2017 (8) TMI 789 - AT - Service Tax

Valuation - includibility - transaction fee/turn-over charges - Held that - the appellant has not produced any plausible evidence to show that the transaction charges cannot be included in the gross value. Further it has also not produced Circular or Instructions issued by the NCEDX with regard to the application of the stock broker to collect a specified percentage as transaction charges on their credit value from the clients and pass the same to the respective stock exchanges - collection of transaction charges should form part of the gross value under Section 67 ibid for the purpose of payment of Service Tax. Extended period of limitation - Held that - the SCN should have been issued within one year from the relevant date seeking confirmation of the adjudged demand - In the present case since the SCN was issued on 28.01.2009 for recovery of Service Tax demand from 01.04.2005 to 31.08.2006 the same is clearly barred by limitation of time inasmuch as there is no element of suppression mis-statement etc. in the case of the appellant for defrauding the Government revenue. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of service tax on transaction charges collected by the appellant.
2. Barred by limitation - Time period for issuance of show cause notice.

Analysis:

Issue 1: Liability of service tax on transaction charges
The appeal was against an order confirming service tax demand on transaction charges collected by the appellant in addition to brokerage charges. The appellant argued that the charges were in the nature of reimbursement and thus not liable for service tax. The Tribunal noted that the appellant did not provide evidence to show that transaction charges should not be included in the gross value for service tax purposes. It was observed that the appellant had not produced any Circular or Instructions from the Commodity Exchange regarding the application of transaction charges. The Tribunal held that the transaction charges should form part of the gross value for service tax payment.

Issue 2: Barred by limitation
The appellant contended that the proceedings were time-barred as the show cause notice was issued beyond the normal period of limitation. The appellant maintained records showing the receipt of charges from clients and payment to the Commodity Exchange. The Tribunal found that the Department was aware of the collection and payment of transaction charges before issuing the show cause notice. Since the notice was issued beyond one year from the relevant date, the Tribunal held that it was clearly barred by limitation. There was no element of suppression or misstatement by the appellant to defraud government revenue. Consequently, the impugned order was set aside, and the appeal was allowed solely on the ground of limitation.

This judgment highlights the importance of timely issuance of show cause notices in tax matters and the need for clear evidence to support claims regarding liability for service tax. The decision emphasizes the significance of maintaining proper records and complying with statutory requirements to avoid disputes related to taxation.