Mutual fund distribution commission exempt as commission agents dealing in goods; contrary circular cannot override the exemption.

Commission earned by a mutual fund distribution agent was held to fall within the exemption for commission agents dealing in goods under Notification No. 13/2003-ST, because mutual fund units were treated as goods for that purpose. The Tribunal also held that a contrary Board circular could not override the statutory exemption. The commission from mutual fund distribution was therefore exempt from service tax as Business Auxiliary Service.

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Issues: Whether commission earned on distribution of mutual fund units was covered by the exemption under Notification No. 13/2003-ST dated 20.06.2003 and hence not liable to service tax as Business Auxiliary Service.

Analysis: The commission arose only from distribution of mutual fund units. The exemption notification extended to commission agents dealing in goods, and mutual fund units were treated as goods for the purpose of the statutory definition and the exemption. The Tribunal followed the earlier view that the Board circular taking a contrary position could not override the exemption, and that the activity of sale or purchase of mutual fund units by a commission agent fell within the exempted category.

Conclusion: The commission from mutual fund distribution was exempt and no service tax was payable on that activity.

Ratio Decidendi: Commission earned by a commission agent on the distribution of mutual fund units is covered by the exemption for commission agents dealing in goods, and the contrary administrative circular cannot defeat the statutory exemption.

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