IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, BANGALORE
COURT NO. I
Appeal Nos. ST/356/2009-DB, ST/357/2009-DB
Arising out of Order-in-Original No. 3 & 4/2009, Dated: 22.01.2009
Passed by Commissioner of Service Tax, BANGALORE
Date of Hearing: 15.05.2019
Date of Decision: 15.05.2019
M/s WAY 2 WEALTH BROKERS PVT LTD
#002,RAHEJA PARAMOUNT, NO 138, RESIDENCY ROAD
BANGALORE – 560025, KARNATAKA
COMMISSIONER OF SERVICE TAX BANGALORE SERVICE TAX-I
1ST TO 5TH FLOOR, TTMC BUILDING, ABOVE BMTC BUS STAND,
DOMLUR, BANGALORE-560071, KARNATAKA
Appellant Rep by: Mr N Anand, Adv.
Respondent Rep by: Mr K Murali, AR
CORAM: S S Garg, Member (J)
P Anjani Kumar, Member (T)
ST – The assessee is registered for providing services under Stock Broker services and Banking and Other Financial services – During the relevant period, the assessee rendered services in relation to IPO to its customers – The Revenue issued two SCNs proposing duty demand on brokerage received by them on IPO related-service u/s 65(19)(i) of the Finance Act 1994 – The adjudicating authority dropped these proposals on grounds that the assessee is not covered under these headings as shares became goods only if alloted – Such proceedings were reviewed by the Commissioner of Service Tax, who issued fresh SCNs confirming the demands on grounds that the assessee’s activities were taxable u/s 65(19)(ii) of the Act – Hence the present appeal by the assessee.
Held: BAS – The assessee’s activities are not covered under this definition as it is not promoting or marketing or selling any goods – It is only an initial offer and until the rights are issued to the subscribers such as share certificate do not assume the character of goods – The assessee’s activities would be taxable only if the service is rendered in relation to promotion or marketing of service rendered by the clients – IPO is only an offer to the prospective buyers and therefore, it cannot be held to be a service by the company offering IPO – Hence the assessee is not covered u/s 65(19) of the Act – The demands raised must be quashed on merits & also on grounds that the Revisionary Authority travelled beyond the scope of the grounds raised in the first SCN: CESTAT
Assessee’s appeals allowed
Case laws cited:
CCE vs. Carrier Aircon Ltd – 2005-TIOL-84-SC-CX… Para 3
JCT Ltd. vs. CCE – 2003-TIOL-253-CESTAT-DEL… Para 3
Sands Hotel Pvt. Ltd. vs. CST – 2009-TIOL-441-CESTAT-AHM… Para 3
Viacom Electronics (P) Ltd. vs. CCE: 2002 (145) ELT 563 (Tri.-Mum.)… Para 3
Markfed Oil & Allied Industries vs. CCE – 2002-TIOL-218-CESTAT-DEL… Para 3
Katni Minerals (P) Ltd. vs. CCE – 2002-TIOL-273-CESTAT-DEL… Para 3
K. Capital Services Ltd. vs. CCE – 2017-TIOL-136-CESTAT-DEL… Para 3.1
CCE vs. Ankit Consultancy Ltd – 2006-TIOL-1793-CESTAT-DEL… Para 3.1
CCE vs. Satguru Management Consultants Pvt. Ltd – 2007-TIOL-1644-CESTAT-BANG… Para 3.1
Karvy Consultants Ltd. vs. CCE: 2008 (10) STR 166 (Tri.-Bang.)… Para 3.1
Link Intime India Pvt. Ltd. vs. CCE – 2015-TIOL-1406-CESTAT-MUM… Para 3.1
HSBC Securities & Capital Markets (I) Pvt. Ltd. vs. CST, Mumbai – 2013-TIOL-1869-CESTAT-MUM… Para 4
FINAL ORDER NOS. 20435-20436/2019
Per: P Anjani Kumar:
This appeal is directed against the Order-in-Appeal No.3 & 4/2009 dated 22.1.2009 passed by the Commissioner of Service Tax, Bangalore.
2. Briefly the stated facts of the case are that the appellants i.e., M/s. Way 2 Wealth Brokers Pvt. Ltd., are duly registered as service provider under the categories of ‘Stock Broker’ and ‘Banking and Other Financial Services”. During the impugned period i.e., July 2003 to September 2006, the appellants have rendered services in relation to Initial Public Offer (IPO) to their customers. Service tax department issued two show-cause notices alleging that the appellants are required to pay service tax on brokerage received by them on IPO related service in terms of Section 65(19)(i) of the Finance Act, 1994. Adjudicating authority has dropped these two show-cause notices holding that the appellant is not covered by the definition as shares will become goods only if allotment was made. Commissioner of Service Tax reviewed the proceedings and issued a fresh show-cause notice and confirmed the same holding that the appellants are liable for tax in terms of Section 65(19)(ii) of the Finance Act, 1994.
3. Learned counsel for the appellant submits that the impugned Revision Order under Section 84 has gone beyond the scope of original show-cause notice. Learned Commissioner has created a separate ground which was not existing in the earlier show-cause notice, therefore, the order is bad in law in view of the following decisions:
– CCE vs. Carrier Aircon Ltd.: 2005 (184) ELT 113 (SC) = 2005-TIOL-84-SC-CX
– JCT Ltd. vs. CCE: 2004 (166) ELT 280 (Tri.-Del.) = 2003-TIOL-253-CESTAT-DEL
– Sands Hotel Pvt. Ltd. vs. CST: 2009 (16) STR 329 (Tri.-Mum.) = 2009-TIOL-441-CESTAT-AHM
– Viacom Electronics (P) Ltd. vs. CCE: 2002 (145) ELT 563 (Tri.-Mum.)
