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2025 (7) TMI 343
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....epair and maintenance service, technical testing and analysis service and various other services and was also availing cenvat credit of central excise duty paid on capital goods. Appellant was also investing its surplus funds into Mutual Funds by subscribing to Mutual Funds and also redeeming the amount from Mutual Funds. Appellant subscribed to Mutual Funds of the funds managed by AMC (Asset Management Company). The investment made by the appellant in Mutual Funds and the gain and losses accruing on the said investment are declared on a daily basis as Net Asset Value (NAV) of the fund. It appeared to Revenue that the said activity of investing surplus funds in Mutual Funds amounts to trading of security and the said trading of security was considered by Revenue as exempted service. Further it appeared to Revenue that the appellant was providing two types of services. One was service of transportation of goods through pipeline on which service tax was being paid and the other was exempted service of trading of securities and the appellant was not maintaining separate accounts and, therefore, it appeared to Revenue that the appellant should have paid the amount as required by sub-ru....
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....scribing to Mutual Funds and thereafter redeeming from such Mutual Funds does not amount to trading of goods/securities. They further submitted that trading essentially involves buying and selling of goods as opposed to subscription and redemption. They further submitted that the activity of investing in Mutual Funds involves subscribing to a Mutual Fund and the Mutual Fund is managed by AMC and that the investments of various investors in the Fund managed by AMC are then pooled and managed by the Fund Manager and that the investments made and the gains and losses accrued on the investments are declared on a daily basis as Net Asset Value of the Fund. They further submitted that investors can subscribe to the Fund at the NAV declared on the given date and likewise exit from the Fund at the value of NAV on that date and the subscription and redemption from Mutual Funds is only through AMC. They further submitted that a subscriber to Mutual Funds cannot sell his investment to any third person and cannot purchase the same from any third person and the same can only be subscribed and redeemed from AMC who manages the Fund. They, therefore, further submitted that they were not providing....
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....ued by him that in view of the said finding, appellant was not providing any exempted service. He has also argued on limitation. Appellant has submitted that it is an undisputed fact that taxable output service would not have been rendered using any lesser quantum of inputs or input services. 5. Heard the learned AR who has relied on the ruling of Hon'ble High Court of Delhi in the case of Lally Automobiles Pvt. Ltd. vs. Commissioner reported at 2018 (17) GSTL 422 (Del.). Learned AR has submitted that Hon'ble Delhi High Court has held that when the assesse is providing taxable service and undertaking trading activity, it is not entitled to utilization of cenvat credit, but cenvat credit needs to be compensated by payment of amount on the basis of proportion of turnover. At this stage learned counsel for the appellant has submitted that in the case of Lally Automobiles Pvt. Ltd. (supra), the appellant therein was involved in sale and service of motor vehicles whereas here in this case there are no tangible goods being traded and, therefore, the said ruling is not applicable in the present case. 6. We have carefully gone through the record of the case and submissions made by bo....
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....re Liquid Debt Fund' under mutual funds and redeemed it at the end of the same month. 3. An audit was conducted of the records of the appellant and it was noticed that the appellant was engaged in trading of mutual funds to the extent of Rs. 6,22,20,898/- as 'Dividend Income on Current Investment' under the head of 'Other Income'. The department formed a view that redemption of mutual funds qualifies to be 'trading of goods', which is an exempted service in terms of the exclusion under the negative list warranting proportionate reversal of credit availed on common input services such as 'chartered accountancy services', 'laptop and computer maintenance services', phone and internet services', and SAP IT services under rule 6 of the Credit Rules. 19. In view of the aforesaid decisions of the Tribunal, it has to be held that the activity of subscription and redemption of the units of mutual funds cannot be said to be an activity of sale and purchase of the securities. It would, therefore, not be an activity relating to trading and securities. The activity undertaken by the appellant would, therefore, not be an exempted....
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.... considered the investment in mutual fund as trading in mutual funds and has issued a notice on the presumption that the appellant is providing exempted services which is trading in mutual funds and has not maintained separate records for common input services availed in providing the output services and exempted activity i.e. trading and hence are liable to pay 6%/7% of the amount of exempted services. Further I find that the 'trading' has not been defined under the Service Tax but in the context of securities, 'trading' means an activity where a person is engaged in selling the goods and occupy for the purpose of making profit but certainly trading is different from redemption of mutual fund units, in the present case appellant cannot transfer the mutual fund 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 p....
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....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 detailed discussion has held that the investment income cannot be held to be trading of goods so as to demand 6% value under Rule 6 (3) (iii) of CCR 2004. Th....
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....e 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 timebarred 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 the various decisions relied upon by the appellant, extended period cannot be invoked where the Revenue's case....
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.... 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 person to another. Exempted service, a....