2017 (4) TMI 1134 - AT - Service Tax

Forward Contract Service - transaction fee collected by the appellant from their clients and paid to the stock exchange as a custodian - case of Revenue is that the transaction fee has to be included in the gross taxable value and will be subjected to service tax at the hands of the appellant as provider of taxable service to the clients - Held that - the fact which is to be supported by the documentary evidence is that the said transaction fee collected by the client is paid to the exchange on actual basis without any retention by the appellant. This aspect requires verification - any amount collected in the name of transaction fee is not remitted to the exchange and is retained by the appellant, it is apparent that the same will be an additional consideration accruing to the appellant towards service rendered to the clients. The name of such consideration becomes immaterial as the same does not represent the actual transaction fee - appeal allowed by way of remand.

Summary

Issues:
Tax liability on transaction fee collected by appellant for providing forward contract service.

Analysis:
The appeal challenged the order of the Commissioner of Central Excise (Appeals) regarding the non-payment of service tax on transaction fees collected by the appellant from clients and paid to the stock exchange. The Revenue argued that the transaction fee should be included in the gross taxable value for service tax. The appellant contended that the transaction fee was a mandated payment to the commodity exchange, not a consideration for taxable service. The appellant's counsel cited Section 67 of the Finance Act, 1994, and circulars to support their argument that transaction charges were not taxable before a certain date. The dispute centered on whether the transaction fee collected from clients should be considered as part of the taxable value for service tax.

The appellant presented specimen copies of bills showing the transaction fee separately from brokerage and service tax. They claimed the fee was collected from clients as mandated by the exchanges and should not be part of the taxable value. The Tribunal noted the circular from the commodity exchange specifying the transaction fee based on turnover. The appellant argued they acted as a pure agent and relied on precedent to support their position.

The Tribunal observed that while the appellant showed transaction fees in bills, verification was needed to confirm if these fees were actually remitted to the exchange without retention. The appellant's claim that fees were collected and paid on an actual basis required substantiation. The Tribunal emphasized the importance of verifying whether the appellant retained any portion of the transaction fee, as such retention would constitute additional consideration for services rendered. The case was remanded to the original authority for reevaluation based on the appellant's submissions, supporting evidence, and relevant case laws, providing the appellant an opportunity to present their defense.

In conclusion, the Tribunal set aside the initial order and remanded the case for further review, emphasizing the need for verification regarding the actual remittance of transaction fees to the exchange without retention by the appellant. The decision highlighted the significance of supporting documentary evidence and the appellant's opportunity to present their defense in the reevaluation process.