2019 (3) TMI 1147 - AT - Service Tax

Valuation - inclusion of transaction charges collected by the appellant and paid to the NSE in assessable value - Sub-Rule (1) of Rule 5 of the Service Tax (Determination of Value) Rules, 2006 - Held that - The demand is raised as per Sub-Rule (1) of Rule 5 of the Service Tax (Determination of Value) Rules, 2006. The said Rule has been set aside as ultra vires by the Hon ble Apex Court in the judgement of M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (3) TMI 357 - SUPREME COURT OF INDIA - Further, the issue whether transaction charges can be subjected to levy of service tax is covered by the decision in the case of M/s. First Securities Pvt. Ltd. 2007 (6) TMI 33 - CESTAT, BANGALORE wherein it has been held that the said charges cannot be equated to brokerage received by the appellant and is not subject to levy of service tax - demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether transaction charges collected by the appellant and paid to the NSE are subject to levy of service tax or not.

Analysis:
The appellants, engaged in stock broking, collected brokerage and turnover charges for services provided to clients. The Department contended that these charges should be included in the taxable value as per Sub-Rule (1) of Rule 5 of the Service Tax (Determination of Value) Rules, 2006. A Show Cause Notice was issued, leading to confirmation of demand, interest, and penalties by the Original Authority and Commissioner (Appeals). The appellant argued that the charges were reimbursable expenses, citing a Supreme Court decision and a tribunal ruling to support their stance.

Decision:
After hearing both sides, the Tribunal noted that the demand was based on a rule that had been set aside by the Supreme Court in a previous case. Referring to a tribunal decision, it was established that transaction charges are distinct from brokerage and not subject to service tax. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any consequential reliefs as per law.