2007 (6) TMI 33 - AT - Service Tax

Valuation (service tax) Department contended that handling charges and transaction charges as part of the taxable value as additional brokerage for service tax purpose Held that department contention was not correct

Summary

Issues:
1. Review of penalty by Commissioner of Service Tax after appeal filed before Commissioner (Appeals).
2. Inclusion of handling charges and transaction charges in taxable value for Service Tax purposes.

Issue 1 - Review of Penalty:
The appeal was filed against the Revision Adjudication Order demanding Service Tax and imposing penalties. The Commissioner of Service Tax enhanced the penalty in the Order-in-Review after the appellants approached the Commissioner (Appeals). However, the Tribunal found that as per Section 84(4) of the Finance Act, the Commissioner is precluded from reviewing an order if an appeal against it is pending before the Commissioner (Appeals). The Tribunal cited precedents where it was held that once an Order-in-Original merges with the Order-in-Appeal, there is no original order left for review. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

Issue 2 - Inclusion of Charges in Taxable Value:
In the second appeal, the Commissioner (Appeals) included handling charges and transaction charges in the taxable value for Service Tax purposes. The appellants argued that these charges should not be considered as part of brokerage or commission. They provided evidence of transaction charges paid to the National Stock Exchange and clarified that handling charges were for physical delivery of scrips. The Tribunal agreed that these charges were not in the nature of commission or brokerage for securities purchase. Referring to the Finance Act and relevant definitions, the Tribunal held that handling and transaction charges should not be included in the taxable value. Consequently, the appeal was allowed with consequential relief.

In conclusion, the Tribunal set aside the impugned orders in both appeals, highlighting the legal limitations on review by the Commissioner of Service Tax and clarifying the exclusion of handling and transaction charges from the taxable value for Service Tax purposes.