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2023 (5) TMI 806 - AT - Service TaxDisallowance of CENVAT Credit - activity of purchase and sale of units of Mutual Fund Schemes - trading (exempt) services or not - manufacturer of Cement and Clinker falling under chapters 25232930 and 25231000 respectively - Rule 6(3A) of the Rules, 2004 - HELD THAT:- Following are the ingredients of trading (as found from definition of trading): i. There should be two parties and a market to purchase and sell the good involved; ii. There should be transfer of right/title involved from the seller to the buyer, while selling the same; iii. There should be a fixed price known in advance while selling or buying the said good etc. On undertaking the test of the activities undertaken by the appellant, against the above criteria the activity of subscription and redemption of the units of the mutual fund is not an activity of sale and purchase of the securities. When the units of mutual fund are redeemed, the units cease to exist i.e., gets cancelled or relinquished, It does not get transferred to the third party. Thus investment activities undertaken by the appellants is totally different from 'trading in securities'. The issue has been considered by the tribunal in ACE CREATIVE LEARNING PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BENGALURU SOUTH GST COMMISSIONERATE [2021 (4) TMI 687 - CESTAT BANGALORE] where it was held that 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. Thus, the activity of redemption and subscription of mutual fund is akin to management of investments and not trading in services, it cannot be held as exempted service, for seeking the reversal as per provisions of Rule 6 of CENVAT Credit Rules, 2004. In the impugned order, reliance has been placed on the decision in the case of ROCA BATHROOM PRODUCTS PVT. LTD. VERSUS C.C.C., JAIPUR [2016 (12) TMI 223 - CESTAT NEW DELHI]. The said decision is distinguishable as it is in respect of the trading of goods and not in the case where the Education Guide itself clarifies that buying and selling of the unit of mutual funds is not service itself. There are no merits in the demand made by the impugned order. As the order fails on the merit of demand, the same will fail on the demand of interest and penalty imposed - appeal allowed.
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