The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that subscription and redemption of mutual funds units cannot be termed as sale and purchase of securities.
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. The activity undertaken would not amount to “service” in terms of Section 65B(44) of the Finance Act.
The Appellant/Assessee, Siegwerk India relates to the non- reversal of proportionate Cenvat credit availed on common input services namely, Chartered Accountant services, telephone services, Legal services, etc., used in relation to Redemption of Mutual Funds by considering it to be “Trading of Goods” which is an exempted service in terms of Section 66D(e) of the Finance Act1. Absolutely, similar issue was considered in the case of the appellant for the period from April, 2015-16 by the Tribunal by its Final Order No.58747/2024 dated 01.10.2024.
The Commissioner (Appeals) confirmed the two order covering the show cause notice. The principle of law enunciated is 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.
The activity to classify as “exempted service” under Rule 2(e) of the Cenvat Credit Rules, 2004 needs to be qualified as“service”, as defined under Section 65B (44) of the Act, meaning thereby that service is an activity carried out by a person for another for consideration and includes a „declared service‟ but excludes a transfer of title in goods or immovable property by way of sale, gift, etc.
The tribunal while allowing the appeal held 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.
Case Details
Case Title: M/s. Siegwerk India Pvt. Ltd. Versus Commissioner of CGST
Case No.: Service Tax Appeal No.52949 of 2019
Date: 21.03.2025
Counsel For Appellant: S.C. Vaidyanathan and Ms. Mehak Mehra
Counsel For Respondent: Rajeev Kapoor
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