2018 (9) TMI 1445 - AT - Service Tax

Valuation - includibility - whether amounts refunded by the petitioner, a registered Forward Contract service provides to its sub-brokers, before the due date of filing of returns, could be excluded from the gross value of consideration received for the taxable services provided? Held that - The appellant have discharged the tax liability on the actual brokerage amounts received by them from the sub-brokers and there is no question of any reference or reliance to the initial invoices raised by them, which have subsequently been consolidated at the end of the month and the actual brokerage amounts stands reflected therein - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of service tax on amounts refunded by the petitioner to sub-brokers before the due date of filing returns.

Analysis:
The judgment revolves around the demand of service tax amounting to ?1,13,316/- along with interest and penalties confirmed by the adjudication order. The issue at hand is whether the amounts refunded by the petitioner to its sub-brokers before the due date of filing returns should be excluded from the gross value of consideration received for taxable services provided. The petitioner, a registered "Forward Contract" service provider, receives consideration from sub-brokers for facilitating them to trade in its name at a particular rate. Subsequently, based on the volume of transactions, the petitioner grants volume rebates to sub-brokers by refunding a percentage of the consideration received. The petitioner then discloses the balance consideration in service tax returns filed and pays tax on such consideration. The Revenue contended that initial amounts received from sub-brokers should constitute the gross taxable value, disregarding the refunds made by the petitioner.

The appellant's Chartered Accountant clarified that the Lower Authorities incorrectly referred to the Points of Taxation Rules introduced in 2011, whereas the period in question predates 2011. Even if extra amounts were realized from sub-brokers, they were subsequently refunded through paper transactions, and tax liability was discharged on the actual amounts recovered from sub-brokers. The appellant argued that the gross value received under Section 67 of the Finance Act, 1994, should reflect the actual value received from service recipients on which tax was paid. The Lower Authorities erroneously relied on the Points of Taxation Rules, 2011, which were not applicable to the case.

The Tribunal agreed with the appellant's contention, emphasizing that tax liability was discharged on the actual brokerage amounts received from sub-brokers. There was no justification for referencing or relying on initial invoices raised by the petitioner, as the actual brokerage amounts were consolidated at the end of the month. Consequently, the Tribunal found no merit in the Revenue's position and set aside the impugned order, allowing the appeal with consequential relief to the appellant.