2009 (7) TMI 131 - AT - Service Tax

CESTAT rules on deduction admissibility for recoveries and deposit fees, emphasizing fixed charges as actual payments.

SAURIN INVESTMENTS PVT. LTD. Versus COMMISSIONER OF SERVICE TAX, AHMEDABAD

The Appellate Tribunal CESTAT, Ahmedabad ruled in favor of the appellant regarding the admissibility of deduction for the amount recovered from customers ... Stock Broker – Fees for depositors - whether the amount recovered by the appellant from their customers and fees paid to the depositors would be an admissible deduction from the value of the service or not – held that - The dispute stand clarified by the Board’s Circular No. B-11/2000-TRU, dt. 9-7-01, laying down that service tax will not be leviable on the NSDL or CDSL fee paid to the depositors and recovered from the customers on actual basis. The benefit of the said circular stand denied by the Commissioner (Appeals) as the same is available only when actual fee is payable and not when fixed charges are paid to NSDL as has been done in the present case. – appeal allowed – demand set aside. Issues:1. Admissibility of deduction for amount recovered from customers and fees paid to depositors.2. Interpretation of Board's Circular regarding service tax on fees paid to depositors.3. Bar of limitation for raising the demand.Analysis:1. The primary issue in this case is the admissibility of deduction for the amount recovered by the appellant from their customers and fees paid to the depositors. The dispute revolves around whether these amounts should be considered as admissible deductions from the value of the service provided by the stock broking business. The Board's Circular No. B-11/2000-TRU, dt. 9-7-01, clarifies that service tax will not be leviable on fees paid to depositors and recovered from customers on an actual basis. However, the Commissioner (Appeals) denied the benefit of this circular to the appellant on the grounds that it is applicable only when actual fees are payable, not fixed charges as in this case.2. The interpretation of the Board's Circular plays a crucial role in this judgment. The Circular specifically mentions that service tax will not be leviable on fees paid to depositors and recovered from customers on an actual basis. The Member (J) finds fault with the Commissioner (Appeals) for not accepting that fixed charges also represent actual charges paid to depositors. As long as the collected amount from customers does not exceed the fee paid to the depositories, the demand for service tax cannot be justified against the appellant. Therefore, the Member (J) disagrees with the reasoning of the authorities below and rules in favor of the appellant.3. Another significant aspect addressed in this judgment is the bar of limitation for raising the demand. The Member (J) notes that the demand in this case is barred by limitation as it was raised beyond the normal period. The appellants were regularly filing ST-3 returns, and there was no allegation of suppression or misstatement against them. In the absence of any such wrongdoing by the appellant, the demand for service tax is considered to be time-barred. Consequently, the appeal is allowed based on the above reasons, and the demand against the appellant is not confirmed.This comprehensive analysis of the judgment highlights the key issues of admissibility of deduction, interpretation of the Board's Circular, and the bar of limitation for raising the demand, providing a detailed insight into the reasoning and decision of the Appellate Tribunal CESTAT, Ahmedabad.