Case Details: Steel City Securities Ltd. vs. Commissioner of Central Tax, Visakhapatnam (2026) 43 Centax 375 (Tri.-Hyd)
Judiciary and Counsel Details
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- S/Shri Angad Prasad, Member (J) & A.K. Jyotishi, Member (T)
- Shri Abhishek Rastogi, Adv., for the Appellant.
- Shri K. Sreenivasa Reddy, AR, for the Respondent.
Facts of the Case
The appellant was engaged in providing stock broking and DEMAT account services. Under the client agreements, where clients delayed payment for purchase of shares, the appellant funded the pay-out to the stock exchange from its own funds and subsequently recovered delayed payment charges at the prescribed rate from the clients. The appellant initially paid service tax on such charges but discontinued payment after the introduction of the negative list regime, treating the charges as interest on loans or advances. The department, however, treated the delayed payment charges as consideration for the declared service of ‘tolerating an act’ and confirmed the demand, which was upheld by the commissioner (appeals). Aggrieved thereby, the appellant filed an appeal before the CESTAT.
CESTAT Held
The CESTAT held that the delayed payment charges were relatable to the time value of money, as the appellant had funded the purchase of shares from its own funds on behalf of the clients. It held that such funding was in the nature of loans or advances and the delayed payment charges constituted interest thereon, and not consideration for ‘tolerating an act’. It further observed that the CBIC clarification issued under GST, though not binding, had persuasive value in clarifying that penal interest is not consideration for tolerating an act. Accordingly, it held that service tax was not leviable on the delayed payment charges and set aside the demand.
List of Cases Cited
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- Saci Allied Products v. Commissioner — 2005 (183) E.L.T. 225 ( S.C.) — Referred [Para 5]
- SD Fine Chem Ltd. v. Commissioner — 2017 (354) E.L.T. 412 (Tri.-Ahmd) — Referred [Para 5]
- Commissioner v. Reliance Port & Terminals Ltd. — 2016 (334) E.L.T. 630 (Guj.) — Referred [Para 5]
List of Departmental Clarifications Cited
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- C.B.E. & C Circular No. F.No.137/25/2011-ST, dated: 3-8-2011 [Paras 2, 3, 9]
- CBIC Circular No. 102/21/2019-GST, dated: 28-6-2019 [Para 12]
