2017 (12) TMI 387 - AT - Service Tax

Levy of service tax - certain charges named as ID charges, turn over charges and transaction charges collected from their clients in the course of providing service - Revenue entertained a view that these charges are also taxable under the category of stock broker service/online data base retrieval service - Held that - For the services rendered commission is received which is taxed - the appellant s claim regarding reimbursable nature of all these amounts requires cross-verification with supporting documents - appeal allowed by way of remand.

Summary

Issues:
Service tax liability on ID charges, turn over charges, and transaction charges collected by stockbrokers from clients.

Analysis:
The case involved five appeals concerning the service tax liability on charges such as ID charges, turn over charges, and transaction charges collected by stockbrokers from their clients. The Revenue asserted that these charges should be taxable under the category of stockbroker service/online database retrieval service. The lower authorities upheld the tax liability based on Section 67 read with Valuation Rules. The appellants argued that they were already paying service tax on stock brokerage services and that the additional charges were not for services rendered but were passed on to the National Stock Exchange without any mark-up. They relied on a Tribunal decision to support their stance.

The appellants contended that the charges in question were not for services rendered but were fees for creating customer IDs and payments to the NSE based on turnover. They provided documents showing these charges separately in their invoices to clients and demonstrated that they paid these amounts to the NSE monthly. The dispute arose regarding the treatment of these charges post 18.4.2006. The Revenue argued that these charges should be considered as additional considerations for taxable services. The Tribunal noted the appellants' claim that these charges were reimbursable and required verification with supporting evidence. If the appellants could prove with documentation that these charges were predetermined, known to clients, and passed on to the NSE without any mark-up, they would not be liable for tax on these amounts. Consequently, the Tribunal set aside the impugned orders and remanded the matter to the original authority for further examination, allowing the appellants to present supporting evidence.

In conclusion, the Tribunal allowed the appeals by way of remand, emphasizing the need for verification of the nature of charges and the appellants' claims regarding reimbursement. The case highlighted the importance of providing supporting evidence to establish the non-taxable nature of certain charges collected by stockbrokers from clients.