2018 (7) TMI 1292 - AT - Service Tax

Tribunal overturns Service Tax demands on various services and CENVAT credit denial.

The Tribunal set aside the Service Tax demands on various services including Stock Broker Services, Business Support Services, Management, Maintenance, ... Business Support Services - stock broker services - appointment of several sub-brokers - Held that:- The appellant has set up a VPN, and such network was utilised not only by the appellant but also their sub-brokers to access the various stock exchanges for putting through their transaction in securities. It is to be noted that the arrangement for the VPN was not made by the appellant by way of a support service for the sub-brokers. Evidently there is no service provider – service receiver relationship between the appellant and the sub-brokers. A part of the cost involved in the VPN has been recovered from sub-brokers as their share of the expenditure. It appears to us that this is a cost sharing arrangement and not in the form of a service provider-service receiver relationship - there is no justification for levy of Service tax under the category of ‘Business Support Services”. Management, Maintenance and Repair Service - consideration received by the appellant for providing computer software Consultancy Services to their customers - Held that:- The service of MMRS basically deals with the maintenance of immovable property. The definition has been amended to include goods also w.e.f. 01.06.2007. But w.e.f. 16.05.2008 a separate category of service has been defined under ‘Information Technology Software Service’. It is seen that the nature of activity carried out involves development and maintenance of software. These activities are covered only by the definition of Information Technology Software Service and cannot be brought within the definition of MMRS for the period prior to 16.05.2008 - It cannot be said that such activity related to software is includible under MMRS for the prior period - demand set aside. Online Information and Data Base Access or Retrieval Service - the appellant’s agreement with M/s National Security Depository Limited (NSDL), for setting up and renting a Facilitation Centre on behalf of the Income Tax Department - Held that:- The issue involved in the present case has been decided by the Tribunal in favour of the appellant in the case of S. V. Engineering Constructions [2016 (11) TMI 108 - CESTAT HYDERABAD], where it was held that When main contractor has discharged the service tax liability, there can be no demand against the subcontractor for the same services for the same period - demand set aside. Reimbursement claimed by the appellant from NSDL - Held that:- Since NSDL has discharged the Service Tax, the appellant cannot be called upon to pay Service Tax once again. This is also applicable for the reimbursement - there is no justification for the levy of Service Tax on the reimbursement which is set aside. Registrar and Share Transfer Agents Service - Held that:- Such amounts were reimbursed to the appellant on actuals. The appellant has raised separate invoices without markup for reimbursement of such expenses. In view of the above, we find no justification to levy Service Tax on such amounts, particularly in view of the decision of the Hon’ble Supreme Court in the case of Intercontinental Consultants and Technocrats [2018 (3) TMI 357 - SUPREME COURT OF INDIA] - Service Tax demand on this ground is set aside. Banking and Other Financial Services - Held that:- The Tribunal in the case of LSE Securities Ltd. vs. CCE, Ludhiana [2012 (6) TMI 364 - CESTAT, NEW DELHI], has came to the conclusion that Service Tax cannot be charged on such amounts under the category of ‘Banking and Financial Services’, since such charges are collected by the appellant and paid to the depository participants who are authorised to levy such charges under the Depository Act, 1996 - demand set aside. CENVAT credit - digitization charges - Held that:- Since the Service Tax on the said income has already been paid by the appellant, the CENVAT credit, which is denied only for the reason for non payment of output service tax, cannot be upheld. Appeal allowed - decided in favor of appellant. Issues Involved:1. Service Tax on Stock Broker Services.2. Service Tax on Business Support Services.3. Service Tax on Management, Maintenance, and Repair Services.4. Service Tax on Online Information and Database Access or Retrieval Services.5. Service Tax on Registrar and Share Transfer Agents Services.6. Service Tax on Banking and Other Financial Services.7. Service Tax on National Skill Registry Services.8. Denial of CENVAT Credit on VPN, warehouse rent, and digitization charges.Detailed Analysis:1. Service Tax on Stock Broker Services:The appellant was ordered to pay Service Tax on transaction charges received from customers under 'Stock Broker Services.' The appellant claimed these charges were remitted to the stock exchange and should not be taxed. The Tribunal referenced the decision in LSE Securities Limited, which held that such charges are not taxable as they are recoveries from investors to make payments to statutory authorities, not commission or brokerage. Consequently, the demand for Service Tax on these charges was set aside.2. Service Tax on Business Support Services:The appellant set up a VPN for sub-brokers to access stock exchanges, recovering part of the cost from sub-brokers. The Revenue viewed this as 'Business Support Services,' but the Tribunal found it was a cost-sharing arrangement, not a service provider-service receiver relationship. The demand for Service Tax under this category was set aside.3. Service Tax on Management, Maintenance, and Repair Services:The appellant provided software consultancy services, which were taxed under 'Management, Maintenance, and Repair Services' (MMRS). The Tribunal noted that such services are covered under 'Information Technology Software Service' from 16.05.2008 and cannot be taxed under MMRS for the prior period. The demand under this category was set aside.4. Service Tax on Online Information and Database Access or Retrieval Services:The appellant's agreement with NSDL involved setting up a Facilitation Centre, with Service Tax already paid by NSDL. The Tribunal followed the decision in S.V. Engineering Constructions, which held that Service Tax cannot be demanded again from the appellant if already discharged by NSDL. The demand was set aside. Additionally, reimbursement claimed from NSDL was not taxable as per the Supreme Court's decision in Intercontinental Consultants and Technocrats Pvt. Ltd.5. Service Tax on Registrar and Share Transfer Agents Services:The appellant received reimbursements for expenses like postage and stationery without markup. The Tribunal found no justification for taxing these reimbursements, referencing the Supreme Court's decision in Intercontinental Consultants and Technocrats. The demand was set aside.6. Service Tax on Banking and Other Financial Services:The appellant collected charges like DEMAT charges from investors, remitting them to NSDL. The Tribunal referenced the decision in Indes Securities and Finance Ltd., which held that such charges are not taxable under 'Banking and Financial Services.' The demand was set aside.7. Service Tax on National Skill Registry Services:The appellant acted as an agent for NSDL, collecting charges and remitting them to NSDL, which had already paid Service Tax. The Tribunal followed the decision in S.V. Engineering Constructions, setting aside the demand for Service Tax on these charges.8. Denial of CENVAT Credit on VPN, warehouse rent, and digitization charges:The Tribunal found the VPN essential for stock broking services, allowing CENVAT credit. Since the appellant had paid Service Tax on storage and warehousing services and digitization income, the denial of credit on these grounds was unjustified. The demands were set aside.Conclusion:The Tribunal set aside the impugned order and allowed the appeal, finding no justification for the Service Tax demands and denials of CENVAT credit on various grounds. The appeal was pronounced on 18.07.2018.