2017 (2) TMI 210 - AT - Service Tax

Commission received as sub-broker - whether the activity of sub-broker in relation of sale or purchase of security comes under Business Auxiliary Service? - Held that - reliance placed in the case of Commissioner of Central Excise, Kanpur Vs P.K. Khandelwal & Company and others 2016 (1) TMI 391 - CESTAT ALLAHABAD , where it was held that when the main broker has paid service tax then the commission received by the sub-broker shall not be subjected to levy of Service Tax. The sub-broker who received commission from the main broker while main broker has paid the service tax on commission received by him cannot be once again subjected to service tax - appeal dismissed - decided against Appellant-Revenue.

Summary

Issues:
1. Whether service tax is applicable on the commission received by sub-brokers in relation to the sale or purchase of securities.
2. Whether the sub-broker should be liable for service tax if the main broker has already paid the tax on the commission received.

Analysis:
Issue 1: The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs (Appeals), Kanpur, demanding service tax from sub-brokers on the commission received. The respondents were sub-brokers of a broker at the Bombay Stock Exchange and were issued a show cause notice for service tax recovery. The Original Authority confirmed the demand and imposed a penalty. The Commissioner (Appeals) later held that the service tax demand was neutral and dropped the proceedings, leading to the Revenue's appeal.

Issue 2: The Revenue argued that a previous Tribunal case established that the activity of a sub-broker in relation to securities falls under Business Auxiliary Service, justifying the service tax demand. However, the Counsel for the respondent cited a different Tribunal case where it was ruled that if the main broker has already paid the service tax, the sub-broker's commission should not be taxed again. The Member (Technical) found the facts of the present case similar to the precedent case and concluded that if the main broker has paid the service tax on the commission, the sub-broker should not be subjected to service tax again. Consequently, the appeal filed by the Revenue was dismissed based on this interpretation and precedent.

In conclusion, the judgment clarified that if the main broker has already paid service tax on the commission received, the sub-broker should not be liable for service tax on the same amount. The decision was based on the interpretation of relevant Tribunal cases and established precedent, leading to the dismissal of the Revenue's appeal against the service tax demand on the sub-brokers.