2016 (1) TMI 391 - AT - Service Tax

Sub-Broker services or BAS - sale or purchase of the securities - the case of the department is that the sub-broker arranged business for their principal broker and they issued contract note-cum bills to the ultimate clients. For the services rendered, the sub-brokers are paid brokerage/commission by the principal broker. Thus, it was held that the sub-brokers are liable to pay tax under the category of Stock Broker Services . Held that - During arguments an issue came up that the services provided by the sub-broker may not be brokerage service. It was only a service which facilitates the work of the Principal Stock Broker and therefore would get covered under the category of Business Auxiliary Services. We reject this view for two reasons. The first reason is that this view also taken in the case of Vijay Sharma 2010 (4) TMI 570 - CESTAT, NEW DELHI , was finally settled by the Larger Bench decision referred above. Secondly, we find that the show-cause notice in this case was raised on the respondent classifying the service as Stock Broker Service. Therefore, it cannot now be stated that the demand is payable under the Business Auxiliary Services. Appeal of the revenue dismissed - Decided against the revenue.

Summary

Issues:
1. Tax liability of sub-brokers under the category of Stock Broker Services.
2. Double taxation issue regarding Service Tax paid by sub-brokers.
3. Interpretation of services provided by sub-brokers as Stock Broker Services or Business Auxiliary Services.

Analysis:

Issue 1: Tax liability of sub-brokers under the category of Stock Broker Services
The case involved appeals filed by the Revenue against orders passed by the Commissioner of Central Excise & Service Tax (Appeals), Kanpur, regarding the tax liability of sub-brokers under the category of Stock Broker Services. The sub-brokers were initially held liable to pay tax under this category, but the Commissioner (Appeals) set aside the demand of duty based on certain observations, including the fact that Service Tax was already paid on the total brokerage by the main broker. The confusion arose due to SEBI's circular prohibiting sub-brokers from issuing contract notes during a specific period. The issue was whether sub-brokers were liable to pay tax under Stock Broker Services.

Issue 2: Double taxation issue regarding Service Tax paid by sub-brokers
The main grounds of appeal by the Revenue were based on the argument that the leviability of tax on sub-brokers had been settled previously. However, the Commissioner (Appeals) observed that Service Tax paid by sub-brokers could be available as CENVAT Credit to the main broker. The dispute centered on whether the same service provided by sub-brokers should be doubly taxable, and the concept of revenue neutrality was discussed in this context.

Issue 3: Interpretation of services provided by sub-brokers
During the proceedings, an argument arose regarding the nature of services provided by sub-brokers, suggesting they should be classified under Business Auxiliary Services instead of Stock Broker Services. This argument was rejected based on previous legal decisions and the classification in the show-cause notice. The judgment emphasized that the demand could not be shifted to Business Auxiliary Services after initially being classified as Stock Broker Services.

In conclusion, the Tribunal dismissed the appeal of the department after considering the arguments and legal precedents. The judgment highlighted the importance of verifying whether tax was paid by Stock-brokers and the applicability of CENVAT Credit. It also clarified the classification of services provided by sub-brokers and the implications for tax liability under different categories.