Service tax valuation excludes non-service amounts; stock broker transaction charges required factual verification before inclusion.

Service tax valuation under Section 67 of the Finance Act, 1994 was limited to the gross amount charged for the taxable service actually rendered, so amounts collected for other purposes could not be automatically included. Rule 5(1)(a) of the Service Tax (Determination of Value) Rules, 2006 could not enlarge the charging provision to cover reimbursable expenditure. Transaction charges collected by a stock broker required factual verification to determine whether the broker acted on a principal-to-principal basis or as a pure agent. The matter was remanded for re-examination of the records and fresh determination of liability.

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Issues: (i) Whether transaction charges collected by a stock broker along with brokerage were includible in the taxable value for service tax, and whether the matter required verification of the nature of the transactions.

Analysis: Section 67 of the Finance Act, 1994 was construed to mean that service tax is chargeable on the gross amount charged for the taxable service actually rendered, and not on amounts collected for something other than that service. Rule 5(1)(a) of the Service Tax (Determination of Value) Rules, 2006 was held to travel beyond Section 67 and could not sustain inclusion of reimbursable expenditure in the taxable value. The transaction charges could not be mechanically treated as part of the gross value without examining whether the broker acted for itself, on a principal-to-principal basis, or as a pure agent. The circular on stock broker services also supported the need to distinguish taxable transactions from non-taxable ones on the basis of the actual nature of the brokerage arrangement.

Conclusion: The inclusion of transaction charges could not be upheld without factual verification, and the matter was remanded to the adjudicating authority to re-examine the records and determine liability accordingly.

Final Conclusion: The demand could not be finally sustained on the existing record, and fresh adjudication was required after distinguishing taxable brokerage services from amounts collected as a pure agent or on a principal-to-principal basis.

Ratio Decidendi: For service tax valuation, only amounts charged for the taxable service actually rendered form part of the taxable value, and reimbursements or other sums not forming consideration for such service cannot be included by subordinate rules beyond the scope of Section 67.

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