– Markfed Oil & Allied Industries vs. CCE: 2006 (3) STR 70 (Tri.-Del.) = 2002-TIOL-218-CESTAT-DEL
– Katni Minerals (P) Ltd. vs. CCE: 2006 (3) STR 81 (Tri.-Del.) = 2002-TIOL-273-CESTAT-DEL
3.1 The learned counsel further submits that even the provisions of Section 65(19)(ii) would be inapplicable to the facts of the case. It is true that the appellants have rendered services in relation to IPO. If a private limited company goes to public and offers shares to invite investments, by no stretch of imagination the same can be termed to be a service provided by the client and that the appellants are promoting the same. Learned counsel submits that the issue is no longer res integra as in the following cases it was held that activity relating to IPO was not covered under ‘Business Auxiliary Services’ as defined in Section 65(19) of the Finance Act, 1994.
– K. Capital Services Ltd. vs. CCE: 2017 (49) STR 449 (Tri.-Del.) = 2017-TIOL-136-CESTAT-DEL
– CCE vs. Ankit Consultancy Ltd.: 2007 (6) STR 101 (Tri.-Del.) = 2006-TIOL-1793-CESTAT-DEL
– CCE vs. Satguru Management Consultants Pvt. Ltd.: 2007 (7) STR 654 (Tri.-Bang.) = 2007-TIOL-1644-CESTAT-BANG
– Karvy Consultants Ltd. vs. CCE: 2008 (10) STR 166 (Tri.-Bang.)
– Link Intime India Pvt. Ltd. vs. CCE: 2015 (38) STR 705 (Tri.-Mum.) = 2015-TIOL-1406-CESTAT-MUM
3.2 Learned counsel further submits that the services in relation to IPO is taxable under the category of “Registrar to an issue” as defined under Sections 65(105)(zzzi), 65(93), 65(59a) and 65(89c) of the Finance Act. It is well settled that when a particular activity or service is made taxable specifically under a particular category, then it cannot be said that the activity would be covered under general category of service. Lastly, the learned counsel submits that first show-cause notice was issued on 10.8.2006 covering the period July 2003 to March 2005. Similarly, second show-cause notice dated 2.11.2006 covered the period from April 2005 to September 2006. Hence, the first show-cause notice is partially time barred and the second show-cause notice is wholly time barred. Therefore, invocation of extended period is not permissible and issue involves only classification of services.
4. The learned AR for the Department reiterated the findings of the impugned order and relied upon the case of HSBC Securities & Capital Markets (I) Pvt. Ltd. vs. CST, Mumbai: 2014 (33) STR 530 (Tri.-Mumbai) = 2013-TIOL-1869-CESTAT-MUM.
5. Heard both sides and perused the records of the case. For the proper appreciation of the case, we require to go through the provisions of the statute in terms of Section 65(19) of the Finance Act, 1994:
(19) “Business Auxiliary Service” means any service in relation to, –
(i) Promotion or marketing or sale of goods produced or provided by or belonging to the client; or
(ii) Promotion or marketing of service provided by the client; or
On going through the definition, we find that the appellant’s activity is not covered by subsection (i) as they are not promoting or marketing or selling any goods. It is only an initial / offer and until the rights are issued to the subscribers such as share certificate do not assume the character of goods. Therefore, as rightly held by the lower authority, the services of the appellant to their client are beyond the scope of sub-section (i)
5.1 Coming to the sub-section (ii), service rendered by the appellant to their clients would be chargeable to tax only if it is rendered in relation to promotion or marketing of service rendered by the clients. IPO is only an offer to the prospective buyers and therefore, it cannot be held to be a service by the company offering IPO. Therefore, we find that in either condition, the appellants are not covered by the definition under Section 65(19) of the Finance Act, 1994.
5.2 Moreover, as submitted by the learned counsel, the Review Order goes beyond the scope of show-cause notice and therefore, is not maintainable under law as held by Hon’ble Supreme Court in the case of CCE, Delhi vs. Carrier Aircon Ltd. (supra). The relevant findings are reproduced herein below:
“6. The respondent challenged this order of the Commissioner before the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT). CEGAT was of the view that the Commissioner of Central Excise could not have passed the order upon points not arising out of the decision or order of the subordinate adjudicating authority and could not have relied on new material. Several decisions had been relied upon in support of this view and the appeal of the respondent was allowed. Being aggrieved, the Department has preferred these appeals before us.
7. We are of the view that there is no substance in these appeals because the principle of law as enunciated by the Tribunal is correct. Furthermore the CEIB report could not in any event man that Chillers could not be classified under Tariff Entry 84.18 as heat pumps were also classifiable under that tariff entry. In these circumstances, the appeals are dismissed.”
5.3 We also find that the appellant submitted that the issue is no longer res integra. We find that the Tribunal in the case of A.K. Capital Services Ltd. (supra) has held in para 7 as under:
“7. We find that the services “Registrar to an issue” and “share transfer agent” more appropriately deal with the services rendered by the appellant. These taxable services were introduced only w.e.f. 1-5-2006 whereas, the demand in the present case is for the period prior to that date. As such, we find that the impugned order is not justifiable on tax liability on these two accounts. Since the tax liability under BAS itself is found to be not tenable, the inclusion of reimbursable expenditure for such tax does not arise.”
5.4 In view of the above, we find that the appeals survive both on merits as well as on the fact that the Revisionary Authority has travelled beyond the grounds raised in the first show-cause notice. Since, we hold that demand itself is not sustainable and we are not going in to the issue of limitation.
6. In view of the above, both the appeals are allowed.
(Operative portion of the Order was pronounced in Open Court on 15.05.2019)