2017 (3) TMI 1459 - AT - Service Tax

Levy of tax - commission received as sub-broker - Held that - 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 - 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 - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Service tax liability of sub-brokers on commission received.
2. Interpretation of Business Auxiliary Service.
3. Applicability of service tax when main broker has already paid.

Analysis:
The appeal before the Appellate Tribunal CESTAT ALLAHABAD involved the issue of service tax liability on the commission received by sub-brokers. The case revolved around the respondents, who were sub-brokers of UPSE Securities Limited, Kanpur, a broker of the Bombay Stock Exchange. The Revenue filed the appeal against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs (Appeals), Kanpur, which had dropped the service tax demand. The Original Authority had confirmed the demand and imposed a penalty, leading to the appeal by the Revenue.

The ground of appeal raised by the Revenue was based on a previous judgment of the Tribunal in the case of Unique Investment Centre, emphasizing that the activity of a sub-broker in the sale or purchase of securities falls under Business Auxiliary Service. The Revenue contended that the service tax liability should apply in this case. However, the Respondent relied on a different case law, Commissioner of Central Excise, Kanpur Vs P.K. Khandelwal & Company, where it was established that when the main broker has paid service tax, the commission received by the sub-broker should not be subjected to additional service tax.

After considering the arguments from both sides, the Member (Technical) of the Tribunal referred to the precedent set by the Tribunal in the case of Commissioner of Central Excise, Kanpur Vs P.K. Khandelwal & Company and others. The Tribunal held that if the main broker has already paid service tax on the commission received, the sub-broker cannot be subjected to service tax again on the same commission. Therefore, the appeal filed by the Revenue was dismissed based on the principle of not double taxing the commission in such scenarios.

In conclusion, the judgment clarified the service tax liability of sub-brokers in cases where the main broker has already paid the service tax on the commission received, providing a significant interpretation of the applicable laws and precedents in the context of Business Auxiliary Service.