2007 (5) TMI 144 - AT - Service Tax

Appellant was getting remuneration from main broker for client referred by him. Main broker had deposited the servie tax besides issuing a certificate indicating the amount of sub-brokerage thereon Strong prima facie case made out in favour of appellant - pre-deposit service tax waived

Summary

Issues:
Challenge to Order-in-Appeal regarding taxation of brokerage earned by sub-broker, interpretation of taxable service under Section 65 of Finance Act, 1994, consideration of sub-brokerage payment certificate, liability of service tax registration holder, waiver of pre-deposit of duty, potential double taxation issue.

Analysis:
The judgment pertains to a challenge against an Order-in-Appeal by the applicant regarding the taxation of brokerage earned by a sub-broker. The Commissioner had observed that the appellant received remuneration from the broker on transactions, constituting a part of brokerage earned by the main broker from client referrals by the appellant sub-broker. The Commissioner held that the appellant rendered taxable service under sub-clause (a) of clause 105 of Section 65 of the Finance Act, 1994. However, the appellant argued that sub-brokers do not directly deal with clients, and the main broker is authorized to handle client agreements and transactions, with the commission from clients being charged by the main broker, who then pays a portion to the sub-broker for client introductions.

The appellant relied on a document issued by the main broker certifying payment of sub-brokerage to support their case. The show cause notice referenced this certificate but also stated that the appellant, holding an independent service tax registration number, was liable to discharge service tax separately under the Service Tax Act, 1994. The Tribunal noted that merely holding a registration does not automatically impose tax liability, emphasizing that taxes should not be imposed where they are not due, to avoid double taxation. The Tribunal found that the appellant had made a prima facie case for waiver of the duty demanded, as charging tax twice on the same transaction, where the main broker had already paid tax, could result in double taxation. Consequently, the Tribunal waived the requirement for pre-deposit of the duty under the impugned order, allowing the stay application.

In conclusion, the Tribunal's judgment addressed the issues of taxation on brokerage earned by a sub-broker, interpretation of taxable services, consideration of documentary evidence, liability of service tax registration holders, and the potential for double taxation. The decision highlighted the importance of avoiding double taxation and ensuring taxes are levied only where they are legally due, ultimately granting the appellant's request for waiver of pre-deposit based on the prima facie case presented.