2023 (9) TMI 522 - AT - Service Tax

Service Tax Exclusion for Computer Linkage Charges Upheld

The Tribunal held that charges collected by a Stock Broking Company for computer to computer linkage services, which are subsequently paid to statutory ... Levy of service tax - computer to computer linkage charges - Stock Broking Company - HELD THAT:- This very issue in the appellant’s own case has been decided in their favour in EDELWEISS FINANCIAL ADVISORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & ST, AHMEDABAD [2022 (12) TMI 975 - CESTAT AHMEDABAD] where it was held that In the light of decision of this Tribunal in M/S ANAGRAM STOCK BROKING LTD VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD [2018 (10) TMI 641 - CESTAT AHMEDABAD] it was held in the case that the allegation of the department that the demat charges collected by the brokers are banking and financial service, hence taxable, also devoid of merit in as much such charges are collected by the Appellant and paid to the depository participants viz. CDSL/NSDL who are authorised to levy such charges under the Depositories Act, 1996. From the above decision in the appellant’s own case, the issue in the present case is no longer res-integra. Hence, no further discussion is warranted to decide this appeal. The impugned order is set aside. Appeals are allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question in this judgment is whether the appellant, acting as a Stock Broking Company, is liable to pay Service Tax on charges collected for computer to computer linkage services.2. ISSUE-WISE DETAILED ANALYSISIssue: Liability to pay Service Tax on computer to computer linkage charges.Relevant Legal Framework and Precedents:The legal framework involves the interpretation of the Service Tax provisions under the Finance Act, 1994, particularly Section 67, which deals with the valuation of taxable services. The case also references several precedents, including the Tribunal's decisions in similar cases involving stock brokers and the treatment of various charges such as CTCL charges, Depository/Demat charges, and others.Court's Interpretation and Reasoning:The Tribunal relied on its previous decision in the appellant's own case, where it was held that charges collected by stock brokers, which are subsequently paid to statutory bodies like the National Stock Exchange (NSE) or depository participants, do not form part of the taxable value. The reasoning is based on the principle that these charges are collected separately and are not retained by the stock brokers but are deposited with the concerned authorities.Key Evidence and Findings:The Tribunal noted that the charges in question are collected in accordance with statutory regulations and are not retained by the stock brokers. These charges include NSE/BSE transaction charges, SEBI turnover fees, Stamp duty, Depository/Demat charges, and Security Transaction charges.Application of Law to Facts:The Tribunal applied the principles established in previous judgments, emphasizing that only the commission or brokerage charged by stock brokers should be included in the taxable value. Any other charges collected and paid to statutory bodies should not be subject to Service Tax.Treatment of Competing Arguments:The Tribunal considered the arguments from the Revenue, which reiterated the findings of the impugned order. However, it found these arguments unpersuasive in light of the established legal precedents and the specific facts of the case.Conclusions:The Tribunal concluded that the charges in question do not form part of the taxable value for Service Tax purposes. Therefore, the demand for Service Tax on these charges is not sustainable, and the appeal was allowed.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:'There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the Legislature's failure to express itself clearly. It is well settled that power to tax cannot be inferred by implication; there must be a charging section specifically empowering the State to levy tax.'Core Principles Established:Charges collected by stock brokers that are paid to statutory bodies do not form part of the taxable value for Service Tax purposes.Only commission or brokerage charged by stock brokers should be included in the taxable value.The law does not permit implied taxation; clear legislative authority is required to impose a tax.Final Determinations on Each Issue:The Tribunal determined that the appellant is not liable to pay Service Tax on the computer to computer linkage charges. The impugned order was set aside, and the appeal was allowed.Cross-References:The judgment cross-references several previous decisions, including those involving Edelweiss Financial Advisors Ltd., Anagram Stock Broking Ltd., and Saurin Investments Pvt. Ltd., which supported the Tribunal's reasoning and conclusions.In conclusion, the Tribunal's decision reaffirms the principle that only charges retained by stock brokers as commission or brokerage are subject to Service Tax, and any charges collected on behalf of statutory bodies are exempt from such tax.