2017 (3) TMI 1156 - AT - Service Tax

Taxability of excess amount collected in the name of reimbursement - over and above amount - Rule 5(2) of the Service Tax (Determination of Value Rules), 2006 - whether the amount collected from the client other than the commission and brokerage is taxable or not? - Held that - the amendment came in the Service Tax Determination of Valuation Rules, 2006 w.e.f. 18.4.2006. Prior to it, the appellant is entitled for the benefit but the same was not provided by the lower authority. However, post period to 18.4.2006, the appellant is liable to pay the service tax on the over and above amount collected from the clients but not deposited to the Govt. exchequer - for the period prior to 18.4.2006, the lower authority has not given the credit to the appellant for which the appellant is entitled. Hence, we modify the impugned order and allow the benefit prior to the period 18.4.2006. For the post period, we confirm the order of the lower authority - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
- Dispute over amount collected from client other than commission and brokerage under Rule 5(2) of Service Tax (Determination of Value Rules), 2006.
- Applicability of Rule 5(1) of Service Tax Rules, 2006.
- Benefit entitlement to the appellant for the period pre and post 18.4.2006.
- Liability of the appellant to pay service tax on amount collected but not deposited to the Govt. exchequer.

Analysis:
The appeal was filed against Order-in-Original No. 233/2012 dated 5.12.2012, concerning the amount collected from clients other than commission and brokerage during the period from April 2004 to September 2009. The appellant, a stockbroker in the security exchange, disputed the categorization of the amount under the "over and above" heading of Rule 5(2) of the Service Tax (Determination of Value Rules), 2006, as confirmed by the original order. The appellant argued that charges collected were for stamp duty and security transaction tax, which were deposited, albeit sometimes late with delayed charges. Reference was made to the Delhi High Court's ruling on Rule 5(1) in a previous case. The department contended that the amendment in the rules on 18.4.2006 brought the "over and above" amount under service tax if not deposited in the Govt. exchequer. Relief was granted for belated charges pre-18.4.2006, but post that date, service tax was applicable on undeposited amounts.

Considering the submissions, the Tribunal noted the amendment effective from 18.4.2006 in the Service Tax Determination of Valuation Rules, entitling the appellant to benefit pre-amendment. However, the lower authority failed to provide this benefit. Post-18.4.2006, the appellant was liable to pay service tax on amounts collected but not deposited to the Govt. exchequer. Referring to Circular No.187/107/2010-CX-4, it was clarified that charges like stamp duty and Security Transaction Tax, the liability of the buyer/seller, paid by the broker as a pure agent, were not taxable. The Tribunal modified the impugned order, granting the appellant the benefit pre-18.4.2006 and confirming the order post that date.

In conclusion, the impugned order was partially allowed, providing relief to the appellant for the pre-amendment period and affirming the liability for service tax post-amendment.