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TMI Blog2012 (6) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... on in a taxing statute is to be construed strictly. The correct assessable value of taxable service usually is the intrinsic value of the service provided since service commands that value only and that should only be taxed without any hypothetical rule of computation of value of taxable service u/S 67. Further, burden of proof was on Revenue to establish that such receipts were in the nature of commission or brokerage or had the characteristic of such nature which it failed to discharge. Therefore, aforesaid charges realized by appellants were not being of commission or brokerage are not taxable and shall not form part of gross value of taxable service. Time bar - Held that:- Suppression of material facts cannot be said to have been made when the commission or brokerage received were disclosed in their service tax returns and taxes were paid thereon. No rule could be pointed out requiring a manufacturer to disclose the turnover of exempted goods. Hence, no penalty is imposable for no case of section 73 made out against Assessee - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... exchanges and SEBI. 3.3 Stock Exchanges are empowered to make laws, and bylaw as well as Rules and regulations as per Section 8 and 9 of Securities Contract Act, to regulation trade in securities. Any charge collected in terms of such Regulations made, shall not form part of assessable value of the appellant because such charges were collected separately and shown in the contract notes as well as in the invoices for payment to concerned stock exchanges. 3.4 Explaining further, Shri Mahajan submitted that "turnover charges" are type of charges which although are collected by the appellant, those were bound to be paid back to SEBI through Stock Exchanges under SEBI guidelines and Stock Exchanges Regulations. Such charges have gone to the stock exchanges, Without a single paise out of that went to the pocket of the appellant. It was further submitted that the liability to pay service tax, if any on turnover charges, would arise in the hands of stock exchanges only because service tax is payable by service provider which are stock exchanges. 3.5 It was further submitted that turnover charges by its name itself was not commission or brokerage at all received by Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. Revenue has challenged decision of the appellate authority who held that the assessee had bona fide belief of no liability but deposited service tax before issuance of show cause notice and decision relating to penalty in Hindustan Steel vs. State of Orissa - 1972 (2) ELT J159 (SC) and Sumit Industries Ltd. vs. CCE, Surat - 2004 (164) ELT 375 (S.C.) was applicable. It was also grievance of Revenue in their appeal that once detection of evasion was made, the appellate authority should not have leniently considered the issues relating to waiver of penalties. But he should have confirmed the same. According to learned Counsel, such contention of Revenue has no basis when no liability arose due to bar of limitation and assessee had bonafide belief of no arise of liability as well as no deliberate suppression of facts made as found by learned appellate authority below. So also it was plea of assessee that where interpretation of law is involved and confusion occurs, no penalty shall be levied and extended period cannot be invoked. 4.3. Shri Mittal, learned Advocate submitted that when the show cause notice dated 28.3.2006 was issued after two years from the date of initiation of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year 2006 significantly, that has no relevance to the present appeal because the period under dispute is December, 2000 to March, 2006 which is prior to amendment. Inviting attention to the budget speech of the Hon'ble Finance Minister in Parliament on 28.2.1994, learned Counsel submitted that in Para 8.7, legislature made its intention clear to impose service tax on brokerage/commission charged by stock brokers in relation to their services. Accordingly, other than the brokerage and commission nothing was intended to be taxed under law. Therefore, adjudication is confined to the brokerage/commission received by stock brokers and nothing beyond that was to be included in assessable value for taxation. 4.7 It was further argument on behalf of the appellant that speech by Hon'ble Finance Minister provides guides to interpret the law relating to imposition of service tax on stock broking service. To submit so, he relied on the decision of Apex Court in the case of K.P. Varghese vs. ITO, Ernakulam and Anr. - AIR 1981 SC 1922: (1981) 4 SCC 173: (Para 8). It was further submitted that a receipt which is not covered by charging section cannot be brought to tax. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment's letter dated 13.4.2010 concluding that except the Stamp duty and STT, all other charges are includable in the value of taxable service. Such clarification flows from legislative Intent of section 67 of the Act changed w.e.f. 28.04.2006 as well as the Service Tax (Determination of Value) Rules, 2006 introduced to value taxable services. It implies that Board has accepted that prior to 18.04.2006, the impugned charges were not includible in the value of taxable service. Disputes were going on across the country and for the period from December 2000 to March 2004, the appellant has been made to suffer for confusion in taxation. 4.9 When show cause notice was issued without appreciating registration status of the appellant w.e.f. 11.7.2000 that vitiates the adjudication and no tax is collectible. So also penalty is not leviable under Section 78 of the Act. There did not exist element of section 73 of the Act to issue show cause notice. Appellant relied on the decision in the case of UOI vs. Rajasthan Spinning and Weaving Mills - 2009 (238) ELT 3 (SC) [Para 18] to support his contention. According to Appellant, when inquiry against it was conducted, statements were recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arose from 15.5.2003, in that circumstance, he should have ignored the demand of ₹ 11,20,638/- pertaining to the period beyond 14.5.2008 which was barred by limitation. 