TaxTMI 
TaxTMI 
2020 (6) TMI 257
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....sand Nine Hundred and Fifty only) for the period 01.04.2004 to 31.03.2009 in terms of Section 73(2) of the Finance Act, 1994, read with Section 66 and Section 68 ibid and Rule 6 of Service Tax Rules, 1994; 5.03 I order for recovery of interest under Section 75 of the Act , at the appropriate rates on the amount of confirmed demand ordered for recovery at Para 5.02 above; 5.04 I impose a penalty of Rs. 500/- (Rupees Five Hundred only) under Section 75A of the Finance Act, 1994. 5.05 I impose a penalty of Rs. 52,36,20,950/- (Rupees Fifty Two Crores Thirty Six Lakhs Twenty Thousand Nine Hundred and Fifty only) under Section 78 of the Act. If the Noticee pays the Service tax confirmed, as mentioned in para 5.02 above, along with the interest on delayed payment within 30 (thirty) days from the date of communication of this Order, the amount of penalty liable to be paid by the Noticee under Section 78 of the Act shall be twenty five percent of the service tax payable/ confirmed in para 5.02 above. However, the benefit of reduced penalty under Section 78 of the Act, shall be available only i the said Service Tax confirmed, Interest and the Penalty of twenty five percent of the servi....
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....tors like dematerialization, re-materialization, transfer and pledge of securities in electronic form through closed user group network of business partners viz issuers/ Registrar & Transfer Agents and Depository Participants (DP); * There electronic platform is designed to provide information in relation to securities and enables the DP or their investors to have access to their securities holding at any time; * Processes of de-materialization/ re-materialization. Pledge, transfer of securities indicate that there is provision of information, transfer of information and data processing through electronic media; * Appellants are providing "provision and transfer of information and data processing" taxable under the category of "Banking and Financial Services" as defined by Section 65 (12)(a) of the Finance Act, 1994; * The amounts charged and recovered by the appellants from the DP's by the Appellant for the provision of these services would be the taxable value on which service tax is liable to be paid; 2.4 After completion of investigations a show cause notice dated 23.10.2009 was issued to appellant asking them to show cause as to why- i. the services provided by them....
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.... depository segment) and to operate TIN Facilitation centres. For providing these services TIN facilitation Centres have obtained registration with Service Tax department and have paid the service tax due, under the category of Business Auxiliary Services. * These services and certain other services in respect of which service tax has been paid have been included in the demand resulting in duplication of demands to tune of Rs. 19,81,59,112/-. The submissions made by them on this account have been rejected by the adjudicating authority for the reason that Shri T K Desai, SR V P has described various heads under which the service tax has been paid and did not include the service tax paid under this head. * They had also produced a Chartered Accountant Certificate dated 25.04.2013 in respect of error in computation of demand in SCN, which has been brushed aside contrary to the decisions in following cases; o Gopikrishna Processors [2007 (218) ELT 529 (T-Del)] o Vijay Leasing & Company [2019 (3 TMI 49 CESTAT HYD] * As per the following decisions the same transaction could not have been taxed twice o Speed and Safe Courier Service [2010-TIOL-493-HC- Kerala] o ABN Amro Ban....
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....Circular F No B-II/2000-TRU dated 9.07.2001. * "The word "customer" was substituted by the word "any person" from 16.05.2008. In case of Standard Chartered Bank 2015-TIOL-1713-CESTAT it has been held that the understanding in terms of above Board Circular with regard to the meaning of the word "customer" should prevail. * They provide infrastructure to DP's and no depository service is provided to them. Board has vide Circular No 50/11/2002-ST dated 18.12.2002 clarifying that the services of "EASI" provided by CDSL is part and parcel of the depository service and covered under Banking and Other Financial Services. * Their Business model requires them to recover from the DP's fixed fees as approved by the Bye Laws under SEBI Regulations. The DP's are entitled to charge customers based on the services rendered which shall include the aforesaid fixed fees for depository. The tax is collected on the gross amount charged by the DP's from the customers and the portion relating to the fixed fee is paid by DP's to the Depository.. Such a fee is tax paid and therefore there is no need to tax this once again. * The SCN dated 23.10.2009, alleges that there services will fall under amb....
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....he services to Depository Participants then also the same could be only "infrastructure support service" which is in the nature of Business Support Service and not the Banking and Other financial Service. * Commissioner has erroneously confirmed the demand on the basis of two circular namely Circular No 50/11/2002 dated 18.12.2002 and Circular No 96/7/2007 dated 23.08.2007. The second circular contradicts the earlier circular with regards to the category of service. * A vague show cause notice which is not specific and demand confirmed on the basis of such vague show cause notice cannot be sustained as has been held in following decisions: o Brindavan Beverage (P) Ltd [2007 (213) ELT 487 (SC)] o Ballarpur Industries Ltd [2007 (215) ELT 489 (SC)] * Entire issue is revenue neutral as the service tax paid by them on services provided to DP's will be available as credit to the DP's * Penalty is imposable when there is deliberate and malafide intention on their part to evade payment of taxes by suppression/ misrepresentation etc. They had filed proper returns on the due dates * Apart from bald assertion there is no substance to show the fact of wilful suppression. Hon'ble ....
