PARAG PARIKH FINANCIAL ADVISORY SERVICES LTD. Vs. C.S.T.
LAWS(CE)-2015-1-119
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on January 15,2015

Parag Parikh Financial Advisory Services Ltd. Appellant
VERSUS
C.S.T. Respondents


Referred Judgements :-

KARVY CONSULTANTS LTD. V. ASSISTANT COMMISSIONER OF CUSTOMS & CENTRAL EXCISE [REFERRED TO]


JUDGEMENT

P.R. Chandrasekharan, Member (T) - (1.)THE appeal is directed against Order -in -Appeal No. SB(58)58/STC/2009, dated 17 -9 -2009 passed by Commissioner of Central Excise (Appeals), Mumbai. Vide the impugned order, the learned lower appellate authority has confirmed service tax demand of Rs. 2,37,711/ - against the appellant, M/s. Parag Parikh Financial Advisory Services Ltd. for the period 1 -4 -2001 to 31 -3 -2002 by classifying the financial advisory services undertaken as a "banking and financial service" and holding that the appellant is a financial institution liable to service tax accordingly. He has also upheld the confirmation of interest on the service tax liability and imposition of penalties under the provisions of Sections 76, 77 & 78 of the Finance Act, 1994. Aggrieved of the same, the appellant is before us. The learned Counsel for the appellant submits that during the relevant period, the appellant was a "stock -broker" registered with SEBI for dealing in shares on behalf of the clients. The appellant was also registered with the department as a stock broker only. The services rendered relating to financial advisory services by a banking company or a financial institution including a non -banking financial company was liable to service tax. Appellant was not a "financial institution" as defined in Section 45 -I(c) of the RBI Act, 1934; which reads as follows:
"(c) "financial institution" means any non -banking institution which carries on as its business or part of its business any of the following activities, namely :

(i) the financing, whether by way of making 'loans or advances or otherwise of any activity other than its own;

(ii) the acquisition of shares, bonds, debentures or securities issued by a Government or Local Authority or other 'marketable securities of a like nature;

(iii) letting or delivering of any goods to a hirer under a hire -purchase agreement as defined in Cl.(c) of Sec. 2 of the Hire -Purchase Act, 1972 (26 of 1972);

(iv) the carrying on of any class of insurance business;

(v) managing, conducting or supervising as foreman, agent or in any other capacity of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto;

(vi) collecting, for any purpose or under any scheme or arrangement by whatever name called, moneys in lump sum or otherwise by way of subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing money in any other way to persons from whom moneys are. collected or to any other person."

1.1 The allegation of the department is that the appellant falls within the definition of Section 45 -I(c), i.e., the acquisition of shares, bonds, debentures or securities issued by a Government or Local Authority or other marketable securities of a like nature. The appellant does not acquire any shares, bonds, etc. for themselves and whatever shares they purchase and sell are on behalf of the clients in the capacity of a broker and therefore, the appellant is not a financial institution as defined in the RBI Act. Reliance is also placed on the decision of the Hon'ble High Court of Andhra Pradesh in the case of Karvy Consultants Ltd. v. Assistant Commissioner of Customs & Central Excise, Hyderabad -II - : 2006 (1) S.T.R. 7 (A.P.) wherein it was held in the context of Non Banking Financial Company (NBFC) that merely because the appellant is registered as an NBFC, unless the activities are undertaken are of receiving deposits/lending service tax liability cannot be fastened. In the present case, the appellant is not undertaking the activity of a financial institution and therefore, the ratio of said decision would apply.

(2.)THE learned Superintendent (AR) appearing for the Revenue reiterates the findings of the lower authorities.
We have carefully considered the submissions made by both the sides. 3.1 To fall within the tax net, the appellant has to be a banking company or a financial institution including a non -banking company. Obviously, the appellant is not a banking company or a non -banking financial company. As per the definition of "financial institution" only when the appellant carries on business of acquisition of shares, bonds, debentures or securities issued by a Government or Local Authority or other marketable securities of a like nature, the appellant can be categorized as a financial institution. Merely because the appellant is registered as a stock broker with the SEBI, which is a statutory requirement, the appellant cannot be considered as a financial institution. If that be so, all stock brokers dealing in shares/securities would be financial institutions which is a totally wrong interpretation of the statutory definition of a financial institution. There is also no evidence available on record to show that the appellant has been registered under the RBI Act as a "financial institution".

In this factual and legal scenario, the conclusion of the lower authorities that the appellant is a financial institution as defined in the RBI Act cannot be sustained. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any, in accordance with law.

(Operative part of the order pronounced in Court)

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