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The CESTAT held that transaction charges collected from customers and deposited with stock exchanges, when reimbursed without markup and acting as a pure agent, do not constitute part of the gross value for service tax purposes. The department's reliance on Rule 5 of the Service Tax (Determination of Value) Rules, 2006 to include such charges in taxable value was invalidated, given the Delhi High Court's earlier ruling striking down Rule 5. Since the appellants had already discharged appropriate service tax on their stock broking services, the additional demand for service tax on transaction charges could not be sustained. Consequently, the CESTAT set aside the impugned order confirming the service tax demand and allowed the appeal.
The CESTAT held that transaction charges collected from customers and deposited with stock exchanges, when reimbursed without markup and acting as a pure agent, do not constitute part of the gross value for service tax purposes. The department's reliance on Rule 5 of the Service Tax (Determination of Value) Rules, 2006 to include such charges in taxable value was invalidated, given the Delhi High Court's earlier ruling striking down Rule 5. Since the appellants had already discharged appropriate service tax on their stock broking services, the additional demand for service tax on transaction charges could not be sustained. Consequently, the CESTAT set aside the impugned order confirming the service tax demand and allowed the appeal.
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