2018 (2) TMI 1184 – CESTAT CHENNAI – TMI – Valuation – includibility – transaction charges – Stock Broking Service – Held that: – It cannot be nobodys case that the transaction charges are charged by the appellants on the clients. It is evident that these charges are required to be paid by the clients only to the stock exchange for the transactions in shares or stocks that they may have entered into on their own or through the stock brokers like the appellant herein. Merely because the appellants are collecting the said charges from their clients and remitting the same to the concerned stock exchange cannot be a reason for considering such amounts as received by them for services rendered by them.
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In the case of First Securities Pvt. Ltd. [2007 (6) TMI 33 – CESTAT, BANGALORE] the Tribunal has held that handling charges collected from investors and the amounts collected towards transaction charges cannot be equated to brokerage or commission for purchase of securities.
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App
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dication, these proposals were confirmed and in addition, penalties were also imposed under Section 76 and 78 of the Finance Act, 1994. On appeal, penalty under 76 was set aside, however, the rest of the order of the original authority was upheld by the Commissioner (Appeals). Hence, this appeal. 2. Today when the matter came up for hearing, Ld. Advocate Ms. Radhika Chandrasekar submitted that prior to the amendment to the Finance Act, 1994 passed w.e.f. 18.04.2006, valuation of taxable services for charging service tax as per Section 67 ibid read as under:- "67 Valuation of taxable services for charging service tax For the purposes of this Chapter, the value of any taxable service shall be the gross amount charged by the service provider for such service provided or to be provided by him. Explanation 1. For the removal of doubts, it is hereby declared that the value of a taxable service, as the case may be, includes, (a) the aggregate of commission or brokerage charged by a broke
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am, AC supports the impugned order. He draws our attention to the finding of the Commissioner (Appeals) that the amounts collected by the appellant as transaction charges is nothing but consideration received by them, which is therefore required to be added in the taxable value and the liability to pay service tax will definitely arise. 4. Heard both sides and have gone through the facts. 5.1 We find merit in the arguments of the Ld. Counsel. It cannot be nobody's case that the transaction charges are charged by the appellants on the clients. It is evident that these charges are required to be paid by the clients only to the stock exchange for the transactions in shares or stocks that they may have entered into on their own or through the stock brokers like the appellant herein. Merely because the appellants are collecting the said charges from their clients and remitting the same to the concerned stock exchange cannot be a reason for considering such amounts as received by them fo
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nvited our attention to Annexure D in Page 38 of Paper Book wherein a letter addressed to the Asstt. Commissioner giving details of transaction charges issued from National Stock Exchange of India Ltd. for year 1999-2003 was furnished. Further he invited our attention to Section 67(a) of the Finance Act which deals with valuation of taxable services in relation to service provider by the stock broker. In terms of the above provisions, the value of taxable service in relation to service provided by a stock broker, shall be the aggregate of the commission or brokerage charged by him on the sale or purchase of securities from the investors and includes the commission or brokerage paid by the stock broker to any sub-broker. The handling charges collected from the investors cannot be called as brokerage or commission. Similarly, the amounts collected towards transaction charges by the appellants also cannot be equated to brokerage or commission. It is seen that the transaction charges colle
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rtain investors/clients. In respect of speculative transactions, no handling charges were collected from the investors/clients as there was no handling of scrips and certificates. We are convinced that the handling charge is not in the nature of commission or brokerage for purchase of securities. They are incurred in connection with the delivery of scrips. In fine, we hold that the value of taxable services in respect of a stock broker will not include transaction charges and handling charges. Therefore there is no merit in the impugned order. Hence we allow the appeal with consequential relief. The same ratio has been relied in LSE Securities Ltd. (supra). The relevant portion of the said decision is reproduced as below:- "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
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ss value of taxable service. On merit, all the appellants succeed on the fundamental principles of taxation. Therefore, other contentions on merit made in respective appeals are not considered in this order. 5.3 In view of the discussions made herein above and in particular following the ratio laid down by the Tribunal in the cases referred supra, we hold in favour of the appellants. The impugned order cannot be sustained for which reason it is set aside. Appeal is allowed with consequential reliefs, if any, as per law. 6. Revenue filed miscellaneous application seeking amendment of the cause title on the ground that the department is shown in the above appeal with jurisdiction of the Commissioner of Central Excise and Service Tax, Chennai, whereas now the same has been changed as The Commissioner of GST & Central Excise, Chennai South Commissionerate, MHU Complex, 692, Anna Salai, Nandanam, Chennai 600 035. We find that the prayer for amendment of the cause title as also the addre
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