TMI Blog2018 (10) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... annot form part of the taxable value - 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 - demand set aside. Service Tax on income from distribution of Mutual funds and Commission from Banks/Companies for investment in their Bonds - validity of SCN - Held that:- 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. - otherwise also, the issue is settled in the case of CST, Delhi vs. ABN Amro Bank [2011 (1) TMI 69 - CESTAT, NEW DELHI], where iCommissioner has dropped the proceedings on the ground that the Circular dated 5.11.2003 of the Board which was the basis for issue of Show Cause Notice stands set aside by the Hon ble High Court of Andhra Pradesh - the demand of service tax on account of income from distribution of mutual funds and selling bonds issued by banks/companies is not sustainable and the same is set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and other Financial Services). II. CTCL Charges 1.10.2006 to 30.09.2007 SCN issued on 28.03.2008 Rs.50,734/- ₹ 4920/- 3. ST/494/2011 Penalty under Sec 76 of the Finance Act, 1994 (Connected with Appeal No. ST/166/2010) 1.10.2006 to 30.09.2007 SCN issued on 07.03.2011 SCN issued for imposition of penalty under Sec 76 Rs.200/- per day 4. ST/765/2011 I. CTCL charges (Stock Broker services) II. Income on Public issues and RBI bonds (BAS) III. Commission from Banks for promotion of their bonds (BAS) 2005-06 to 2009-10 SCN issued on 20.10.10, Rs.4,81,134/- Rs.3,06,821/- ₹ 1,044/- (2005-06) ₹ 16,776/- 5. ST/771/2011 I. Income from public issues and income from RBI Relief Bonds confirmed under BAS. II. CTCL charges. III. Income from Distribution- others (Income from public issues, RBI Relief Bonds, Income from com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on various charges/commissions/income, which are dealt under the following heads:- (A) Service Tax on CTCL charges and Depository Charges :- We find that these charges relate to payments made by the appellant for the CTCL computer program. Such a program provides a single point trading access to equity, commodity and currency derivatives markets. The NSE (National Stock Exchange) charges fees for giving this facility to the brokers. The broker then shares this service with the customers and charges the customers to recover the fees paid to NSE by way of 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 Caplease Pvt 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. 12.3 There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the Legislatures failure to express 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no way leaves scope for implication to make the statutory grant ineffective. Law being well settled that there is no intendment in taxation and the State has to discharge its burden of proof to bring the subject into tax, there is no scope to bring any other element of receipt other than brokerage or commission to the scope of assessable value in respect of service provided by stock brokers. 14. Normally value is derived from the price and value is the function of the price. This is conceptual meaning of value. Section 67 is the sole repository of law governing value of taxable 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. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any reason to deviate from the ratio laid down in the aforesaid judgments of this Tribunal. We are also of the view that the allegation of the department that the demat charges collected by the brokers are banking 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. Thus, in view of the aforesaid precedent, we do not find merit in impugned orders and accordingly set aside. The appeals are allowed with consequential 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as dropped the proceedings on the ground that the Circular dated 5-11-2003 of the Board which was the basis for issue of Show Cause Notice stands set aside by the Hon ble High Court of Andhra Pradesh. The said judgment of the Hon ble High Court has not been set aside or stayed. Under these circumstances, we do not find any infirmity in the order of the Commissioner. Same view has been taken by this Tribunal in the case of P.N. Vijay Financial Services Pvt Ltd. - 2008 (12) STR 628. In view of the above, the demand of service tax on account of income from distribution of mutual 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax on commission received from sale of RBI bonds is not liable to service tax. 6. As the demands in appeal nos. listed at Sr. No. 1, 2, 4 5 have been set aside, accordingly the penalties imposed on the basis of these demands do not survive. 7. We note that appeal nos. ST/166/2010 and ST/494/2011 are both in relation to the show cause notice bearing F.N. ST-29/O7A/SCN/Anagram/JC/08 dt. 08.03.2008, which was adjudicated by Additional Commissioner vide Order-in-Order No. STC/5/ADC/2009 dt. 21.07.2009. In the said Original-in-Order dt. 21.07.2009, demand on account of CTCL Charges, income from 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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