2018 (5) TMI 1222 - AT - Service Tax

Valuation - Includibility of turn over charges / transaction fee in the gross value for the purpose of payment of Service Tax - Held that - the appellants had recovered the actual turn over charges / transaction fee from their customers and paid the same to the respective Stock Exchanges as per the SEBI Regulations and that the appellants did not retain any amount on account of such charges with them - the issue is no more res-integra in view of the decision of this Tribunal in the case of LSE Securities Ltd. vs. Commissioner of C. EX., Ludhiana 2012 (6) TMI 364 - CESTAT, New Delhi , wherein it has been held that turn over charges etc. cannot be included in assessable value for the purpose of taxation inasmuch as, the same are recovered from investors to make payment as per the SEBI guide lines. While interpreting the phrase for such service used in Section 67 of the Act, the Hon ble Supreme Court, in the case of Union of India and Anr. vs. Intercontinental Consultants & Technocrats Pvt. Ltd. 2018 (3) TMI 357 - SUPREME COURT OF INDIA , have held that the said phrase to be strictly construed, to include only the amount of consideration paid for providing the taxable service and all expenses to be excluded for consideration of the gross value. Appeal allowed - decided in favor of appellant.

Summary

Issues involved: Whether turn over charges / transaction fee should form part of the gross amount for the purpose of levy of Service Tax under Section 67 of the Finance Act, 1994.

Analysis:

1. Issue of Inclusion of Turn Over Charges in Gross Value: The appellants, stock/commodity brokers, collected turn over charges/transaction fees from customers and paid them to respective Stock Exchanges as per SEBI guidelines. The Service Tax Department contended that these charges should be part of the gross value for Service Tax levy. The Tribunal referred to a previous decision where it was held that such charges cannot be included in the assessable value for taxation as they are recovered to make payments as per SEBI guidelines, not as commission or brokerage. The Tribunal upheld this view, emphasizing that charges not being of commission or brokerage are not taxable and should not form part of the gross value of taxable service.

2. Interpretation of Section 67 of the Act: The Tribunal cited a Supreme Court judgment regarding the interpretation of the phrase "for such service" in Section 67 of the Act. The Court held that the phrase should be strictly construed to include only the consideration paid for providing the taxable service, excluding all other expenses. The Court emphasized that the valuation of taxable services for charging service tax should focus on the gross amount charged for providing the specific taxable service. Any amount not calculated for providing the taxable service should not be part of the valuation. The Tribunal aligned with this interpretation, stating that the value of taxable service should be the consideration paid for rendering the service, as quid pro quo.

3. Decision: Based on the settled legal position, the Tribunal found no merit in the Commissioner (Appeals) order. The Tribunal set aside the order and allowed the appeals in favor of the appellants. The judgment clarified that charges like turn over charges/transaction fees, not being commission or brokerage, should not be included in the gross value for Service Tax purposes.