The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable on security deposits taken from customers towards the trading of shares.
The two-member bench of Ramesh Nair (judicial member) and Raju (technical member) has observed that the amount is refundable and was towards security deposits and was not for the purpose of providing any services, so to levy service tax on it would be inappropriate.
The issue involved was whether the appellant was liable to pay service tax on the deposit taken by the appellant from their customers as a security deposit against trading in shares, which was subsequently refunded without being used.
The appellant submitted that in the appellant's own case, the tribunal held that the deposit taken by the appellant as a security deposit is not liable to service tax. Therefore, the issue is no longer resolved.
The tribunal found that the department had demanded the service tax on the security deposit taken by the appellant from their customer towards the operation of the trading account for shares.
The CESTAT held that the amount collected by the appellant from the clients is in fact an interest-free, refundable deposit and is not an advance for a service. It is, therefore, not taxable.
Case Title: Marwadi Shares & Finance Ltd. Versus C.C.E. & S.T.-Rajkot
Citation: Service Tax Appeal No. 12087 of 2017
Counsel For Appellant: Advocate Sudhansu Bissa
Counsel For Respondent: Superintendent (Authorized Representative) G. Kirupanandan