2024 (1) TMI 398 - AT - Service Tax

Classification of services - Banking and Other Financial Services - providing of tips/information related to shares of various companies which are traded at National Stock Exchange and Bombay Stock Exchange to it s clients - time limitation - Cum tax value for quantification of the demand - HELD THAT - In the present matter undisputed facts are that the appellant are providing tips/information related to shares of various companies traded in NSE and BSE and collecting fees for sending the aforesaid tips/information from the clients. Revenue authorities and Ld. Commissioner are of the view that such activity undertaken by the appellant would fall under category of advisory and other auxiliary financial services including investment and portfolio research and advice, advice of mergers and acquisitions and advice on corporate restructuring and strategy as enshrined in the definition of banking and financial service. From the reading of the definition of banking and financial services and the meaning of financial institution, it appears that the services rendered by the appellant would not fall under the category of service provided by a banking or a financial institution or any other body corporate or commercial concern. In the case in hand, it is found that it is undisputed as to the appellant is only giving tips/information related to shares. Appellant are not giving any advice to its customers related to purchase or sell of share. It is on record that appellant are doing research and giving information to their customers on the basis of their research. They have not been guiding or suggesting any course of action to his customers. The appellant neither adviced nor guided the customers as to what quantity of share they can buy, when can they buy, when can they sell the share etc. Appellant have neither provided any broking or portfolio services nor has any details of the shares held by his customers - thus merely providing tips/information related to shares will not encompass the ingredients of Banking and Other Financial Services . In the absence of any advisory and other auxiliary services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy activity undertaken by the appellant, the services rendered by the appellant will not fall under the category of banking and financial services. Time Limitation - HELD THAT - The transaction of the appellant alleged activities are recorded in their books of account. Therefore there is no suppression of fact with intent to evade payment of service tax on the part of the appellant. Therefore the demand of service tax is clearly hit by limitation of time and the service tax demand for the extended period is not sustainable on the ground of time bar also in terms of Section 73(1) of the Finance Act, 1994. Cum tax value for quantification of the demand - HELD THAT - It is settled law beyond any doubt that while calculating any service tax demand, the gross value of the service invariably has to be considered as cum tax and the service tax amount has to be deducted to arrive at the assessable value for calculating demand of service tax. Hence, the learned adjudicating authority has seriously erred in not providing the benefit of cum tax value while calculating the service tax demand in the present case. The appellant s activity is not covered under the taxable service Banking and other financial Services - the impugned order set aside - appeal allowed.

Issues Involved:
1. Classification of Services
2. Definition and Scope of 'Banking and Other Financial Services'
3. Applicability of Extended Period of Limitation
4. Cum-Tax Benefit
5. Jurisdiction of Issuing Authority

Summary:

1. Classification of Services:
The primary issue was whether the appellant's service of providing stock market tips and advice falls under the taxable category of "Banking and Other Financial Services" as defined under Section 65(105)(zm) of the Finance Act, 1994. The Tribunal held that the appellant's activities of providing tips/information related to shares do not fall under the category of advisory and other auxiliary financial services. The appellant was merely providing information based on technical analysis and not advising or guiding customers on stock transactions.

2. Definition and Scope of 'Banking and Other Financial Services':
The Tribunal analyzed the definition of "Banking and Other Financial Services" and concluded that the appellant does not qualify as a banking company, financial institution, or non-banking financial company. The services provided by the appellant were not similar to those typically rendered by banks or financial institutions. The Tribunal relied on the precedent set in Parag Parikh Financial Advisory Services Ltd. v. Commissioner of Service Tax, Mumbai, which established that merely providing stock tips does not make an entity a financial institution.

3. Applicability of Extended Period of Limitation:
The Tribunal found that the extended period of limitation under Section 73(1) of the Finance Act, 1994, was not applicable. The appellant's activities were recorded in their books of account, and there was no suppression of facts with intent to evade tax. The demand for service tax for the extended period was thus time-barred.

4. Cum-Tax Benefit:
The Tribunal held that the gross value of the service should be considered as inclusive of service tax (cum-tax), and the service tax amount should be deducted to arrive at the assessable value. The adjudicating authority erred in not providing the cum-tax benefit while calculating the service tax demand.

5. Jurisdiction of Issuing Authority:
The Tribunal did not address the issue of jurisdiction and other arguments raised by the appellant, as the matter was decided on merit, limitation, and cum-tax value.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals, concluding that the appellant's activities do not fall under the taxable service of "Banking and Other Financial Services." The decision was pronounced in the open court on 08.01.2024.

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