2011 (8) TMI 438 - AT - Service Tax

Waiver of pre-deposit - short payment of service tax - Service Tax demand of ₹ 73,437/- was made alleging that there was short payment of service tax, tax of ₹ 28,07,537/- was imposed taxing transaction charges to form part of gross value and there was levy of service tax of ₹ 71,92,261/- on the delay pay-in-charges classifying the service provided by the appellant under the category banking and financial services - As the law declared in All India Federation of Tax Practitioners - 2007 (8) TMI 1 - Supreme Court and Association of Leasing and Financial Service Companies 2010 (10) TMI 4 - SUPREME COURT OF INDIA , held that appellant failed to bring out a prima facie case in its favour. - Stay granted partly.

Summary

Issues:
1. Short payment of service tax
2. Tax imposition on transaction charges
3. Levy of service tax on delay pay-in-charges
4. Taxability of IPO income
5. Time-barred adjudication and penalty imposition

Short payment of service tax:
The appellant argued that there was no short payment for the imposition of service tax demand. They claimed that any reconciliation difference should be resolved before determining the tax liability. Regarding transaction charges, it was contended that these charges were not related to stock broker services and should not be taxable if charged separately on an actual basis. The appellant also highlighted that being a pure agent for collecting transaction charges exempted them from the levy. However, the tribunal found a short payment of service tax and upheld the demand.

Tax imposition on transaction charges:
The tribunal examined the issue of transaction charges in detail. It was concluded that transaction charges paid to the stock exchange, to the extent payable, attracted service tax liability as part of the taxable service provided. The tribunal confirmed the demand proposed by the adjudication authority in this regard.

Levy of service tax on delay pay-in-charges:
The revenue viewed the recovery of delay pay-in-charges by the appellant from clients as a form of recovery for delayed payments, indicating an extension of credit by the appellant. The authority analyzed the agreement between the stockbroker and clients and determined that the entire payment received by the appellant included the extension of credit facility, thus justifying the levy of service tax on delay pay-in-charges.

Taxability of IPO income:
The authority considered the IPO commission under the category of business auxiliary service. The appellant received commission from mutual funds and IPO sources. While service tax was paid on mutual fund commission, it was not paid on sub-brokerage from IPO. The tribunal agreed with the authority's decision that the IPO income was taxable under business auxiliary service, leading to a determined service tax liability.

Time-barred adjudication and penalty imposition:
The appellant argued that there was no suppression of facts to warrant time-barred adjudication and that no penalty should be imposed. However, the tribunal, following established legal precedents, directed the appellant to make a pre-deposit to protect the interest of revenue. A specific amount was specified for pre-deposit, with the balance amount to be waived during the appeal's pendency upon compliance.

This detailed analysis of the judgment provides insights into the various issues raised, the arguments presented by the parties, and the tribunal's findings and decisions on each issue.