Stock/Commodity Broker Fees Excluded from Service Tax Valuation. Tribunal Rules in Favor of Appellants.

The Tribunal held that turn over charges/transaction fees collected by stock/commodity brokers should not be included in the gross value for Service Tax levy as they are not akin to commission or brokerage. Relying on a Supreme Court judgment, the Tribunal emphasized that the valuation of taxable services should strictly focus on the consideration paid for providing the specific taxable service, excluding other expenses. Consequently, the Tribunal allowed the appeals in favor of the appellants, emphasizing that charges like turn over charges/transaction fees should not form part of the gross value for Service Tax purposes.

---

---

Issues involved: Whether turn over charges / transaction fee should form part of the gross amount for the purpose of levy of Service Tax under Section 67 of the Finance Act, 1994.

Analysis:

1. Issue of Inclusion of Turn Over Charges in Gross Value: The appellants, stock/commodity brokers, collected turn over charges/transaction fees from customers and paid them to respective Stock Exchanges as per SEBI guidelines. The Service Tax Department contended that these charges should be part of the gross value for Service Tax levy. The Tribunal referred to a previous decision where it was held that such charges cannot be included in the assessable value for taxation as they are recovered to make payments as per SEBI guidelines, not as commission or brokerage. The Tribunal upheld this view, emphasizing that charges not being of commission or brokerage are not taxable and should not form part of the gross value of taxable service.

2. Interpretation of Section 67 of the Act: The Tribunal cited a Supreme Court judgment regarding the interpretation of the phrase "for such service" in Section 67 of the Act. The Court held that the phrase should be strictly construed to include only the consideration paid for providing the taxable service, excluding all other expenses. The Court emphasized that the valuation of taxable services for charging service tax should focus on the gross amount charged for providing the specific taxable service. Any amount not calculated for providing the taxable service should not be part of the valuation. The Tribunal aligned with this interpretation, stating that the value of taxable service should be the consideration paid for rendering the service, as quid pro quo.

3. Decision: Based on the settled legal position, the Tribunal found no merit in the Commissioner (Appeals) order. The Tribunal set aside the order and allowed the appeals in favor of the appellants. The judgment clarified that charges like turn over charges/transaction fees, not being commission or brokerage, should not be included in the gross value for Service Tax purposes.

---