2013 (2) TMI 328 - Commissioner - Service Tax

Transaction charges or Turnover charges whether the appellant is liable to pay Service tax on the transaction charges or turnover charges collected Appellant are engaged in the business of stock broking registered with the department under the category of Stock Broking Services and Banking and Financial Services Also collected turnover charges or transaction charges of the total value of transaction from their clients through their branches for the services provided to their clients. This amount was paid to the stock exchange for getting the Computer to Computer Link (CTCL) facility appellant - Held that - It is the obligation of the stock broker to collect a specified percentage as transaction charges on their traded value from their clients and pass the same to the respective stock exchanges. The appellant is collecting the transaction charges from his clients as a pure agent as per Rule 5(2) of Service Tax (Determination of Value) Rules, 2006 and pass the same to the stock exchange. Further it is not the case where stock broker had collected any excess amount from his clients and had not paid such amount to the stock exchange. The Pure Agent issue is not under dispute. Therefore, appellant are coming under the category of Pure Agents Therefore turnover charges or transaction charges are not includible in the taxable value and the appellant is not liable to pay Service tax on the same during the disputed period In favour of assessee. Cenvat credit towards employees insurance, food charges Whether the appellant is eligible for the Cenvat credit availed on Service tax paid towards employees insurance, food charges, subscription/books/periodicals and travelling expenses Appellant had availed credit on the Service tax paid towards employees insurance, food charges and travelling expenses which are not used in providing their output service It has been decided in the case of Ultratech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT that the assessee is entitled for input service credit of the services, which are availed in course of their business and manufacturing activity. Thus, the services which were availed during the course of their business activity are eligible input services to take credit In favour of assessee. Credit taken on debit notes Whether the appellant is entitled for the credit taken on debit notes issued by their associate company Held that - The appellant submitted that the relevant debit note is a valid document. This implies that all the relevant details required as are available in any invoice are available in these debit notes. Hence, the details available in the debit notes and also the genuineness of payment of Service tax by the service provider satisfy the conditions laid down in Rule 9(2) of CCR, 2004 for permitting Cenvat credit. Also in the case of Phasrmalab Process 2009 (4) TMI 142 - CESTAT AHMEDABAD it has been held that if details required under Rule 9(2) of CCR 2004 is satisfied, then the appellant is entitled for credit based on debit notes In favour of assessee.

Summary

Issues Involved:
1. Inclusion of transaction charges in taxable value.
2. Eligibility for Cenvat credit on specific expenses.
3. Entitlement for credit based on debit notes issued by an associate company.

Detailed Analysis:

(i) Inclusion of Transaction Charges in Taxable Value:

The appellant argued that they acted as a "pure agent" by collecting transaction charges from clients and remitting them to stock exchanges, thus these charges should not be included in the taxable value. The Department contended that these charges were for connectivity purposes, making them taxable under Section 67 of the Finance Act, 1994, and Rule 5(1) of Service Tax (Determination of Value) Rules, 2006.

The judgment noted that the appellant collected these charges as mandated by stock exchanges and passed them on without retaining any amount, fulfilling the conditions of a pure agent under Rule 5(2) of Service Tax (Determination of Value) Rules, 2006. Therefore, it was held that these charges are not includible in the taxable value, and the appellant is not liable to pay Service tax on them.

(ii) Eligibility for Cenvat Credit on Specific Expenses:

The appellant claimed Cenvat credit on Service tax paid towards employees' insurance, food charges, subscription/books/periodicals, and traveling expenses, arguing these were used in providing output services. The judgment referenced the Bombay High Court decision in Ultratech Cement Ltd., which allowed input service credit for services availed during business activities. Consequently, it was held that the appellant is eligible for Cenvat credit on these expenses.

(iii) Entitlement for Credit Based on Debit Notes Issued by an Associate Company:

The appellant availed credit based on debit notes issued by their associate company, which shared common expenses. The Department did not dispute the eligibility of input services or the payment of Service tax but questioned the validity of debit notes as documents for availing credit. The judgment found that the debit notes contained all necessary details as per Rule 9(2) of CCR, 2004, and followed the precedent set in Phasrmalab Process, which allowed credit based on such notes. Thus, the appellant's credit claim was upheld.

Conclusion:

The impugned Order-in-Original was set aside. The appellant was recognized as a pure agent for transaction charges, allowed Cenvat credit on specified expenses, and entitled to credit based on debit notes. The appeal was allowed in favor of the appellant.