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of <h1>CESTAT Bangalore: Account Maintenance Charges not Taxable for Stock Brokers</h1> <h3>ACUMEN CAPITAL MARKET (I) LTD. Versus CCE., CUS. & ST., COCHIN</h3> ACUMEN CAPITAL MARKET (I) LTD. Versus CCE., CUS. & ST., COCHIN - 2013 (32) S.T.R. 338 (Tri. - Bang.) Issues:1. Taxability of account maintenance charges collected by a stock broker registered as a Depository Participant.2. Whether account maintenance charges are part of taxable services of a stock broker.3. Applicability of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006.4. Pre-deposit requirement and stay petition.Issue 1: Taxability of Account Maintenance ChargesThe judgment deals with the taxability of account maintenance charges collected by a stock broker who is also registered as a Depository Participant. The authorities had treated these charges as part of taxable services of the stock broker, leading to a demand for service tax along with penalties. The appellant argued that the activities of a stock broker and a Depository Participant are distinct, and investors may choose to avail services from either entity. The Tribunal acknowledged the separate registration for these activities and ruled that the charges collected as a Depository Participant may not be includible in the taxable value of stock broking services.Issue 2: Inclusion of Account Maintenance Charges in Taxable ValueThe Tribunal considered the arguments presented by both sides regarding the inclusion of account maintenance charges in the taxable value of stock broking services. The Additional Commissioner relied on the Board's Circular and sought pre-deposit based on the Commissioner (Appeals) findings. However, the Tribunal observed that a Depository Participant and a stock broker are registered separately for their activities, indicating that charges collected for account maintenance as a Depository Participant may not be automatically considered part of the taxable value of stock broking services.Issue 3: Applicability of Rule 5(1) of Service Tax RulesThe Additional Commissioner referenced Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, to support the inclusion of charges in the taxable value. However, the Tribunal's analysis focused on the distinct nature of the activities undertaken by the appellant as a stock broker and a Depository Participant, emphasizing that these roles do not necessarily overlap. This led to the Tribunal waiving the pre-deposit requirement and staying the recovery of dues pending the appeal's disposal.Issue 4: Pre-Deposit Requirement and Stay PetitionThe Tribunal heard both parties on the stay petition and examined the submissions along with the records. After considering the arguments and perusing the details, the Tribunal found that the activities of a stock broker and a Depository Participant are separate, with separate registrations for each. Consequently, the Tribunal decided to waive the pre-deposit of dues as per the impugned order and stayed the recovery of the amount until the appeal is resolved.This judgment from the Appellate Tribunal CESTAT Bangalore clarifies the distinct nature of activities undertaken by a stock broker and a Depository Participant, emphasizing that charges collected for account maintenance by the appellant as a Depository Participant may not be considered part of the taxable value of stock broking services. The ruling highlights the importance of separate registrations for different activities and provides clarity on the taxability of specific charges in the financial services sector.
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