2015 (11) TMI 1177 - AT - Service Tax

Demand of service tax - whether service tax liability arises on the appellant under the category of Banking and other Financial Services for the commission received by them on new issues & other commission - whether the appellant is liable to pay the service tax on an amount received for deputation of persons to some other assessees - Held that - Amount received by the appellant as commission for initial public offer and other activities that they are engaged only for their clients in respect of new issues. Revenue wants to tax this amount under the category of Banking and other Financial Services holding that the appellant would fall under the category of Financial Institutions. We do not agree with the contentions raised by the learned D.R. for the Revenue nor do we accept the findings by the first appellate authority on this issue. Basically, the definition of financial institutions which sought to be relied upon by the lower authorities and the representative is misplaced in as much this Bench in the case of Parag Parikh Financial Advisory Services Ltd. 2015 (2) TMI 351 - CESTAT MUMBAI has considered identical issue Activity of the appellant would fall under the category of Management Consultancy Services . We have reached this view after perusing the invoices raised by the appellant in the name of M/s. Equity Masters India Ltd., wherein it is very clearly states that the persons deputed for compliance review and strengthening of computer, customers work relating to NSE, front office systems and processes etc. As the services which are raised by the appellant indicate that their employees on deputation were infact doing Management Consultancy Services. To that extent we find that the impugned order is correct and legal and does not suffer from any infirmity. We hold that the appeal of the appellant on this point fails and the service tax liability with interest needs to be upheld - Decided partly in favour of assessee.

Summary

Issues:
1. Whether service tax liability arises on the appellant for commission received on new issues and deputation of persons to other assessees under 'Banking and other Financial Services' and 'Stock Broking Services' categories respectively.

Analysis:

Issue 1: Commission received on new issues
The appeal questioned the service tax liability on the appellant for commission received on new issues. The Revenue argued that the appellant should be taxed under 'Banking and other Financial Services' as a financial institution. However, the Tribunal disagreed with this interpretation. Referring to a previous case, the Tribunal highlighted that the appellant, being a stock broker, does not qualify as a financial institution unless involved in specific financial activities. As the appellant was not registered under the RBI Act as a financial institution and did not engage in acquiring securities, the tax liability under 'Banking and other Financial Services' was dismissed. The Tribunal held in favor of the appellant, setting aside the demand for service tax, interest, and penalties.

Issue 2: Deputation of persons to other assessees
The second issue involved the service tax liability on fees received for deputing persons to another entity, which the Tribunal categorized under 'Management Consultancy Services'. By examining the invoices raised by the appellant, it was evident that the deputed persons were engaged in activities related to compliance review and strengthening of computer systems, among others, indicating management consultancy services. Despite the appellant's argument against this categorization, the Tribunal found the service tax liability valid and legal. Thus, the appeal on this point was dismissed, upholding the service tax liability with interest.

Penalties Imposed
Regarding the penalties imposed, the Tribunal considered the issue of interpreting the services rendered by the appellant, acknowledging the possibility of a genuine belief on the appellant's part. In light of this, the penalties were set aside under Section 80 of the Finance Act, 1994. The appeal was disposed of accordingly, with the decisions outlined for each issue.