2017 (4) TMI 1135 - AT - Service Tax

Valuation of taxable services - The Revenue contend that the appellant/assessee is collecting other charges and did not pay service tax on such charges - The claim made by the appellant/assessee is that these other charges are nothing but transaction charges paid to stock exchange and turnover fee, stamp duty etc. - Held that - On the excess stamp duty charges collected and retained by the appellant/assessee it was recorded that the amount which is shown as reserve and surplus in the balance sheet cannot be considered as receipt on account of stamp duty and accordingly liable to be added in the gross value for service tax purposes. Short payment of service tax - banking and other financial services - The main dispute relates to the tax liability of the appellant/ assessee for receipts under other charges - Held that - The contract note itself does not elaborate the nature of such other charges. The appellant/ assessee claims that the other charges covered the turnover charges, VSAT connectivity charges, stamp duty etc. Categorical documentary evidence to that effect is not on record. Further, we note that the claim of the appellant/assessee to have acted as pure agent can be considered only on fulfillment of the conditions mentioned in Rule 5 (2) of the Valuation Rules. The main requirement for exclusion of charges when the appellant/assessee is acting as a pure agent is the amount collected from client should be passed on actual basis to third party based on a clear prior understanding. There are various conditions under the said Rule 5 (2). Only on fulfillment of all these conditions any consideration received by appellant can be excluded considering transaction under the concept of pure agent . The evidences to that effect are not presently on record. Matter remanded to the Original Authority for a fresh decision - appeal allowed by way of remand.

Issues Involved:
1. Valuation of taxable service rendered by the appellant/assessee.
2. Applicability of service tax on various heads of income.
3. Legality of the demand for the extended period.
4. Calculation errors in service tax demand.
5. Service tax liability on retained stamp duty amount.
6. Best judgment assessment for the year 2003-2004.
7. Revenue's appeal regarding turnover charges and penalties.

Detailed Analysis:

Valuation of Taxable Service:
The primary dispute concerns the valuation of taxable services provided by the appellant/assessee, a stock broker registered under various service categories. The appellant argued that payments made as a pure agent on behalf of clients for charges such as transaction charges to stock exchanges, stamp duty, and Demat charges should not form part of the taxable value. The Commissioner, however, confirmed the service tax liability on several heads of income, including turnover charges, V-SAT connectivity, and excise stamp duty, among others.

Applicability of Service Tax:
The appellant contended that various charges paid to stock exchanges were not taxable under stock broker services before 16/05/2008. They relied on precedents such as LSE Securities Ltd. vs. CE, Ludhiana, and Consortium Securities Pvt. Ltd. vs. CST, New Delhi, where similar charges were not taxed under brokerage or commission. The Tribunal noted that the claim of acting as a pure agent requires fulfillment of conditions under Rule 5 (2) of the Service Tax Valuation Rules, which was not substantiated by the appellant.

Legality of the Demand for Extended Period:
The appellant challenged the legality of the extended period demand, arguing there was no evidence of suppression of facts, mis-statement, collusion, or willful fraud. They cited the Tribunal's decision in LSE Securities Ltd. (supra) to support their claim that the extended period is not invokable in such situations.

Calculation Errors in Service Tax Demand:
The appellant pointed out a calculation error in the V-SAT/landline connectivity charges, where the service tax rate was incorrectly applied at 12% instead of 10% for certain periods. This issue was part of the broader contention regarding the correctness of the service tax demand.

Service Tax Liability on Retained Stamp Duty Amount:
The appellant argued that the retained stamp duty amount should not be subjected to service tax due to an ongoing dispute regarding the rate of stamp duty with the Delhi Government. The Commissioner, however, included this amount in the gross value for service tax purposes, as it was shown as reserve and surplus in the balance sheet.

Best Judgment Assessment for the Year 2003-2004:
The appellant claimed that the best judgment assessment for 2003-2004 violated principles of natural justice, as they were not given due notice regarding the basis of such assessment. The Original Authority invoked Section 73A for recovery, although the demand notice did not propose this provision.

Revenue's Appeal Regarding Turnover Charges and Penalties:
The Revenue appealed against the dropping of the extended period demand for turnover charges and the lack of appropriate penalties under Section 78 for short payment of service tax. The Tribunal noted that the Original Authority should re-examine these aspects during the fresh adjudication.

Conclusion:
The Tribunal set aside the impugned order and remanded the case to the Original Authority for a fresh examination of supporting evidence and re-evaluation of the claims made by the appellant/assessee. The Original Authority is to consider the applicability of the Tribunal's decisions in similar cases and address the Revenue's grievances regarding turnover charges and penalties. The appellant/assessee will be given adequate opportunity to present their defense before a final decision is taken.

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