2024 (3) TMI 15 - AT - Service Tax

Levy of service tax - Stock Broker s Services - Banking Other Financial Services - transaction charges - delayed payment charges - Extended period of limitation - interest - penalty. Transaction charges - HELD THAT - The transaction charges collected by the appellant are not in relation to the provision of taxable service but the same are collected from the clients and are remitted to the stock exchange. Therefore, applying the principle that any receipt other than brokerage or commission is not exigible to service tax under the category of stock broker service, the appellant cannot be saddled with the liability of service tax on the transaction charges. Delayed payment charges (DPC) - HELD THAT - The appellant had made payments to Stock Exchanges on behalf of their clients who delayed the payments against their transactions of securities and the appellant charged the DPC from the said clients by making debit entries in their ledgers which cannot be termed as consideration for the service rendered - The learned Counsel for the appellant has also referred to a recent decision of the Mumbai Bench in M/S IIFL HOLDING LTD. VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, MUMBAI CENTRAL (VICE-VERSA) 2024 (2) TMI 967 - CESTAT MUMBAI wherein after quoting the observations in M/S RELIGARE SECURITIES LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI 2014 (4) TMI 588 - CESTAT NEW DELHI , the demand on the assessee in respect of delayed payment of charges paid by the clients for the actual delay, if any, in payment for the purchase of shares or other stocks was set aside as it in no way, can be considered as service of tolerating or refraining from an act, or to tolerate an act or a situation, or to do an act - demand set aside. Extended period of limitation - interest - penalty - HELD THAT - As the issue decided on merits in favour of the appellant, the other consequential issues of extended period of limitation, interest and penalty does not require any consideration although the same is covered by the observations made by the Tribunal in LSE SECURITIES LTD. VERSUS CCE 2012 (6) TMI 364 - CESTAT, NEW DELHI that there persisted several confusion between the revenue and the appellants in respect to determination of accessible value of taxable service provided by the stock brokers and therefore there was a bona fide belief that there was no levy on receipts other than commission or brokerage received by the stock broker and consequently, no suppression of material facts can be attributed on the appellant with intent to evade payment of duty. Thus, no demand of service tax both can be raised on the appellant on account of transaction charges and delayed payment charges - the impugned order set aside - appeal allowed.

Summary

Issues:
The judgment involves challenging the demand of service tax on transaction charges and delayed payment charges under the categories of 'Stock Broker's Services' and 'Banking & Other Financial Services'.

Transaction Charges:
The appellant, engaged in trading securities, challenged the demand raised by the service tax department for not discharging the service tax liability on transaction charges and delayed payment charges. The order in original confirmed the demand, stating that the service of a broker includes completing the terms of the contract note with the client and making outstanding payments to the Stock Exchange. The appellant cited various judicial pronouncements to support their case, emphasizing that only commission or brokerage should be considered for service tax, not other receipts. The Tribunal agreed with the appellant, ruling that transaction charges collected were not part of the taxable value as they were remitted to the stock exchange, not retained as service charges.

Delayed Payment Charges:
Regarding delayed payment charges (DPC), the Tribunal found in favor of the appellant, noting that DPC is not related to the sale/purchase of securities but is a penal interest for delayed payments by clients. The Tribunal referred to earlier decisions and CBEC's letter, stating that such charges are not includible in the taxable value for service tax. The appellant's practice of charging DPC from clients who delayed payments for securities transactions was deemed not a consideration for the service rendered. Consequently, the demand for service tax on DPC was set aside.

Conclusion:
Based on the judicial pronouncements and the merit of the appellant's arguments, the Tribunal allowed the appeal, setting aside the demand for service tax on transaction charges and delayed payment charges. The Tribunal highlighted that no demand for service tax could be raised on the appellant for these charges.