Service Tax Appeal No.250 of 2012
(Arising out of OIA-53/2009/STC/KANPAZHAKAN/COMMR-A-/AHD dated 14/02/2012 passed
by Commissioner of Service Tax-SERVICE TAX – AHMEDABAD)
Saurin Investments Private Limited
VERSUS
C.S.T.-Service Tax – Ahmedabad
APPEARANCE:
Shri S J Vyas, Advocate for the Appellant
Shri R P Parekh, Superintendent (AR) for the Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10026 /2023
DATE OF HEARING: 14.09.2022
DATE OF DECISION: 10.01.2023
RAJU
The appellant are a stock broking firm. This appeal has been filed
against inclusion of NSDL & CSDL charges in assessable value for the
purpose of service tax by the appellant.
- The dispute relates to includability of NSDL/CSDL charges paid by the
appellant to the depositories. The same is recovered by the appellant from
their clients. The appellant had not included the said amounts in the
assessable value for the purpose of payment of service tax. It is noticed that
in the appellant’s own case, the
tribunal vide Order No.
A/1538/WZB/AHD/2009 dated 16.07.2009 has allowed the exclusion of the
said charges from the assessable value relying on the board circular B-
11/1100-TRU dated 9.7.2001. The impugned Show Cause Notice issued to
the appellant was dropped by the original adjudicating authority on the
ground of limitation relying on the aforesaid circular issued by the board. On
revenue’s appeal the Commissioner (Appeals) reversed the order and
confirmed the demand.
2.1 It is noticed that the issue of includability of NSDL/CSDL has been
considered by the tribunal in the case of M/s. KUNVARJI FINSTOCK PVT.
LTD.- 2018 (12) TMI 344- CESTAT AHMEDABAD and in the case of M/s.
INNOVATIVE SECURITIES PVT. LTD.- 2018 (11) TMI 1473- CESTAT
AHMEDABAD. It has been the consistent stand of the tribunal that these
charges being statutory charges as per SEBI Rules should not be included for
the purpose of service tax. The tribunal vide Order No. A/12761-12788/2017
dated 29.09.2017 had observed as follows:-
“9. The limited question of law involved in the present appeals is to
addressed is: whether the appellants-stock brokers are required to include
NSE/BSE transaction charges, SEBI turnover fees, Stamp duty,
Depository/Demat charges and Security Transaction charges in the value of
„brokerage and commission charges‟ recovered from their customers/clients.
The contention of the Advocates for the respective appellants is that these
charges are collected separately and in accordance with various statutory
Bodies Regulations and not retained by the stock brokers but deposited with
the authorities concerned viz., Stock Exchanges, hence, such charges cannot
form part of the taxable value as alleged by the Dept. The determination of
the aforesaid question should not the same has been considered by way of
judgments Including M/S LSE Securities Ltd (supra)
“12.1 Matters before us fall within the periods before 2001 and after
2001 but before 2004. When service tax was introduced in the year
1994 to tax the service provided to investors by stock brokers in
connection with sale or purchase of securities listed on a recognized
stock exchange, Legislature, up to the year 2001 intended that
aggregate of the commission or brokerage charged to the investors by
stock broker for sale or purchase of securities shall be taxed under the
charging provision of the Act. So also the commission or the brokerage
paid by stock broker to any sub-broker was made liable to tax. Such
receipts were measure of value for taxation. The valuation provision
incorporated in Section 67 of the Act envisaged that aggregate of
commission or brokerage only shall be measure of tax. Basis of
taxation was provided in express terms and no implied taxation was
permitted by law.
12.2 Law is well settled that there is nothing like an implied power to
tax. The source of power which does not specifically speak of taxation
cannot be so interpreted by expanding its width as to include therein
the power to tax by implication or by necessary inference. The judicial
opinion of binding authority flowing from several pronouncements of
the Hon‟ble Supreme Court has settled these principles: (I) in
interpreting a taxing statute, equitable considerations are entirely out
of place. Taxing statutes cannot be interpreted on any presumption or
assumption. A taxing statute has to be interpreted in the Light of what
is clearly expressed; it cannot imply anything which is not expressed; it
cannot import provisions in the statute so as to supply any deficiency;
(ii) before taxing any person it must be shown that he falls within the
ambit of the charging section by clear words used in the section; and
(iii) if the words are ambiguous and open to two interpretations, the
benefit of interpretation is given to the subject.
12.3 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. When these are the principles laid down by Apex
Court in the case of Slate of West Bengal v. Kesoram Industries Ltd. –
(2004) 10 SCC 201, bringing a strange element to the ambit of tax
shall be without authority of law. There was no scope provided by
Section 67 of the Act to expend its width to have artificial measure of
levy bringing a receipt by implication or inference running counter to
the charging provision.
