2007 (9) TMI 118 - AT - Service Tax

Demand Stock broker Demand confirmed on sub-broker w.e.f. 10.9.04 when Not. 25/04 was withdrawn Demand on main stockbroker is not justified in respect of the taxable service provided by the sub-broker during the period in dispute Impugned order is set aside

Summary

Issues:
1. Confirmation of service tax demand against the appellants for providing service as a stock broker.
2. Dispute over the demand for the period prior to and post 10-9-2004.
3. Liability of the stock broker for service tax on the portion of taxable value charged by the sub broker.

Analysis:
The appellants filed an appeal against the adjudication order confirming a service tax demand of Rs. 21,955 and imposing penalties for providing the service of a stock broker. The show cause notice raised a demand of Rs. 52,57,610 for not paying service tax for the service. The adjudicating authority dropped the demand prior to 10-9-2004, citing exemption under Notification No. 25/2004 for the portion of taxable value not received by the stock broker. However, the demand for the period from 10-9-2004 to 30-9-2004 was confirmed due to lack of evidence of service tax payment by the sub broker.

The appellant argued that as they only received a small percentage of the brokerage charged by the sub broker, who was liable to pay service tax post 10-9-2004, the demand against the stock broker was unjustified. The revenue contended that the lack of evidence of service tax payment by the appellants justified the demand. The Tribunal observed that the demand was confirmed for the portion of taxable value charged by the sub broker during the relevant period. Since sub brokers were liable to pay service tax from 10-9-2004, and most of the demand was dropped due to exemption under Notification No. 25/2004, the demand against the stock broker was deemed unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellants, highlighting that the demand for service tax from the stock broker for the service provided by the sub broker during the disputed period was not sustainable. The decision emphasized the liability of sub brokers to pay service tax post 10-9-2004 and the exemption under Notification No. 25/2004, leading to the allowance of the appeal and setting aside of the adjudication order.