2012 (6) TMI 364 - AT - Service Tax

Stock Broking service - Valuation - Revenue contending that various charges like Misc. charges, turnover charges, Trade Guarantee Fund (TGF), Investor s Protection Fund (IPF), Stamp duty, Stock Exchange charges, Transaction charges, SEBI fees, Custom Protection Fund (CPF) and Demat charges received by stock brokers shall constitute value of taxable service - Held that - The valuation provision incorporated in section 67 of the Act envisaged that aggregate of commission or brokerage only shall be measure of tax. Basis of taxation was provided in express terms and no implied taxation was permitted by law. - Provision of section 67 provides the basis to determine the value of taxable service. No receipt other than commission or brokerage made by a stock broker is intended to be brought to the ambit of assessable value of service provided by stock broker. Charging section in a taxing statute is to be construed strictly. The correct assessable value of taxable service usually is the intrinsic value of the service provided since service commands that value only and that should only be taxed without any hypothetical rule of computation of value of taxable service u/S 67. Further, burden of proof was on Revenue to establish that such receipts were in the nature of commission or brokerage or had the characteristic of such nature which it failed to discharge. Therefore, aforesaid charges realized by appellants were not being of commission or brokerage are not taxable and shall not form part of gross value of taxable service. Time bar - Held that - Suppression of material facts cannot be said to have been made when the commission or brokerage received were disclosed in their service tax returns and taxes were paid thereon. No rule could be pointed out requiring a manufacturer to disclose the turnover of exempted goods. Hence, no penalty is imposable for no case of section 73 made out against Assessee - Decided in favor of assessee.

Issues Involved:
1. Levy of service tax on stock broking service and other charges.
2. Inclusion of turnover charges, stamp duty, BSE charges, SEBI fees, and DEMAT charges in the assessable value.
3. Applicability of extended period of limitation and penalties.
4. Validity and timeliness of show cause notices and appeals.

Detailed Analysis:

Issue 1: Levy of Service Tax on Stock Broking Service and Other Charges
The appeals concern the levy of service tax on stock broking services under the Finance Act, 1994. The assessees argued that charges such as "turnover charges" collected were paid to stock exchanges and should not form part of the assessable value for service tax. It was contended that these charges were statutory levies under SEBI guidelines and not considerations for stock broking services.

Issue 2: Inclusion of Turnover Charges, Stamp Duty, BSE Charges, SEBI Fees, and DEMAT Charges in the Assessable Value
The appellants argued that various charges collected were not in the nature of commission or brokerage and hence should not be included in the assessable value of taxable services. The Tribunal held that only the commission or brokerage charged by stock brokers should be taxed, and other charges like turnover charges, stamp duty, BSE charges, SEBI fees, and DEMAT charges should not be included in the assessable value. The Tribunal emphasized that the statutory provisions under Section 67 of the Act did not intend to tax these other charges.

Issue 3: Applicability of Extended Period of Limitation and Penalties
The appellants argued that the show cause notices were time-barred and that there was no willful suppression of facts to invoke the extended period of limitation under Section 73 of the Act. The Tribunal agreed, stating that there was no deliberate intention to evade tax and that the appellants had a bona fide belief that the charges were not taxable. The Tribunal cited various Supreme Court judgments to support the view that mere failure to declare does not amount to willful suppression.

Issue 4: Validity and Timeliness of Show Cause Notices and Appeals
The Tribunal found that the show cause notices issued were beyond the permissible period and thus time-barred. Additionally, the appeal filed by the Revenue was dismissed as it was filed beyond the statutory period without an application for condonation of delay.

Conclusion:
1. Levy of Service Tax on Stock Broking Service and Other Charges: The Tribunal held that only the commission or brokerage charged by stock brokers is liable to service tax, and other charges collected for statutory payments are not includible in the assessable value.

2. Inclusion of Turnover Charges, Stamp Duty, BSE Charges, SEBI Fees, and DEMAT Charges: These charges are not to be included in the assessable value as they are not in the nature of commission or brokerage.

3. Extended Period of Limitation and Penalties: The extended period of limitation is not applicable as there was no willful suppression of facts. Consequently, no penalties are imposable.

4. Validity and Timeliness of Show Cause Notices and Appeals: The show cause notices were time-barred, and the Revenue's appeal was dismissed for being filed late without a condonation application.

The Tribunal allowed all the appeals of the assessees both on merit and time-bar, setting aside the impugned orders, and dismissed the Revenue's appeal. The cross objection filed by the assessee became infructuous.

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