2007 (1) TMI 631 - AT - Service Tax

Summary

Issues involved: Application for waiver of Service Tax amount and penalties based on the interpretation of turnover tax in relation to brokerage received by a stock broker.

In the present case, the applicant, a registered stock broker, filed an application seeking waiver of Service Tax amounting to Rs. 7,45,634/- and penalties. The core contention put forth by the applicant was that the turnover tax, payable to the recognized stock exchange, should not be considered as part of the assessable value for charging Service tax. The applicant argued that the turnover tax is distinct from brokerage or delivery brokerage received from sub-brokers, as the former is a fee payable to the stock exchange as per the Security Contracts Regulation Act, 1956. On the other hand, the Revenue contended that the amount received by the applicant from customers should be considered as brokerage or delivery brokerage, thereby making it subject to Service tax.

Upon examination, the Tribunal observed that the applicants had been transparently disclosing the turnover tax separately in the contract notes issued to clients, clarifying it as turnover tax to be deposited with the recognized stock exchange. This amount was deemed unrelated to brokerage. Consequently, the Tribunal found merit in the applicant's argument, indicating a strong case in their favor. As a result, the pre-deposit of the Service tax amount and penalties was waived, and the stay petition was allowed.