4.12 Lastly, arguing against appeal of Revenue (ST/90/2008) it was vehemently objected that in view of the aforesaid submissions, Revenue's appeal being time barred and devoid of merit is not entertainable in absence of application for condonation of delay. When the first appellate authority passed order on 29.10.2007 appeal should have come to Tribunal from Revenue within 3 months thereof. But appeal was filed by it on 11.2.2008. Accordingly, that is time barred. Moreover, the Committee of Commissioners did not form an opinion to seek remedy of appeal applying section 86 of the Act. Revenue's reliance on the decision in Surat-I vs. Neminath Fabrics Pvt. Ltd. - 2010 (256) ELT 369 (Guj.) is of no relevance because that case was under Excise Law touching removal of goods without invoice, which is not the case in the present appeal. It was further argued by Shri Mittal that he opposes appeal of Revenue through Cross objection filed by Assessee on the aforesaid ground argued by him as stated herein befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf of Revenue submitted that services taxed by concerned adjudication orders imposed tax on the gross receipts finding the same to be relatable to the service provided by the appellant concerned and that cannot be detached from the gross value to make same tax free. According to Revenue, what that is integral part of service provided forms part of gross value following the decision of Tribunal in Naresh Kumar case - 2008 (11) STR 578 (Tri.-Kol.). The concerned recoveries made by the said broker contribute to the value addition to the service provided which needs appreciation. Relying on para 4 of decision of Tribunal in the case of Shriram Insight Sales Broker Ltd. - 2009 (14) STR 86 (Kol.) it was submitted that when the turnover charges are collected by share broker that was part of service charge. Similarly relying on the Larger Bench decision in the case of Bhagwati Traders - 2011 (24) STR 290 (Tri-LB) it was submitted that when the expenses reimbursable are taxed under service tax law, the realisation made by share broker cannot be excluded from gross value for taxation. 7. Placing Section 67 of the Act, learned D.R. argued that by Explanation I appended to Section 67 it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of taxable service by Revenue. But no inclusion thereof is the claim of the assessee. Therefore, the legal question as to whether receipts other than brokerage and commission made by stock brokers shall be liable to tax forming part of gross value of taxable service being common question in all the appeals, such question is dealt first for decision in all the appeals commonly dealt by this order for applying the legal principles to the respective cases. Legal Provision For Valuation of Taxable Service Provided by Stock Brokers Prior to 2001 and in Between 2001 to 2004 12.1 Matters before us fall within the periods before 2001 and after 2001 but before 2004. When service tax was introduced in the year 1994 to tax the service provided to investors by stock brokers in connection with sale or purchase of securities listed on a recognized stock exchange, legislature, up to the year 2001 intended that aggregate of the commission or brokerage charged to the investors by stock broker for sale or purchase of securities shall be taxed under the charging provision of the Act. So also the commission or the brokerage paid by stock broker to any sub-broker was made liable to tax. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggregate charge was gross value. An explanation appeared in the amended section declaring that value of taxable service as the case may be shall include certain receipts prescribed by different clauses appearing under section 67. Clause (a) is the relevant clause insofar as that relates to taxable service provided by stock broker and that is under consideration in these appeals. That clause states that aggregate of commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock broker to any sub-broker shall be liable to service tax. Thus, there is no extended meaning of measure of levy even by amended definition of valuation of taxable service. 12.5 Provision of section 67 provides the basis to determine the value of taxable service. No ambiguity persists in section 67 of the Act. No receipt other than commission or brokerage made by a stock broker is intended to be brought to the ambit of assessable value of service provided by stock broker. Charging section in a taxing statute is to be construed strictly. As is often said, there is no equity about tax. If the words used in a taxing statute are clear, one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat value only and that should only be taxed without any hypothetical rule of computation of value of taxable service under section 67 of the Act. The other receipts a stock broker makes are irrelevant for determination of the assessable value of taxable service provided by him. Thus the test is whether a receipt of stock broker is in the nature or commission or brokerage to levy service tax. Burden of Proof Failed to be Discharged by Revenue to Bring the Receipts to Charge 16. The appellants in these appeals received "turnover charges", stamp duty, BSE charges, SEBI fees and DEMAT charges contending that the same was payable to different authorities and claimed that the same is not taxable. But Revenue taxed the same on the ground that such receipt by stock broker was liable to tax. Revenue failed to bring out whether the turnover charges and other charges in dispute in these appeals received by appellant were commission or brokerage. The character of receipts was claimed by appellants as recoveries from investors to make payment thereof to respective authorities in accordance with statutory provisions of Indian Stamp Act and SEBI guidelines and were not received tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the appellant could not be held guilty of suppression when the law itself was not certain. Hon'ble Court held that section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. It was accordingly held that when there is scope for entertaining doubt to take a particular stand that rules out application of Section 11A of the Act. 20. It was further held in the case of Continental Foundation Jt. Venture that as far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word 'willful', preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words 'contravention of any of the provisions of this Act or Rules' are again qualified by the immediately following words 'with intent to evade payment of duty.' Therefore, there cannot be suppression or mis-statement of fact, which is not willful and yet constitute a permissible ground for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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