2013 (2) TMI 215 - AT - Service Tax

Classification of service - Extended period of limitation - Business auxiliary service - Section 65 (101) - Sub-broker to the main stock broker - Circular No. 334/13/2009-TRU, dated 6.7.09 - Appellant is not a sub-broker recognized under the SEBI Act, 1992 Held that - Once the appellant is out of purview of section 65 (101), its activity was rightly covered by the service found by Revenue because there was a taxable service provided which unambiguously appears to be in the nature of business auxiliary service since the appellant was not sub-broker recognized by law. Therefore, both the authorities have rightly held that the appellant provided the impugned service. In favour of revenue Penalty - Held that - There was confusion in understanding the law by the assessee as to the role of sub-broker and taxability of the service provided by the appellant. Accordingly, in all fairness the appellant shall only be liable to service tax for the normal period without being taxed for extended period. The reasons aforesaid also convince to hold that the appellant shall not be liable to penalty. In favour of assessee

Summary

Issues:
Interpretation of business auxiliary service in relation to sub-broker status under SEBI Act 1992.

Analysis:
The appellant contended that they were brought under the business auxiliary service provider category due to acting as a sub-broker to a stock broker, citing a Board Circular. However, it was revealed that the appellant was not registered under SEBI, which is a crucial requirement for being considered a sub-broker under the SEBI Act 1992. The appellant's argument was based on a certificate from the stock broker they worked with, but lacking SEBI registration, they did not meet the legal definition of a sub-broker. Consequently, the service provided by the appellant was correctly classified as business auxiliary service, as they did not hold the status of a sub-broker recognized by law. Both authorities upheld this classification, denying the appellant's claim to be exempt from service tax.

The Larger Bench decision cited by the appellant did not support their case, as it was specific to sub-brokers recognized under the SEBI Act 1992. Since the appellant did not fall under this category, the Board's communication regarding sub-brokers recognized by law did not apply to them. The appellant's misunderstanding of the law regarding the role of sub-brokers and the taxability of their services led to confusion. Despite this confusion, the appellant was held liable for service tax for the normal period only, avoiding taxation for an extended period. The appellant was also relieved from paying a penalty due to the genuine confusion surrounding their status and tax liability.

In conclusion, the judgment clarified that the appellant's lack of SEBI registration prevented them from being considered a sub-broker, leading to the correct classification of their services as business auxiliary services. The appellant was granted partial relief by being taxed only for the normal period and exempted from penalty, considering the genuine confusion and misunderstanding of the law surrounding their activities.