Customs, Excise and Gold Tribunal - Mumbai
K.R. Choksey And Company vs Commissioner Of C. Ex. on 11 October, 1996
Equivalent citations: 1996(88)ELT566(TRI-MUMBAI), 2006[2]S.T.R.225, [2007]7STT255
ORDER J.H. Joglekar, Member (T)
1. These 2 appeals and 2 stay applications are filed by the same appellants and were taken up together for disposal. After hearing the preliminary submissions, we felt that the main appeals could be taken up for disposal. Since both sides agreed, the 2 main appeals are being decided together.
2. The appellants are stock brokers collecting brokerage on each sale or purchase made by them on behalf of their clients. With effect from 4-7-1994, Service Tax of 5% was imposed on the brokerage. The Rules relating to the levy and collection of service tax provided for filing of returns and for assessment by the proper officer. The assessee filed one return for the period July, 1994 to Sept., 1994 and another return for the period Oct., 1994 to Dec., 1994. The assessing officer calculated the tax leviable on the value of the taxable service shown in Col. 3 of the periodical returns and came to the conclusion that the service tax deposited by the appellants was less than the tax calculated by him. The shortage was estimated by him for the first quarter at Rs. 36,749/- and for second quarter at Rs. 17,064/-. He confirmed the demand for the short levy. In his combined order in appeal, the Commissioner upheld the order giving rise to the two appeals before us. In the order, the Commissioner also upheld the order of the assessing officer that interest was payable on the service tax short paid.
3. Shri Sheth, the ld. advocate, for the appellants appeared before us and Shri V.K. Puri, the SDR represented the revenue.
4. Shri Sheth invited our attention to contracts in Form A which indicate details of each transaction between the stock broker and the client. He showed that in each contract, the following entry is prominently included:
"Brokerage includes 5% service tax as per new guidelines levied from 1st July, 1994."
He stated that the summary of all such contracts is made at the end of the day, which is submitted by the broker to the concerned stock exchange. He stated that since the element of service tax was already included in the brokerage for calculating the service tax payable; this sum had to be deducted from the brokerage collected. In this manner, the calculation was made by them. The assessing officer, however, made the calculation on the brokerage collected, which was inclusive of the service tax giving rise to the allegation of short levy. He submitted that the contracts and the summary were computer generated and software was designed to show the brokerage with the element of service tax added. To remove any misunderstanding, he stated that in the current contracts they are showing the quantum of service tax collected on each transaction in the contract in Form A. He pointed out that in the new format also the information that the brokerage included service tax was indicated. He stated that so far neither the department nor the SEBI had given any specific instruction about the manner in which the service tax should be shown in the returns. He invited our attention to an advertisement in the Economic Times dated today (Friday the 11th October, 1996) inserted by the Mumbai Stock Exchange in which the Stock Exchange advised that in the contract service tax should be shown separately. Shri Sheth claimed that the format of contract in Form A which as prescribed by the BSE does not have a separate column to show the amount of service tax. He claimed that where the statement was made on the face of the form that the brokerage shown therein included service tax, the department had no reason to doubt. He also claimed that the provisions of the Finance Act, 1994 also did not prescribe this condition.
5. Shri Puri, the ld. SDR, explained to us the various provisions relating to this service tax and defended the impugned orders.
6. We have carefully considered the submissions made by both the sides. The provisions relating to imposition of service tax as announced in the Finance Bill, 1994 came into operation with effect from 4-7-1994. Section 67 of the Finance Bill, which later became the Act, prescribes the manner in which valuation of taxable services is made for charging service tax. It shows that the taxable amount, would be the aggregate of the commission or brokerage charged by a dealer on the sale or purchase of Securities from the investors. The provisions do not prohibit showing of the figure as inclusive of the service tax. The Commissioner, in his order, also admits that the provisions of Section 4 of the Central Excises Act are not attracted, but he still maintains that the inclusion of the tax in the brokerage was wrong. In relation to the payment of excise duty, Section 12A of the Act requires the quantum of duty to be prominently indicated in all the documents related to assessment and clearance of the goods. This provision has not been incorporated in the scheme of service tax although certain other provisions have been incorporated vide Section 83 of the Finance Bill, 1994. Therefore, there was no requirement to show the tax collected in a certain manner when filing the returns for assessment. The ld. advocate made a claim that the department has nowhere held that the appellants have collected more tax than what was paid by them. The dispute was only about their showing brokerage as inclusive of the service tax. On examination of the relevant provisions and on perusal of the orders, we find that this claim to be correct. In the absence of any specification, there was no prohibition on the appellants' showing the brokerage as inclusive of service charges. The fact that this claim was prominently made on the face of each contract has not been denied by the department. The daily summary of contracts is submitted by all the brokers to the stock exchange daily. The ld. advocate showed us such summaries for the relevant period in which the tax payable was calculated and shown separately from the brokerage. This summary was relied upon by the brokers while filing the assessment returns.
7. We find that the lower orders do not contain sufficient justification for sustaining the charge for short levy. Where the brokerage collected was shown to be inclusive of service tax and where the fact was indicated in all the relevant documents, there was no justification for calculating the service tax on the brokerage so inclusive of service tax. Orders confirming short levy and directing payment of interest thereupon, therefore, do not sustain.
8. At this stage, Shri Puri submits that the assessing officer should have an opportunity to go into the contracts in Form A during the relevant period to satisfy himself that the same indicate the fact that the service tax was not shown separately but was shown inclusive of the brokerage. Accepting this submission, we set aside the lower orders and remit the cases back to the assessing officer, who will examine the contracts and related documents and satisfy himself about the existence of this condition and proceed to assess the returns afresh.
9. Ordered accordingly.