2008 (8) TMI 61 - AT - Service Tax

Appellant is a sub-broker - whether as a sub-broker he is liable to pay Service Tax for the period October, 2004 to September, 2005 - submission that the stock-broker has already paid service tax on the entire amount and, therefore, any amount to be paid by the appellant as sub-broker would amount to double payment, is devoid of substance - in terms of Clause (101) of Section 65 as amended w.e.f. 10.9.2004, stock-broker includes sub-broker appeal dismissed

Summary

Issues:
1. Whether a sub-broker is liable to pay Service Tax.
2. Interpretation of the definition of 'stock-broker' under the Finance Act, 1994.
3. Applicability of Service Tax on commission received by a sub-broker.
4. Double taxation concern when the main broker has already paid Service Tax.

Analysis:
1. The appeal questioned the liability of a sub-broker to pay Service Tax for the period from October 2004 to September 2005. The appellant argued that as per SEBI guidelines, a sub-broker does not directly engage in the sale or purchase of securities, thus should not be liable for Service Tax. The appellant contended that being a mere liaison between investors and stock-brokers, he does not provide taxable services. However, the Department argued that post-amendment in 2004, a sub-broker falls under the definition of 'stock-broker' and is subject to Service Tax.

2. The Tribunal analyzed the definition of 'stock-broker' under the Finance Act, 1994. The amendment broadened the scope to include sub-brokers within the definition. The taxable service regarding the sale or purchase of securities was redefined to encompass services provided to any person, not just investors. The Tribunal emphasized that any service in connection with securities transactions, even if not directly involving the sale or purchase, falls within the taxable service ambit.

3. The Tribunal addressed the concern of double taxation raised by the appellant, stating that as a provider of taxable service, the sub-broker is liable to pay Service Tax on the commission received. The Tribunal highlighted that the absence of evidence showing the discharge of this liability by the sub-broker negates the argument of duplication of tax. Additionally, a previous decision suggesting that the levy falls only on the main broker was deemed to have overlooked the broader interpretation of services 'in connection with' securities transactions.

4. Ultimately, the Tribunal dismissed the appeal, finding no merit in the arguments presented. The decision emphasized that even if there is no direct contract between the sub-broker and the investor, if the sub-broker is registered and receives commission from the stock-broker, Service Tax liability applies. The Tribunal's decision was based on a comprehensive interpretation of the legal provisions and previous case law, upholding the Service Tax demand on the sub-broker.