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2018 (4) TMI 1335 - AT - Service TaxSharing of revenue - Business support services - Appellant have entered into agreement with M/s RMIL outlining the role of each of them in providing consolidate service to the investor. By virtue of agreement M/s RMIL was entrusted with the sole responsibility of collection of card fee including service tax for such consolidated service to the customer - SCN issued on the ground that Appellant is engaged in providing infrastructure services, namely its internet based trading platform to the clients of M/s RMIL and such service are classifiable under taxable service category of Business Support Service . Held that - The discharge of service tax liability has been made by M/s RMIL as it has collected fee as agent of the Appellant and paid applicable service tax before remitting the 95% amount to the Appellant. The amount thus shared in between the Appellant and M/s RMIL cannot be taxed as it has already suffered taxes at the time of receipt by M/s RMIL - no service tax demand can be made against Appellant. Scope of SCN - Held that - on the one hand the show cause notice has demanded tax under the category of Business Support Service on the ground that the Appellant made available its infrastructure namely its internet based trading platform to clients of M/s RMIL and on the other hand the impugned order confirmed the demand on the ground that Appellant is providing stock broking service to investor. This amounts to confirmation of demand beyond the scope of show cause notice which is not permissible under law. Extended period of limitation - penalty - Held that - the demand pertains to the period 2008 09 to 2009 10 is hit by limitation of time - The discharge of service tax on entire card fee by M/s RMIL clearly shows that the Appellant had bonafide belief that M/s RMIL is only liable to tax - extended period and penalty set aside. Appeal allowed - decided in favor of appellant.
Issues involved:
1. Classification of services provided by the Appellant under taxable service category. 2. Discharge of service tax liability on card fees collected by M/s RMIL. 3. Allegations of double taxation on the same amount. 4. Applicability of limitation of time for the demand period. 5. Revenue neutrality and availability of Cenvat Credit. Analysis: Issue 1: Classification of services provided by the Appellant The Appellant, a stock broking company, provided services to investors through an agreement with M/s RMIL. The dispute arose regarding the classification of services under the taxable service category of "Business Support Service." The Appellant argued that they were providing stock broking services to investors and not to RMIL. The Tribunal observed that the agreement between the parties indicated that M/s RMIL acted as an agent for the Appellant in collecting card fees and discharging service tax. The sharing of fees between the parties did not imply that the Appellant was providing services to RMIL's clients. The Tribunal held that no service tax demand could be made against the Appellant in this scenario. Issue 2: Discharge of service tax liability on card fees collected by M/s RMIL M/s RMIL collected card fees from investors and discharged the service tax on the total amount collected. The Appellant received 95% of the fees from M/s RMIL, and it was argued that the service tax liability had been discharged by M/s RMIL on behalf of the Appellant. The Tribunal concluded that since the tax had already been paid on the amount received by the Appellant, demanding service tax from the Appellant would result in double taxation, which was deemed erroneous and unsustainable. Issue 3: Allegations of double taxation The Tribunal emphasized that once the service tax on the entire value had been discharged by M/s RMIL, imposing additional tax on the Appellant would amount to double taxation. Citing relevant case laws, the Tribunal held that such demands were not sustainable under law and could lead to erroneous taxation practices. Issue 4: Applicability of limitation of time The demand for service tax pertained to a specific period and was subject to the limitation of time. The Tribunal noted that there was no element of fraud, suppression, or intention to evade taxes on the part of the Appellant. Therefore, the extended period of limitation was deemed not applicable, and no penalty was deemed payable. Issue 5: Revenue neutrality and availability of Cenvat Credit Even if the contentions of revenue regarding the levy of service tax were accepted, the Tribunal highlighted that the service tax paid by M/s RMIL would be available to the Appellant as Cenvat Credit, ensuring revenue neutrality. This factor further supported the decision to set aside the impugned order and allow the appeal with consequential reliefs. In conclusion, the Tribunal set aside the impugned order and allowed the appeal, providing relief to the Appellant in accordance with the law.
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