The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that subscription and redemption of liquid mutual fund units cannot be termed as ‘Trading Of Goods’.
The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that the activity of investment in mutual funds does not involve the presence of a service rendered by a service provider towards a recipient of service for some consideration. Following the principles enunciated in various decisions, the activity undertaken would not amount to “service‟ in terms of Section 65B(44) of the Finance Act, 1994.
The appellan/assesseet is engaged in providing Manpower Recruitment/Supply Agency Service, Commercial Training, Coaching, Renting of Immovable property, Works Contract Service, Legal Consultancy Services, other taxable services. The appellant took credit of service tax paid on various input services which are used in renting the aforesaid outward services. The appellant as part of its business practice had also invested in surplus funds in various mutual funds by way of subscription to mutual funds units.
The appellant redeemed such units as and when the additional funds were needed to meet the business requirements. Show cause notice dated 14.09.2017 was issued to the appellant alleging that the activity of investment in mutual funds is akin to “trading of goods” in the Negative List and hence is an exempt service as defined in Rule 2(e) of CCR read with section 66D(e) of the Act.
Therefore, CENVAT credit attributable to input services which were used commonly in relation to provision of taxable services as well as trading of goods, is not admissible, and as the appellant did not maintain separate accounts in relation to these two kind of services in terms of rule 6(2), they are liable to pay an amount equal to 6%/7% of the value of exempted services under rule 6(3) of the CCR.
The adjudicating authority confirmed the demand under SCN. The appeal filed by the appellant has been dismissed by the order.
The appellant contended that non-reversal of proportionate credit availed on common input services used in relation to redemption of mutual funds by considering it to be trading of goods which is an exempted service under section 66D(e).
The tribunal while allowing the appeal held that the subscription and redemption of liquid mutual fund units cannot be termed as “trading of goods” and, therefore, do not fall under the exempted services under Section 66D(e) of the Finance Act.
Case Details
Case Title: M/s. Career Point Limited Versus Commissioner of Central Goods & Service Tax, Excise and Customs, Udaipur
Case No.: Service Tax Appeal No. 52382 of 2019
Date: 06.05.2025
Counsel For Petitioner: B.L. Narsimhan
Counsel For Respondent: Aejaz Ahmad
