2018 (9) TMI 1716 - AT - Service Tax

Valuation - Banking and Other Financial Services - inclusion of transaction charges in assessable value - Held that - The matter has been addressed by the Tribunal in the case of First Securities Pvt. Ltd. Vs CST Bangalore 2007 (6) TMI 33 - CESTAT, BANGALORE wherein it was held that value of such taxable services in respect of stock brokers will not include transaction charges and handling charges - such transaction charges cannot form part of the taxable value - demand set aside. CENVAT credit - input services - insurance of the employees - food charges - subscription - books / periodicals - travelling expenses - Held that - All these credits relate to the period prior to 01.04.2011, only after which date, the definition of input service has been made narrowed and certain exclusions also included in the definition - the issue decided in the case of CCE Nagpur Vs Ultratech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT , where it was held that the definition of input service is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, be it prior to the manufacture of final products or after the manufacture of final products - credit allowed. CENVAT credit - duty paying invoices - credit availed on the basis of debit notes raised by an associate company M/s. Cholamandalam DBS Finance Ltd. for common expenses such as car parking expenses, water and electricity expenses, coffee and stationery expenses etc. - Held that - Hon ble High Court of Rajasthan in the case of CCE Jaipur Vs Bharti Hexacom Ltd. 2018 (6) TMI 435 - RAJASTHAN HIGH COURT has held that cenvat credit can be allowed even on debit notes - credit allowed. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Tax liability on transaction charges paid to stock exchanges.
2. Eligibility of input service credit for employees insurance, food charges, and travelling expenses.
3. Validity of availing credit on debit notes.

Analysis:

Issue 1: Tax liability on transaction charges
The case involved the tax liability on turnover charges or transaction charges paid to stock exchanges by the assessee, who is engaged in stock broking services. The Revenue argued that these charges are essential for conducting trading activities and hence subject to service tax. However, the assessee contended that these charges are levied by stock exchanges on the traded value of transactions and are not directly related to the number of Computer to Computer Link Connectivity (CTCL) connections. The Tribunal referred to previous decisions, including First Securities Pvt. Ltd. case, and concluded that transaction charges do not form part of the taxable value for stock brokers. The Tribunal upheld the decision of the lower appellate authority on this issue.

Issue 2: Eligibility of input service credit
Regarding the eligibility of input service credit for employees insurance, food charges, and travelling expenses, the assessee argued that these services have a direct nexus with their output services of stock broking and Portfolio Management Services. The Tribunal noted that the Bombay High Court had already settled this issue in the case of CCE Nagpur Vs Ultratech Cement Ltd. The Tribunal found no fault with the lower appellate authority's decision, especially considering that the credits in question pertained to a period before certain exclusions were included in the definition of 'input service.'

Issue 3: Validity of availing credit on debit notes
The dispute over availing credit on debit notes was addressed by referring to the judgment of the Hon'ble High Court of Rajasthan in the case of CCE Jaipur Vs Bharti Hexacom Ltd., which allowed cenvat credit on debit notes. The Tribunal also cited the Gujarat High Court's judgment in a related case. Based on these precedents, the Tribunal found no infirmity in the lower appellate authority's decision. Consequently, the appeal of the Revenue was dismissed.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the lower appellate authority's decision on all three issues, namely tax liability on transaction charges, eligibility of input service credit, and validity of availing credit on debit notes.