2018 (11) TMI 1473 - AT - Service Tax

Liability of service tax - charges of National Stock Exchange (NSE)/ Bombay Stock Exchange (BSE) such as transaction charges, SEBI turn over fees etc. paid to the NSE/BSE and collecting reimbursement of the same from their clients - appellant is a stock broker. Held that - On this issue much water has flown as in various judgments, this Tribunal has consistently held that all these charges being statutory charges as per SEBI Rules, should not be liable for service tax - The Tribunal in the case of INDSES SECURITIES AND FINANCE LTD, SPAN CAPLEASE PVT LTD AND OTHERS VERSUS C.S.T. -SERVICE TAX - AHMEDABAD 2018 (2) TMI 569 - CESTAT AHMEDABAD , where it was held that the allegation of the department that the demat charges collected by the brokers are banking and financial service, hence taxable, also devoid of merit in as much such charges are collected by the Appellant, and paid to the depository participants viz. CDSL/NSDL who are authorised to levy such charges under the Depositories Act, 1996. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Whether charges paid to National Stock Exchange (NSE)/ Bombay Stock Exchange (BSE) and collected from clients by a stock broker are liable to service tax.

Analysis:

Issue 1: Liability of Service Tax on Charges Paid to NSE/BSE
The main issue in this case was whether charges paid to NSE/BSE by a stock broker, such as transaction charges and SEBI turnover fees, are liable to service tax. The appellant argued that similar issues had been settled in various judgments, including the case of Span Caplease Pvt. Limited and others vs. CST, Ahmedabad. The Tribunal had consistently held that such charges, being statutory charges as per SEBI Rules, should not be liable for service tax. The Tribunal referred to specific clauses in the Finance Act, 2001, and Section 67 of the Act to support their decision. They emphasized that only commission or brokerage charged by stock brokers should be taxable, and any other receipts not in the nature of commission or brokerage should not be taxed. The burden of proof was on the Revenue to establish that the receipts were in the nature of commission or brokerage, which they failed to do. The Tribunal concluded that the charges collected by the appellants were not in the nature of commission or brokerage and hence not taxable.

Issue 2: Characterization of Charges
The Tribunal also addressed the characterization of charges such as turnover charges, stamp duty, BSE charges, SEBI fees, and DEMAT charges. The appellants claimed that these charges were payable to different authorities and were not in the nature of commission or brokerage. The Tribunal found that the Revenue failed to prove that these charges were in the nature of commission or brokerage. They reiterated that only charges related to commission or brokerage should be considered for service tax, and other receipts should not be taxed. The Tribunal emphasized that the value of taxable service provided by a stock broker should be based on the intrinsic value of the service and not on arbitrary rules of computation. They held that the charges collected by the appellants were not taxable as they were not in the nature of commission or brokerage.

Conclusion:
Based on the above analysis and citing previous judgments, the Tribunal set aside the impugned order and allowed the appeal, stating that the issue had been settled in favor of the appellant. The judgment emphasized the strict interpretation of taxing statutes and the importance of clear legislative intent in determining the taxability of specific charges collected by stock brokers.