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TMI Blog2025 (3) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... and "consideration. A ruling by the Larger Bench of the Tribunal Bhayana Builders (P) Limited Vs. Commissioner of service tax [2013 (9) TMI 294 - CESTAT NEW DELHI-LB], wherein it was observed that any consideration (whether monetary or otherwise), should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the latter. Larger Bench of Tribunal in Service Tax Appeal No. 511 of 2011-LB with Service Tax Cross Application No. 40320 of 2018 [2020 (7) TMI 472 - CESTAT CHENNAI] holds that foreclosure charges collected by banks and NBFCs on premature termination of loans is not leviable to service tax; analyses what constitutes "consideration" for service and damages for breach of contract. The Tribunal observed that the banks and NBFCs are promisors and they would not desire premature termination of the loan, as it is in their interest that it runs the entire agreed tenure. Thus, any income which gets generated up to the settlement of the agreement of rendering services which shall form the part of the taxable value of Section 67 of the Finance Act the service of stock broker gets completed when the terms and conditions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt herein are engaged in providing Stock Broker Agent Service to their clients relating to the facilitation of sale or purchase of securities/stocks on Stock Exchanges by their clients against a consideration/brokerage at the, agreed terms for their clients. The appellants were found discharging their service tax liability on this brokerage income. However, during investigation conducted based on intelligence received in DGCEI, the department observed that the appellants were receiving consideration from their clients as Delayed Payment Charges DPC towards extending credit facilities, however, were not paying service tax on the said amount. Based on the insertion with effect from 01.07.2012 to Rule 6(1) of Service Tax (Determination of Value) Rules, 2006, department found an opinion that the service of extending credit facility is an activity distinct from the stock broker service. Thus, the "Delayed Payment Charges" is the consideration for provision of this separate service/activity of extension of credit facility. 2. Department alleged that the appellant's claim about DPC being levied against default made by the client and not for any other activity being carried out by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. has been clarified by CBEC Circular No. 32/3/2006 dated 20.12.2000. It is further submitted that DPC has wrongly been compared to demurrage charges because in case of demurrage charges the value of service itself undergoes change. Hence decision relied upon by the adjudicating authority below are not applicable to the facts of the present case. Learned counsel further submitted that this Tribunal in appellant's own case titled as IIFL Holding Ltd. Vs. CCGST, Mumbai Central Service Tax Appeal No. 87042 of 2018 CESTAT, Mumbai has already decided the present issue in favour of the assessee. The order under challenge is, therefore, prayed to be set aside and the appeal is prayed to be allowed. 5. While rebutting these submissions, that the issue involved in the present case, has been a PAN India issue as such number of demand notices have been issued by the various of the department. In many cases, the demand has been confirmed even in one of the appellant's own case, the demand has been confirmed by a DG (ADJ), DGGCEI. However, for the subsequent period Commissioner (Mumbai) has dropped the demand. 6. Learned Departmental Representative while submitting on merits mentioned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lse is taxable being a consideration for providing a separate service of settling the account of clients with stock exchanges as different from the service of stock broking for the purpose or is not the amount of consideration which is liable to be taxed. 9. We foremost need to look into the concept of consideration. Section 67 of the Finance Act deals with the concept, what constitutes "consideration" for service. Service tax is leviable only when an activity is considered to be a service. There has to be a consideration for the provision of such service. Only an amount payable for the service would be "consideration." Consideration must flow from the service recipient to the service provider and should accrue to the benefit of the service provider. There is a marked distinction between "conditions to a contract" and "consideration. A ruling by the Larger Bench of the Tribunal Bhayana Builders (P) Limited Vs. Commissioner of service tax 2013 (32) S.T.R. 49 (Tribunal-LB), wherein it was observed that any consideration (whether monetary or otherwise), should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the latter. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purview of either the substantive appeals or the issue referred to us. In this view of the matter it is not necessary to consider the contention on behalf of the assessees that an interpretation that Section 67 of the Act enables or mandates inclusion of the value of goods and materials incorporated into construction services (whether provided by the service provider or as a free supplies by the service recipient) would render the legislative provision unconstitutional, since value of the goods incorporated being sale of goods would be liable to sales tax, an area within the legislative competence of State, the value of goods sold would thus be beyond the legislative competence of Parliament for levy of tax on such sale; consequently could not also constitute the value of taxable services. Ld. Counsel placed reliance on the judgment in M/s Gannon Dunkerley and Co. and Others vs. State of Rajasthan and Others (1993) 1 SCC 364 = (2002-TIOL-103-SC-CT); and State of Andhra Pradesh and Others vs. Larsen & Toubro Limited and Others (2008) 9 SCC 191 = (2008-TIOL-158-SC-VAT ) , to buttress this contention. (viii) Since Section 67 of the Act, as currently structured does not, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cludible in the taxable value for charging service tax. We also find that the issue of Delayed Payment Charges (DPC) arising in the context of purchase of shares has been addressed by the Co-ordinate Bench of this Tribunal in the case of Religare Securities Limited Vs. Commissioner of Service Tax, Delhi 2014 (36) STR 937 (Tr.-Del) by holding that the same is not liable to service tax. The relevant paragraphs of the said order is extracted below: "10. After appreciating the submissions made by both the sides, we find that the dispute to be decided in the appeal is as to whether the DPC collected by the appellants from their clients in those cases where the appellants have already made payments to the Exchange but has not recovered the same from their clients, are required to be considered as a part of the value of the services, so as to levy the Service Tax in respect of the same. We find that there is not much dispute on the facts. The DPCs are being collected by the appellants only from those clients, who have not paid them well within the time-limit period and the appellants being under a legal contract with the Exchange, had to deposit the value of the securities, sold or/and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been received seeking clarification regarding leviability of Service Tax on the additional amount that is collected towards the delay in making payment to the stock-brokers by their customers (delayed payment charges) in respect of Stock Broker"s services. 2. The matter has been examined. Clarifications issued by the Board in the past on similar issues are summed up below :- (i) Circular No. 96/7/2007 at para 002.01 clarifies that an amount collected for delayed payment of a telephone bill is not to be treated as consideration charged for provision of telecom service and therefore, does not form a part of the value of taxable service. (ii) Circular No. 121/02/2010-S.T., dated 26-4-2010 clarifies that detention charges in respect of detained containers are not in respect of service provided on behalf of client (under BAS) nor it on account of infrastructure support services (under BSS). Such charges can at best be called as „penal rent" for retaining the containers beyond the predetermined period. Therefore, the amount collected as „detention charges" is not chargeable to Service Tax. 2.1 In a similar manner, delayed payment charges received by the stock-br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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