Exemption for commission agents on mutual fund units applies where units are treated as goods for service tax purposes.

Commission received for sale and purchase of mutual fund units was treated as falling within Business Auxiliary Service, but the exemption for commission agents dealing in goods under Notification No. 13/2003-ST applied because mutual fund units were treated as goods for this purpose under the statutory definitions. The Board circular denying the exemption was not followed in view of the Delhi High Court decision quashing it. As a result, the commission on such transactions was not liable to service tax for the relevant period, and the refund claim could not be rejected.

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Issues: Whether commission received for sale and purchase of mutual fund units was chargeable to service tax, and whether such activity was covered by the exemption for commission agents dealing in goods under Notification No. 13/2003-ST.

Analysis: Section 65(19) of the Finance Act, 1994 defined Business Auxiliary Service to include promotion or sale of goods and certain service-related activities. Notification No. 13/2003-ST exempted business auxiliary services provided by a commission agent where the agent caused sale or purchase of goods. Section 65(50) of the Finance Act, 1994 adopted the meaning of goods from section 2(7) of the Sale of Goods Act, 1930, which is an inclusive definition covering movable property and stock and shares. Mutual fund units were treated as falling within the same class of goods for this purpose. The Board circular denying exemption was not accepted as controlling in view of the Delhi High Court decision quashing it, and the commission earned on sale and purchase of mutual fund units was held to fall within the exempted category.

Conclusion: The commission on sale and purchase of mutual fund units was not liable to service tax during the relevant period, and the refund claim could not be rejected.

Ratio Decidendi: Commission agents dealing in mutual fund units are entitled to the exemption available to commission agents dealing in goods under Notification No. 13/2003-ST, because mutual fund units were treated as goods for the purpose of the notification and the related statutory definitions.

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