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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 ..... 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 appellant, was alleged baseless and the appellant was held liable to pay service tax on the said DPC. Accordingly, the show cause notice No. 545/2015/9295 dated 29.11.2016 was served upon the appellant after invoking the extended period of limitation proposing the recovery of service tax amounting to Rs. 11,70,58,419/- along with proportionate interest and the appropriate penalties under Section 77 and 78 of the Finance Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase 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 it is stock broker obligation to make payment to the stock exchange/SEBI on behalf of investor/customer and by recovering this payment from the customer along with some interest. The appellant used to settle an account of client with stock exchange while extending credit facility which is another essential aspect of the agreement between stock broker and its client. Thus it is not part of the stock broker service but a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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. - The Supreme Court"s decision in Commissioner of service tax v. M/s Bhayana Builders 2018 (2) TMI 1325 in affirming the above ruling Bhayana Builders (P) Limited (supra) wherein it was held that "any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under section 67," which was also reiterated in another landma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 view require inclusion of free supplies in the gross value charged, for computation of the value of taxable services;" 10. Thus, it becomes clear that 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 contract entered wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder 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 purchased by their clients. As such, the nature of the said DPCs being a penal charge, is established. Where there is no delay in making payments by the clients, no DPC is being charged from them. As such, one thing becomes clear that such DPC is not on account of any stockbroking services being provided by the appellants. In terms of clause 45 of the agreement entered by the appellants with investors, - "any amount ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.01 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-brokers are not includible in taxable value as the same are not the charges for providing taxable services. Such charges are on account of delay in making payments by the service recipient to the service provider and are in the nature of a penal charge for not making the payment within stipulated time. Such amounts are not includible in the taxable value for charging Service Tax. This principle will also apply to other serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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