2018 (3) TMI 859 - AT - Service Tax

Misdeclaration of total income from brokerage during the year 1995-2000 and 2000-2001 - demand of service tax - Held that - There is no dispute by either side that a sub-broker is falling under the definition of stock broker under Section 65(101) of the Finance Act, 1994 w.e.f. 10-9-2004 - It is apparent that the services provided by sub-broker to investor was not liable to tax prior to 10/09/2004. The services provided by sub-broker to brokers stand exempted vide N/N. 25/2004-ST for the past period - the demand in so far as it relates to the brokerage received by the appellant in a capacity as sub-broker is set aside. Demand of service tax on income under various heads like, penalty charges, insurance charges, NSE transaction charges, SEBI fees and stamp duty, other charges and share transfer fees, etc. - Held that - the matter is remanded to the Commissioner (Appeals) to decide the issue. Appeal allowed in part and part matter on remand.

Summary

Issues:
Appeal against service tax demand and penalty imposition under Section 76 & 78 of the Finance Act - Taxability of brokerage income earned as a sub-broker - Demand of service tax on various income heads in balance sheet.

Analysis:
The appellant, M/s. Kaynet Finance Ltd., appealed against the confirmation of service tax demand and penalty imposition. The appellant was alleged to have not declared/mis-declared total income from brokerage during specific years, leading to the demand of service tax. The appellant argued that the brokerage income, on which no tax was paid, pertained to income earned as a sub-broker. The contention was that sub-brokers were not taxable on such transactions until 10/09/2004. It was highlighted that services provided by sub-brokers were exempted from tax before 10/09/2004, as they were not considered stock brokers until the amendment on that date. The appellant also raised concerns regarding the demand of service tax on income under various heads in their balance sheet, such as penalty charges, insurance charges, NSE transaction charges, SEBI fees, stamp duty, and other charges. The Commissioner's order did not address this issue. The Assistant Commissioner relied on the impugned order.

The Tribunal referred to a previous case where it was established that a sub-broker fell under the definition of a stock broker from 10/09/2004 onwards. It was clarified that services provided by sub-brokers to investors were not taxable before this date. The demand related to brokerage received by the appellant as a sub-broker was set aside based on this clarification. However, regarding the demand of service tax on income under various heads, the impugned order did not provide any findings. Consequently, the Tribunal set aside the order on this issue and remanded the matter to the Commissioner (Appeals) for further consideration.

In conclusion, the appeal was partly allowed based on the Tribunal's findings. The judgment was pronounced on 31/01/2018 by the Tribunal.