TaxTMI 
TaxTMI 
2026 (5) TMI 1094
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....ies'/ 'delayed payment charges'. It was also noticed that in case of DEMAT account services, the service tax was being paid under 'Banking & other financial services'. They were collecting certain amount towards default in payment of account maintenance/ other related charges, which were also booked in the income ledger as penalty/ delayed payment charges. In this case, service tax was paid till 2012-13, however, from 2013-14, they stopped making payments. It was noticed from the documents, which were used for opening of Trading and DEMAT account, that the appellants were also charging and collecting penalty of Rs.50/- per day for every lac rupees of pay-in outstanding for each trading day in case of clients, who delay the payment of amounts. The department also noticed that they had paid service tax on such penalties/ delayed payment charges till August, 2011, however, from September, 2011, they stopped making payment. The department felt that the reliance placed by the appellant on Board's Circular F.No.137/25/2011-ST dt.03.08.2011 is no longer relevant w.e.f. 01.07.2012 with the introduction of negative list as a specific entry has been made at sub-clause (e) of section 66E of t....
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.... consideration is by way of interest or discount. 4. The adjudicating authority felt that the appellants are neither giving any deposit or loans or advances and the appellant's clients are not in receipt of any money as deposit or towards a loan or advance nor the appellant is charging any interest/discount and in fact, the appellant is charging penalty for default in payment by their clients. 5. Learned Advocate for the appellant has taken various grounds including the fact that delayed payment charges are not consideration towards any service and that the amount in dispute is covered under section 66D(n) of the Act. He has also submitted that extended period of limitation cannot be invoked as the issue involves interpretation of law nor penalty can be imposed under section 78. Insofar as the argument that the OIO has travelled beyond the scope of SCN, he has submitted that SCN was issued demanding service tax in respect of said consideration in terms of section 66E(e) as 'declared service', whereas, the amount has been confirmed predominantly on the ground that delayed payment charges were nothing but consideration received from stock broking and DEMAT account related activ....
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....n thereto, they are also getting regular payment in the form of commission for the stock broking services and in terms of maintenance charges for DEMAT Account services. In terms of the agreement with their clients, payments for these services are to be made within specified time limit and if the payments are not made then they impose penalty on per day delay basis. This particular activity is being considered as act of tolerance and therefore, covered under declared service, by the department. 9. Firstly, we find that insofar as period prior to 01.07.2012, the Board has themselves clarified that the delayed payment charges collected by the broker is not includable in the value of service. We find that though certain activities have been brought under the ambit of declared service w.e.f. 01.07.2012, whether the said activities, which were not being charged to service tax by treating them as delayed payment charges and hence, not includable in the value of service, can now be subjected to service tax as declared service needs to be examined. We find that insofar as Stock Broking service is concerned, the appellants are collecting the consideration of Rs.50/- per lakh per day for ....
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.... by them is covered under negative list i.e., clause (n) of section 66D or otherwise, we find that appellant is charging penalty for default in payment by his client, however, we find that the adjudicating authority has considered such delayed payment as an integral component of the service i.e., Stock Broking service and DEMAT Account service and also held that said comprehensive activity cannot be vivisected to term one part of the activity as not amounting to service and that the activity of allowing delayed payment as integral part of agreement to provide service. In this regard, we find that there is force in the argument by the appellant that while the demand was made primarily on the ground that the said activity was a declared service in terms of section 66E(e), the observation of the adjudicating authority, as also upheld by the Commissioner (Appeals), is that the said service is an integral part of their main service i.e., Stock Broking service and DEMAT Account service and therefore, this has to be subjected to service tax. We find that there is clear deviation in the ground for confirming the demand from what was charged in the SCN. Therefore, as the adjudicating author....
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....e an act or a situation, or to do an act", as this levy of additional/penal interest satisfies the definition of 'interest'. Therefore, though this clarification is in the context of GST Act, the activity is similar to the activity considered as declared service for the purpose of levying service tax as is evident from the wording of section 66E(e) and entry 5(e) of Schedule II to CGST Act. Therefore, we find that it has got persuasive value. In view of the same, we find that even this activity of delayed payment charges cannot be treated as declared service for the purpose of charging service tax. 13. We also note that the said delayed payment charges have been proposed to be charged to service tax under the category of declared service. While in the case of Stock Broking service, there is a clear element of that being covered under negative list also, there is no such clear link to bring delayed payment charges for the DEMAT Account services within the ambit of said negative list. We also note that these delayed payment charges are being collected in relation to providing DEMAT Account services and not towards margin fund provided by stock broker and therefore, the rationale f....