12.4 The scheme of valuation of aforesaid service which was in force till
15-7- 2001 underwent amendment by Finance Act, 2001. The
amending Act replaced Section 67 by Finance Act, 2001, prescribing
levy of tax on the gross amount charged by service provider (stock
broker) for the taxable service provided by him. Such aggregate charge
was gross value. An explanation appeared in the amended section
declaring that value of taxable service as the case may be shall include
certain receipts prescribed by different clauses appearing under Section
- Clause (a) is the relevant clause insofar as that relates to taxable
service provided by stock broker and that is under consideration in
these appeals. That clause states that aggregate of commission or
brokerage charged by a broker on the sale or purchase of securities
including the commission or brokerage paid by the stock broker to any
sub-broker shall be Liable to service tax. Thus, there is no extended
meaning of measure of levy even by amended definition of valuation of
taxable service.
12.5 Provision of Section 67 provides the basis to determine the value
of taxable service. No ambiguity persists in Section 67 of the Act. No
receipt other than commission or brokerage made by a stock broker is
intended to be brought to the ambit of assessable value of service
provided by stock broker. Charging section in a taxing statute is to be
construed strictly. As is often said, there is no equity about tax. If the
words used in a taxing statute are clear, one cannot try to find out the
intention and the object of the statute (Ref: Govt. of Andhra Pradesh V.
- Laxmi Devi – (2008) 4 SCC 720 – AIR 2008 SC 1640].
- Learned Counsels arguing the matter are correct to say that budget
speech of the Hon‟ble Finance Minister made clear what was intended
to be taxed in respect of service provided by stock broker. It was
submission of the Learned Counsel Shri Mittal that insofar as stock
brokers are concerned, brokerage or commission charged by them only
from value of taxable service and that was intended to be taxed by the
budget of 1994-95. This was the proposal in Part „B‟ of the Budget
presented to the Parliament on 28th February, 1994. Reading of the
legislative intent from the budget speech and the express Legislation in
Section 67 of the Act does not Leave any room for implication of
ambiguity. Therefore, express grant of the statute no way leaves scope
for implication to make the statutory grant ineffective. Law being well
settled that there is no intendment in taxation and the State has to
discharge its burden of proof to bring the subject into tax, there is no
scope to bring any other element of receipt 5 Appeal No. ST/467-
468/2010 other than brokerage or commission to the scope of
assessable value in respect of service provided by stock brokers.
- Normally value is derived from the price and value is the function of
the price. This is conceptual meaning of value. Section 67 is the sole
repository of law governing value of taxable service provided by the
stock broker. Any charge on the non-includible elements other than
brokerage or commission will result in arbitrary taxation. Similarly
receipts not in the nature of commission or brokerage should not be
taxed in disguise. The brokerage or commission service provided by
stock broker shall be liable to service tax. That being consideration for
taxable service provided, become assessable value of such service.
Because tax is compulsory exaction, no subject shall be made Liable
without authority of law. To the extent authority is vested, only to that
extent tax can be imposed. Commission or brokerage charged by stock
brokers are only liable to tax by express provision of law. Any other
exercise of authority beyond that shall make that fatal.
- The correct assessable value of taxable service usually is the
intrinsic value of the service provided since service commands that
value only and that should only be taxed without any hypothetical rule
of computation of value of taxable service under Section 67 of the Act.
The other receipts a stock broker makes are irrelevant for
determination of the assessable value of taxable service provided by
him. Thus the test is whether a receipt of stock broker is in the nature
of commission or brokerage to levy service tax. Burden of proof failed
to be discharged by Revenue to bring the receipts to charge
- The appellants in these appeals received “turnover charges”, stamp
duty, BSE charges, SEBI fees and DEMAT charges contending that the
same was payable to different authorities and claimed that the same is
not taxable. But Revenue taxed the same on the ground that such
receipt by stock broker was liable to tax. Revenue failed to bring out
whether the turnover charges and other charges in dispute in these
appeals received by appellant were commission or brokerage. The
character of receipts was claimed by appellants as recoveries from
investors to make payment thereof to respective authorities in
accordance with statutory provisions of Indian Stamp Act and SEBI
guidelines and were not received towards consideration in the nature of
commission or brokerage of sale or purchase of securities. While
burden of proof was on Revenue to establish that such receipts were in
the nature of commission or brokerage or had the characteristic of such
nature that was failed to be discharged. The character of commission or
brokerage is remuneration for the service of stock broking provided by
a stock broker to investors. Therefore, aforesaid charges realized by
appellants were not being of commission or brokerage are not taxable
and shall not form part of gross value of taxable service. On merit, all
the appellants succeed on the fundamental principles of taxation.
Therefore, other contentions on merit made in respective appeals are
not considered in this order.”
- Similar view has been expressed recently by the Tribunal in M/s
Consortium Securities Pvt. Limited‟s case (supra). We do not find any reason
to deviate from the ratio laid down in the aforesaid judgments of this
Tribunal. We are also of the view 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 authorized to levy such charges under the Depositories Act, 1996. Thus,
in view of the aforesaid precedent, we do not find merit in impugned orders
and accordingly set aside. The appeals are allowed with consequential relief,
if any, as per law.”
- In view of the above and also in view of the fact that in the appellant’s
own case, the tribunal has held in favour of the appellant on this very issue
the impugned order cannot be sustained.
- The impugned order is set aside. Appeal is allowed.
(Pronounced in the open court on 10.01.2023 )
(RAMESH NAIR)
MEMBER (JUDICIAL)
(RAJU)
MEMBER (TECHNICAL)
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