Tribunal excludes NSE/BSE charges from Stock Broker service tax valuation. Precedent upheld.

The Tribunal held that NSE/BSE transaction charges and SEBI turnover fees should not be included in the gross value of Stock Broker services for Service Tax purposes. Citing precedent judgments, the Tribunal emphasized that these charges, when collected separately and in accordance with regulations, should not form part of the taxable value. The Tribunal reaffirmed principles such as no implied power to tax, prospective application of amendments, and the burden of proof on the Revenue. Consequently, the Tribunal set aside the lower authority's decision, allowing the appeals with consequential relief.

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Issues Involved:
1. Inclusion of NSE/BSE transaction charges and SEBI turnover fees in the gross value of Stock Broker services for Service Tax purposes.
2. Applicability of precedent judgments on the inclusion of such charges in taxable value.

Detailed Analysis:

Issue 1: Inclusion of NSE/BSE Transaction Charges and SEBI Turnover Fees in Gross Value of Stock Broker Services

The primary issue in this case is whether the statutory NSE/BSE transaction charges and SEBI turnover fees paid by the appellant broker and subsequently collected from clients should be included in the gross value of Stock Broker services for Service Tax purposes. The department contended that the appellants were availing wrong exemptions on the amounts received for these charges, treating them as non-taxable, despite charging and collecting these amounts from their clients.

Issue 2: Applicability of Precedent Judgments

The appellant's counsel argued that this issue had already been settled by various judgments, including those in the appellant's own case. The counsel cited several judgments to support their position, including:
- Span Caplease Pvt Ltd Vs. CST
- Intercontinental Consultants & Technocrats Pvt Ltd Vs. UOI
- CST VS. Bhayana Builders (P) Ltd
- Suchitra Components Ltd Vs. CCE
- Kunvarji Commodities Brokers Pvt Ltd Vs. CST
- Indses Securities & Finance Ltd Vs. CST
- Nizam Sugar Factory Vs. CCE

Tribunal's Findings

The Tribunal carefully considered the submissions from both sides and examined the records. It found that the issue had already been addressed in the appellant's own case and in other similar cases. Specifically, the Tribunal referred to the following judgments:

1. Kunvarji Commodities Brokers Pvt Ltd Vs. CST:
- This judgment clarified that turnover charges collected from clients and paid to the Commodity Exchange should not be included in the gross value of Stock Broker services. The Supreme Court's decision in Intercontinental Consultants and Technocrats Pvt. Ltd. was cited, emphasizing that reimbursable expenses should not be included in the valuation of taxable services unless specifically amended by legislation, which only occurred from May 14, 2015.

2. Indses Securities & Finance Ltd Vs. CST:
- This judgment addressed whether stock brokers should include NSE/BSE transaction charges, SEBI turnover fees, and other similar charges in the value of brokerage and commission charges. It was determined that these charges, collected separately and in accordance with statutory regulations, should not form part of the taxable value as they are not retained by the stock brokers but deposited with the respective authorities.

Legal Principles Established

1. No Implied Power to Tax:
- The judgment reiterated the principle that there is no implied power to tax, and the source of power must specifically speak of taxation. Taxing statutes must be interpreted strictly, and only clear words in the statute can impose a tax.

2. Prospective Application of Amendments:
- The Tribunal noted that amendments to Section 67 of the Finance Act, 1994, which included reimbursable expenses in the valuation of taxable services, were prospective and only applicable from May 14, 2015.

3. Burden of Proof:
- The burden of proof lies with the Revenue to establish that receipts are in the nature of commission or brokerage. In this case, the Revenue failed to prove that turnover charges and other disputed charges were commission or brokerage.

Conclusion

The Tribunal concluded that the demand confirmed by the lower authority was not sustainable in view of the settled position of law established by the cited judgments. The impugned orders were set aside, and the appeals were allowed with consequential relief as per law.

(Pronounced in the open court on 05.12.2018)

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