is permissible prior to this date when sub-broker was not within the fold of law during that period - primafacie case in the favour of assessee.

Summary

Issues involved: Demand of service tax on commission received for distribution of mutual fund units from 9.7.2004 to 31.3.2005.

Analysis:
The case revolved around the demand of service tax on the commission received by the applicants for distributing mutual fund units during a specific period. The applicants had an agreement with a main contractor who entered into agreements with mutual fund companies for investment services. The mutual fund companies paid commission to the main contractor, who then shared a portion with the applicants. The issue arose when the department issued a show cause notice demanding service tax on the commission received by the applicants from the main contractor.

The advocate for the applicant argued that since the main contractor had already discharged the service tax liability on the commission, the applicants should not be liable for double taxation as per the Finance Act. The advocate relied on a previous decision by the Tribunal in the case of M/s. Vijay Sharma & Company vs. Commissioner of Central Excise, Chandigarh. The Tribunal in the mentioned case had held that there is no provision for double taxation under the Finance Act, and if a sub-broker has paid service tax on a taxable service provided to the main broker, the main broker is entitled to credit for the tax paid.

Considering the arguments presented and the precedent set by the Larger Bench in the case of M/s. Vijay Sharma & Company, the Tribunal found a strong prima facie case in favor of the applicants. Consequently, the Tribunal granted waiver of the entire service tax and various penalties under the Finance Act, staying the demand during the pendency of the appeal. The judgment was pronounced in open court on 11.2.2011.