9911796707
TMI Blog2023 (8) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... nking 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. In view of the above decision of this Tribunal, the issue that whether the consideration received towards the service relating to Initial Public Offering (IPO) of Shares/Bond is not liable to Service Tax under Business Auxiliary Services . The impugned order is not sustainable - Appeal allowed. - HON'BLE MEMBER ( JUDICIAL ) , MR. RAMESH NAIR And HON'BLE MEMBER ( TECHNICAL ) , MR. C. L. MAHAR Shri, Amal Dave , Advocate appeared for the Appellant Shri P. Ganesan, Superintendent ( AR ) for the Respondent ORDER RAMESH NAIR The issue involved in the present case is that whether the appellant is liable for Service Tax on the Brokerage/Commission received towards the services relating to public issue of Equity Shares/Bonds. 2. Shri Amal Dave, Learned Counsel, appearing on behalf of the appellant the outset submits that this issue is no longer res-Integra as the same has been decided in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reimbursements. The Depository/Demat Charges are levied by the Depository under Depositories Act, 1996. The appellants collect these charges from customers and pay the same to depository participants like CDSL or NSDL. It has been held by this Tribunal in the case of Span CapleasePvt Ltd (supra) that such charges, which are collected separately and in accordance with various statutory bodies regulations and not retained by the stock brokers but deposited with the authorities concerned (e.g. National Stock Exchange), such charges cannot form part of the taxable value. Relevant portions of the said judgment are extracted below: 9. The limited question of law involved in the present appeals is to be addressed is: whether the appellants-stock brokers are required to include NSE/BSE transaction charges, SEBI turnover fees, Stamp duty, Depository/Demat charges and Security Transaction charges in the value of brokerage and commission charges recovered from their customers/clients. The contention of the Advocates for the respective appellants is that these charges are collected separately and in accordance with various statutory Bodies Regulations and not retained by the stock broker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s itself clearly. It is well settled that power to tax cannot be inferred by implication; there must be a charging section specifically empowering the State to levy tax. When these are the principles laid down by Apex Court in the case of State of West Bengal v. Kesoram Industries Ltd. - (2004) 10 SCC 201, bringing a strange element to the ambit of tax shall be without authority of law. There was no scope provided by Section 67 of the Act to expend its width to have artificial measure of levy bringing a receipt by implication or inference running counter to the charging provision. 12.4 The scheme of valuation of aforesaid service which was in force till 15-7-2001 underwent amendment by Finance Act, 2001. The amending Act replaced Section 67 by Finance Act, 2001, prescribing levy of tax on the gross amount charged by service provider (stock broker) for the taxable service provided by him. Such aggregate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service provided by the stock broker. Any charge on the non-includible elements other than brokerage or commission will result in arbitrary taxation. Similarly receipts not in the nature of commission or brokerage should not be taxed in disguise. The brokerage or commission service provided by stock broker shall be liable to service tax. That being consideration for taxable service provided, become assessable value of such service. Because tax is compulsory exaction, no subject shall be made liable without authority of law. To the extent authority is vested, only to that extent tax can be imposed. Commission or brokerage charged by stock broker are only liable to tax by express provision of law. Any other exercise of authority beyond that shall make that fatal. 15. 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 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 tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial relief, if any, as per law. Accordingly, we hold that the aforesaid charges realized by the appellant are not in the nature of commission or brokerage and that being so; the same shall not form part of the value of taxable services. (B) Service Tax on income from distribution of Mutual funds and Commission from Banks/Companies for investment in their Bonds:- As rightly pointed out by the Ld. Advocate, in appeal nos. ST/765/2011 and ST/771/2011, the demand in the show cause notice has been raised in the category of banking and financial services whereas in the adjudication order, the same has been confirmed under Business Auxiliary Service (BAS), which is beyond the show cause notice. This fact has not been rebutted by the Ld. A.R. On this ground alone, the demand of service tax under this head is liable to be set aside in these appeals. On merits also, we find that the legal position on this issue is already settled as the demand was raised by the department only on the basis of the Circular No. 66/15/2003-ST dt. 05.11.2003. 9 ST/69/2009, ST/166/2010, ST/494, 765, 771/2011 However, the said circular has been quashed by the Hon ble High Court of Andhra Pradesh in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utual funds and selling bonds issued by banks/companies is not sustainable and the same is set aside. (C) Service Tax demand on income from RBI bonds:- We find that the issue of liability to pay the service tax on commission received from sale of RBI bonds is no longer res integra and has been settled by this Tribunal in favour of assessee in the case of Enam Securities Pvt Ltd (supra) and HDFC Bank Ltd (supra). In this regard, in the case of Enam Securities Pvt Ltd (supra), it was held as under: 4.1 Unlike other banks, RBI does not undertake borrowing or lending on its own. Whenever the RBI undertakes borrowing activities, it is on behalf of the Government of India to manage the Indian economy which its constitutional responsibility. Therefore, the lending or borrowing of money by the Government is a sovereign function and on such functions there cannot be any tax liability whether by way of direct tax or by way of indirect tax. This is the principle followed by this Tribunal in the case of HDFC Bank and Canara Bank case (supra). 5. In view of the above, the impugned demands are clearly unsustainable in law. Accordingly, we set aside the same and allow the appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om public issue/RBI relief bonds and income from distribution of mutual funds was confirmed along with interest and penalty under Section 78 was imposed. However, penalty under Section 76 of the Finance Act, 1994 was dropped. While Revenue went for Revision proceedings for imposition of penalty under Section 76 ibid, the appellant filed appeals before Commissioner (Appeals) for setting aside the entire demand as well as the penalty under Section 78 ibid. In appeal no. ST/494/2011, in the impugned order dt. 18.05.2011, the Commissioner imposed the penalty under Section 76 ibid. In appeal no. ST/166/2010, in the impugned order dt. 23.12.2009, the Commissioner (Appeals) upheld the service tax demand on CTCL Charges and income from public issues/RBI bonds along with pro rata penalty under Section 78 ibid. However, demand on commission on distribution of mutual funds was dropped. Since we have already set aside the demand of service tax pertaining to CTCL charges and income from public issues/RBI bonds emanating from the Order-in-Original dt. 21.07.2009, the imposition of penalty under Section 76 in relation to the same Order-in-Original dt. 21.07.2009 is therefore not sustainable and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, we find that the appellant's activity is not covered by subsection (i) as they are not promoting or marketing or selling any goods. It is only an initial/offer and until the rights are issued to the subscribers such as share certificate do not assume the character of goods. Therefore, as rightly held by the lower authority, the services of the appellant to their client are beyond the scope of sub- section (i) 5.1 Coming to the sub-section (ii), service rendered by the appellant to their clients would be chargeable to tax only if it is rendered in relation to promotion or marketing of service rendered by the clients. IPO is only an offer to the prospective buyers and therefore, it cannot be held to be a service by the company offering IPO. Therefore, we find that in either condition, the appellants are not covered by the definition under Section 65(19) of the Finance Act, 1994. In view of the above decisions of this Tribunal, the issue that whether the consideration received towards the service relating to Initial Public Offering (IPO) of Shares/Bond is not liable to Service Tax under Business Auxiliary Services . 5. Therefore, following the above decisions, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
