2024 (9) TMI 922
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....of securities, and the amount was reflected under the schedule for 'other income' in their Annual Reports. The Department was of the view that the appellant has earned profit from the activity of trading of securities. As per Rule 2 (e) of Central Credit Rules, 2004 which defines 'exempted services' from 01.04.2011 an Explanation has been added which says 'exempted services' includes 'trading'. 2. Section 66D of the Finance Act, 1944 which gives the list of services which are not subject to levy of service tax reads as follows : "The negative list shall comprise of the following services, namely -, (a) "services by Government or a local authority excluding the following services to the extent they are not covered elsewhere - ........ (e) trading of goods. ...... (q) funeral, burial, crematorium or mortuary services including transportation of the deceased." 3. Since trading of goods is listed in the 'negative list' of services, no service tax is leviable on 'trading of goods'. This implies that trading of goods continues to be an exempted service as per Rule 2 (e) of Cenvat Credit Rules, 2004 even after 01.07.2012. 4. As per Section 65 (50) of the Finance Act, ....
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....e and sale of units of Mutual Fund Schemes and Equity Shares indulged by the appellant, is an exempted service. 10. Rule 6 provides for the obligation of manufacturer or service provider. It says that cenvat credit is not allowed on input services used for providing output services. Rule 6 (1) of the Cenvat Credit Rules, 2004, reads as follows - 'The Cenvat credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services, except in the circumstances mentioned in sub-rule (2).' 11. Sub-rule (2) of Rule 6 of the Cenvat Credit Rules, 2004, reads as follows - 'where a manufacturer or provider of output service avails of Cenvat credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for - (a) the receipt, consump....
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....Technology Software Services to their clients. Such income is judiciously invested by the appellant. They are not engaged in trading of securities and have only invested in securities as permitted by the provisions of the Companies Act and the guidelines issued by SEBI. The appellant has only deposited the surplus income received by them in specified investments for the purpose of appreciation and acquisition of the value in their investment. As and when the need for any expenditure arises, the appellant liquidates these investments which is part of their treasury operations. These facilities are essential for their own investment of funds and the appellant is in no way engaged in trading of securities. The appellant company has only one portfolio which investment portfolio and does not have two separate portfolios for investment and trading. The securities are valued and held as capital assets in their books and not as stock in trading. 15. The show cause notice has been issued on a misconception of facts and law, alleging that the appellant is engaged in the business of trading. The appellant does not engage in buying or selling of securities for any other person. They only inve....
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....mpted service and therefore the demand raised is legal and proper. 19. Countering the arguments put forward by the Ld. Consultant appearing for the appellant, it is submitted that the definitions contained in the Finance Act, 1994 as well as Cenvat Credit Rules, 2004 has to be interpreted literally as there is no ambiguity or room for doubt. The provisions being very clear the contention of the appellant that they have not engaged in trading of goods or exempted services is not acceptable. It is prayed that the appeal may be dismissed. 20. Heard both sides. 21. The issue that arises for consideration is whether the demand confirmed alleging that appellant has availed common input services for taxable and exempted services (amount received from mutual funds / securities) is sustainable or not. 22. From the facts narrated above, it can be seen that the appellant is investing their surplus / income in mutual funds. The entire demand is raised on the basis of financial statements of the appellant for the disputed period. A sample of the financial statement for the year 2010-11 has been extracted above. In such financial statement the amount invested in mutual funds is shown under t....
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....n sale and purchase of securities for another is a taxable service under Finance Act, 1994. Only a licensed person or agent can engage in doing such activity of sale and purchase of shares. The department seems to have confused purchase and sale of shares as an investment with the 'trading of goods' as a business. A manufacturer who also sells goods can be said to be engaged in trading of goods. Such manufacturer if avails common inputs / input services for manufacture of dutiable goods and for trading of goods is liable to reverse the proportionate credit as under Rule 6 (3A) or pay amount as per Rule 6 (3) (i). This is because trading is a deemed exempted service w.e.f. 01.04.2011, and no credit can be availed in respect of trading. In this scenario, trading of goods is part of the business of the manufacturer. The appellant is not engaged in the business of trading of shares. In fact it is stated that they have only one portfolio which is investment portfolio. All this goes to establish that appellant is not engaged in trading of goods / securities. 25. The issue stands decided by the Tribunal in the case of M/s. Instakart Services Pvt. Ltd. (supra) . The Tribunal after detaile....
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....nd units to third party and give only by redemption to the mutual fund because the appellant is not permitted to trade mutual fund unit in the absence of a license from the SEBI. There is a restriction on the right to transfer unit and the appellant cannot transfer units to any other person. Further I find that the appellant cannot be termed as "service provider" because he only makes an investment in the mutual fund and earn profit from it which is shown in the Books of Accounts under the head "other income". Hence the question of invoking Rule 6 does not arise and I am of the view that Department has wrongly invoked the provisions of Rule 6(3) demanding the reversal of credit on the exempted services. I also find that substantial demand is time barred as during the audit, the Department entertained the view that the appellant is engaged in providing the exempted services and consequently issued the show cause notice. The appellant has been filing the returns under the taxable service of 'Commercial Training and Coaching and has provided all the records to the Department during the course of investigation and has not suppressed any material fact from the Department and in view of ....
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.... what was 'service' element involved in such investment. The revenue has only fastened the liability on surmises and without there being any positive findings in this regard. It was for the revenue to prove that 'investment' itself was a service, in order to demand service tax. Rather, the first appellant authority himself has at paragraph No. 14.01 observed that "... such investment would be an activity outside the definition of service, being a mere transaction in money" but, however, has concluded in the same para that activity of investment in shares and derivative trade satisfy the definition exempted services under Cenvat Credit Rules, 2004. 13. We fail to understand the logic in treating the mere 'investment' as an exempted service because, the revenue has not specifically alleged if there is any 'service' in the first place. Secondly, up to 01.07.2012, even if it is assumed to be an exempted service, then the same was not taxable. With the introduction of negative list w.e.f. 01.07.2012, S. 66B of the Finance Act empowers the levy of service tax on the value of all services other than those in the negative list, which are provided or agreed to be provided, by one pe....