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....n including a non-banking financial company or any other body corporate or any other person namely :- (i) financial leasing services including equipment leasing and hire-purchase; (ii) credit card services; (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking; (v) asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services, but does not include case management; (vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy; (vii) provision and transfer of information and data processing; and (viii) banker to an issue services; and (ix) other financial services, namely, lending; issue of pay order, demand draft, cheque, letter of credit and bill of exchange; transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts. (b) foreign exchange broking provided by....
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....llows: "4. Agreement between depository and participant. (1) A depository shall enter into an agreement with one or more participants as its agent. (2) .............. 5. Services of depository. Any person, through a participant, may enter into an agreement, in such form as may be specified by the bye-laws, with any depository for availing its services. 9. Securities in depositories to be in fungible form. (1) All securities held by a depository shall be dematerialised and shall be in a fungible form. (2) ......... 10. Rights of depositories and beneficial owners. (1) Notwithstanding anything contained in any other law for the time being in force, a depository shall be deemed to be the registered owner for the purposes of effecting transfer of ownership of security on behalf of a beneficial owner." 4.9 On their website, Appellants have specifically stated as follows: Basic Services Under the provisions of the Depositories Act, NSDL provides various services to investors and other participants in the capital market like, clearing members, stock exchanges, banks and issuers of securities. These include basic facilities like account maintenance, dematerialisati....
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.... and can transfer securities only to three prespecified broker accounts of his choice. The second is the smartcard based user who is issued a smart card for logging on to the site and can transfer the securities to any account. A password user can visit the SPEED-e website, fill-up the registration form available on the website. The website would allot a registration number and the DP of the client would authorise him for using the facility upon submission of a request with the registration number. A smart card user can download the form from the website, fill it and submit the same to its DP. The DP will process the form and enable the client for using the facility. The smart card user will also be issued a smart card reader and a smart card. What will be the charges for account opening and other depository related services? NSDL charges the DPs and not the investors. NSDL's charges to its DPs are fixed and are based on the usage of NSDL system. Complete details of NSDL charges as are payable by the DPs are available on NSDL website (www.nsdl.co.in). The DP charges its client for the services offered. The charges that the DP will be charging you for various services are ment....
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....talled on the hardware system of the Issuer or its Registrar and Transfer Agent. 3.1.9 Depository System means the hardware, software and telecommunication network established by the Depository to facilitate the operations of the Depository. This shall include the Depository Module, Depository Participant Module, User Hardware System and the hardware installed at the Depository. 3.1.15 User Hardware System (Depository Participant)-(DP) means the hardware set up of the Participant relating to Depository operations and User Hardware System (Clearing Corporation)-(CC) means the hardware set up of the Participant which is a Clearing Corporation relating to Depository operations. This shall consist of servers, workstations, router and the communication line linking them to the Depository. 3.1.16 User Hardware System (Issuers/ Registrars)-[UHS (SHR)] means the hardware setup of the Issuer or its Registrar and Transfer Agent relating to Depository operations. This shall consist of servers, workstations, router and the communication line linking them to the Depository." Further these Business Rules lay down: "4.1 Depository System 4.1.1 The User shall carry out transactions re....
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....he Participant shall authorize the ICF, enclose the client details printed from the DPM(DP) and forward it to the Issuer or its Registrar and Transfer Agent. 11.4.8 The Issuer or its Registrar and Transfer Agent shall verify the request in the DPM (SHR), and if in order, confirm the request for ISIN in the DPM (SHR) and provide to the Depository the details of the request for conversion of ISIN. 11.5.6 The Participant shall execute and forward the request electronically for transfer of holdings held in other eligible SGL entity to an account held with the Participant in the DPM System and shall inform the SGL entity name and SGL account number of the other eligible entity to NSDL in such form and manner as may be prescribed. 11.6.7 The Participant shall execute and forward the request electronically for transfer of holdings held in dematerialized form to other eligible SGL entity for transfer to an SGL account with other eligible entity, and shall inform the SGL entity name and SGL account number of the other eligible entity to NSDL in such form and manner as may be prescribed. 11.6.9 In case the request was for transfer to an SGL account with other eligible entity, the Dep....
