Stockbroker wins appeal on service tax liability, exempt for pre-amendment charges

The Tribunal partially allowed the appeal, granting relief to the appellant for the period pre-amendment but confirming the liability for service tax on amounts collected but not deposited post-amendment. The appellant, a stockbroker, successfully argued that charges collected for stamp duty and security transaction tax, deposited late with delayed charges, were not subject to service tax. The Tribunal referenced a Delhi High Court ruling and Circular No.187/107/2010-CX-4 to support its decision.

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Issues:
- Dispute over amount collected from client other than commission and brokerage under Rule 5(2) of Service Tax (Determination of Value Rules), 2006.
- Applicability of Rule 5(1) of Service Tax Rules, 2006.
- Benefit entitlement to the appellant for the period pre and post 18.4.2006.
- Liability of the appellant to pay service tax on amount collected but not deposited to the Govt. exchequer.

Analysis:
The appeal was filed against Order-in-Original No. 233/2012 dated 5.12.2012, concerning the amount collected from clients other than commission and brokerage during the period from April 2004 to September 2009. The appellant, a stockbroker in the security exchange, disputed the categorization of the amount under the "over and above" heading of Rule 5(2) of the Service Tax (Determination of Value Rules), 2006, as confirmed by the original order. The appellant argued that charges collected were for stamp duty and security transaction tax, which were deposited, albeit sometimes late with delayed charges. Reference was made to the Delhi High Court's ruling on Rule 5(1) in a previous case. The department contended that the amendment in the rules on 18.4.2006 brought the "over and above" amount under service tax if not deposited in the Govt. exchequer. Relief was granted for belated charges pre-18.4.2006, but post that date, service tax was applicable on undeposited amounts.

Considering the submissions, the Tribunal noted the amendment effective from 18.4.2006 in the Service Tax Determination of Valuation Rules, entitling the appellant to benefit pre-amendment. However, the lower authority failed to provide this benefit. Post-18.4.2006, the appellant was liable to pay service tax on amounts collected but not deposited to the Govt. exchequer. Referring to Circular No.187/107/2010-CX-4, it was clarified that charges like stamp duty and Security Transaction Tax, the liability of the buyer/seller, paid by the broker as a pure agent, were not taxable. The Tribunal modified the impugned order, granting the appellant the benefit pre-18.4.2006 and confirming the order post that date.

In conclusion, the impugned order was partially allowed, providing relief to the appellant for the pre-amendment period and affirming the liability for service tax post-amendment.

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