TMI Blog2012 (6) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Service Tax Appeal No. 3 and 363/2007, 81, 90/2008, 90/2007 - - - Dated:- 7-5-2012 - D.N. Panda, Rakesh Kumar, JJ. J.K. Mittal, Adv., Jatin Mahajan, Adv, Sukriti Das, Adv. for the Appellant Amresh Jain, SDR, B.L. Soni, SDR, K.P. Singh, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, that such charges were collected for paying to the respective Stock Exchanges and were not the considerations of the appellant for providing stock broking service. This was a statutory levy under SEBI guidelines as required under SEBI Act, and were collected under the instructions of stock 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 15,14,554/- was raised in adjudication followed by penalties and interest. But penalties imposed under Section 76 and 78 of the Act were dropped by first appellate authority, invoking extended period of limitation. Revenue is in appeal against immunity granted to the assessee from penalty. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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; (b) ............... 4.6 It was further submitted by the learned Counsel for the appellant that although Section 67 of the Act has undergone amendment 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 impositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of judgments of the Tribunal and the High Courts. Thus no contrary view can be taken by Tribunal to tax the appellant on the aforesaid legal position. 4.8 It was also submitted on behalf of Appellant that Board issued Instruction No. 187/107/2010-CX.4, dated 17.09.2010. Examining the issue on the basis of department'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 Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndore vs. M/s. Indira Securities Final Order No. ST/337-339/11, CCE, Pune vs. Telco Ltd. - 2006 (196) ELT 308 (Tri.-Mumbai) and Rajhans Metals (P) Ltd. vs. CCE, Rajkot - 2007 (8) STR 498 (Tri.-Ahm.). 4.11 It was also argued on behalf of appellant that when learned Commissioner (Appeals) found that liability of the appellant 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod 1.1.2002 to 30.9.2005. No penalty was imposable when demand was time barred. 5.4 Learned Counsel also adopted the arguments of Shri Mittal, learned Advocate who argued in appeal No. ST/81/2008. and other appeals to submit immunity from levy of tax and penalty. Arguments on Behalf of Revenue 6. Learned D.R. appearing on behalf 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 decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious charges received by stock brokers shall constitute value of taxable service, assessees oppose such proposition. Charges like Misc. charges, Trade Guarantee Fund (TGF), Investor's Protection Fund (IPF), Stamp duty, Stock Exchange charges, Transaction charges, SEBI fees, Custom Protection Fund (CPF) and Demat charges are intended to be included in 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 li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of uncertainty in law to include the turnover of the two items and if it failed to do so then it amounted to suppression of fact and second whether it was the duty of appellant to keep the Department informed about the turnover of the goods which were not liable to any duty. No rule could be pointed out requiring a manufacturer to disclose the turnover of exempted goods. Even assuming it was, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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