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....the proprietary communications platform, products and services that allow their customers to connect and exchange financial information securely and reliably; SWIFT is solely a carrier of messages. It does not hold funds nor does it manage accounts on behalf of customers, nor does it store financial information on an ongoing basis. As a data carrier, SWIFT transports messages between two financial institutions. This activity involves the secure exchange of proprietary data while ensuring its confidentiality and integrity. As per the history of SWIFT available in the said website, SWIFT started the mission of creating a shared worldwide data processing and communications link and a common language for international financial transactions. The services provided by SWIFT involves providing of information related to financial transactions viz. transfer of funds; transfer of information contained in the said message after processing the data contained therein. Data processing in any computer is a process that converts data into information. The data contained in the said financial message when presented for processing is raw data which when processed become useful information for the cu....
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..... Therefore, it appears that the entire activity of messaging of financial transactions with the intention to transfer funds, confirm receipt of such messages, etc., is done exclusively with the objective to retrieve the information contained in the said financial message, process the same and then transfer the processed information to the respective customers, i.e., presenting and recipient banks, financial institutions, etc., as the case may be. After the processing is complete in all respects, such processed data leads to settlement of funds between BOB and the recipient banks. It further appeared that messaging data through magnetic media or through communication backbone leads to data being transferred between two intended users related to the same financial transaction. 7.2 From the above detailed process involved, it is clear that the activities appear to amount to provision and transfer of information and data processing in relation to banking and other financial services, as defined under the Act and clearly covered under the entry provided in sub-clause (a)(vii) of Section 65(12), i.e., "provision and transfer of information and data processing". 7.3 As regards the co....
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....lation to Central Depository Services and not in relation to services of providing for "provision and transfer of information and data processing". Since the services which are subject matter for the present dispute were never disclosed to the concerned revenue authorities hence we are not in position to uphold the contentions raised by the appellant's against invoking extended period of limitation to demand the tax from them. For upholding the invocation of extended period of limitation we rely on the decision Hon'ble Gujarat High Court in case of Neminath Fabrics [2010 (256) ELT 369 (Guj)] and CESTAT in case of Star India Pvt Ltd [2015 (380 STR 884 (T-Mum)]. 4.15 Appellants have challenged the quantification of demand on two counts, stated as follows: ➢ The amount collected by them from the DP's was the gross amount collected and if the tax was to be demanded then this amount should be treated as inclusive of Service Tax payable. Thus treating this amount as cum tax amount the tax payable should be computed as per Section 67(2) of the Finance Act, 1994. ➢ They had paid a certain amount of taxes during the period of dispute. The amounts paid by them towards the ....
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....all the four heads find separate mention in the date provided by noticee and therefore the same are correctly reflected in the Annexure to SCN. In view of the above, I find that the computation of demand is correctly done as made out in the SCN. 4.20 Another contention of the noticee is that even if service tax is payable on the value of services rendered, then the liability if any has to be determined as if the value is inclusive of service tax. Cum-tax value is provided for in Section 67(2) of the Finance Act, 1994 which is reproduced below: Section 67 Valuation of taxable services for charging service Tax (1) .................................................... (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) ......................................... (4) ......................................... It is not the argument of the noticee that the consideration collected by them is inclusive of service tax nor that is a fact. Provisions of Section 6....
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....Hon'ble Apex Court in case of Maruti Udyog [2002 (141) ELT 3 (SC)] in following words "A reading of the aforesaid Section clearly indicates that the wholesale price which a charged is deemed to be the value for the purpose of levy of excise duty, but the element of excise duty, sales tax or other taxes which is included in the wholesale price is to be excluded in arriving at the excisable value. This Section has been so construed by this Court in Asstt. Collector of Central Excise & Others vs Bata India Ltd., [1996] 4 SCC 563, and it is thus clear that when cum-duty price is charged, then in arriving at the excisable value of the goods the element of duty which is payable has to be excluded. The Tribunal has, therefore, rightly proceeded on the basis that the amount realised by the respondent from the sale of scrap has to be regarded as a normal wholesale price and in determining the value on which excise duty is payable the element of excise duty which must be regarded as having been incorporated in the sale price, must be excluded. There is nothing to show that once the demand was raised by the Department, the respondent sought to recover the same from the purchaser of scrap. T....
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.... Tax as required under Rule 5(2) of the Service Tax Rules, 1994. By virtue of the provisions of Section 77 and by the acts of omission by M/s. NSDL as mentioned above, I hold M/s. NSDL liable to penal action under Section 77 of the Act." Penalties under Section 77 are civil in nature and are imposed for infractions noticed. Hon'ble Supreme Court has in case of Gujarat Travancore Agency vs. Commissioner of Income Tax [1989 (42) ELT 350 (SC)], Hon'ble Supreme Court held as under: 4. ..........In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by Statute proceeds on the assumption that society suffers injury by and the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of Revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is ....