TMI Blog2023 (5) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... taken 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcisable goods viz. Cement and Clinker falling under chapters 25232930 and 25231000 respectively of the erstwhile Central Excise Tariff Act, 1985. They are availing the benefit of Cenvat Credit Scheme and are availing the Cenvat Credit of inputs, Capital Goods used in manufacture of their final product namely Cement. service tax paid on various Input Services. 2.2 The Corporate office of M/s. Ambuja cement Limited, (ACL) was registered as a Large Taxpayer Unit having Membership No.LTU/MUM/2212. The Appellant was holding Central Excise Registration No.AAACG0569PXM006. ACL were also holding Input Service Tax Distribution Registration No. XAACGOS69PSTO35 for distributing credit to 17 manufacturing units under Rule 7 of Cenvat Credit Rules, 2004. 2.3 During the course of audit, from the Annual Reports of ACL for the period 2011, 2012, 2013 and 2014, it was noticed that they were engaged in 'Trading of Securities'. From ACL's cash Flow Statement it was evident that they purchase and sell current Investments viz., Mutual Funds ('Securities'), reflected in their Annual Reports under the Schedules for Current Investments and Non Current investments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed by them during the year from 2011, 2012, 2013 and 2014 should not he demanded and recovered from them under Rule 14 of the Rules, 2004 read with Sec. 11A(4) of the Central Excise Act, 1944 and /or Section 73 of Finance Act, 1944; (ii) Appropriate interest payable on the amount demanded under Sl. No. (i) above should not be recovered from them under Rule 14 of the Rules, 2004 read with Section 11AB / 11AA of the Central Excise Act, 1944 and/ or Section 75 of the Finance Act, 1994; (iii) Penalty should not be imposed on them under Rule 15(3) of the Rules, 2004 read with Section 11AC of Central Excise Act, 1944 and / or Section 78 of the Finance Act, 1994 for suppressing the facts of actual Cenvat credit availed and utilized which has resulted in wrong availment and utilization of Cenvat credit resulting in short payment of correct Service Tax. (iv) Penalty should not be imposed on them under Rule 15A of Rules, 2004 for contravention of the provisions of these rules for which no penalty has been provided in the rules; (v) Penalty should not be imposed on them under Section 15A Central Excise Act, 1944 for failure to pay Service Tax within the prescribed time as requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the activity of redemption and subscription of the mutual funds by the appellant is different from sale and purchase of securities/ trading in securities. Issue is squarely covered in their favour by the decisions as follows: ACE Creative Learning Pvt Ltd [2021 (51) GSTL 393 (T)] Tata Sons Ltd. [2022 (11) TMI 325 CESTATMumbai] Space Matrix Design Consultants Pvt Ltd. [2019 (4) TMI 1599 CESTAT Bangalore] Shriram Life Insurance Company [2019 (2) TMI 688 CESTAT Hyderabad] The activity of investment in mutual fund units is not a service per-se as per Education Guide para 2.6.6 and 2.6.9, therefore, would not qualify as exempted service . Reliance is placed on the decisions in the cases of: Orion Appliances Ltd [2010 (19) STR 205 (T)] Gulf Oil Corpn Ltd. [2014 (33) STR 298 (T)] Elder Pharmaceuticals Ltd. [2014-TIOL-271-CESTATMum] The activity of investment in mutual funds is integral to the primary business of the appellants. Hence, the investment activity cannot be treated as 'trading' for the purpose of reversal under Rule 6 of the Cenvat Credit Rules, 2004. Without prejudice to any of the above submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal. but excludes,- [A] service portion in the execution of a work contract and construction services including services listed under clause (b) of section 66E of the Finance Act (here in after referred as specified services) in so far as they are used for- (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or] [(B) [services provided by way of renting of motor vehicle], in so far as they relate to a motor vehicle which is not a capital goods; [(BA) service of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ather their nexus with trading established - In view of clear statutory provisions that credit available only if inputs / input service used directly or indirectly in relation to manufacture and clearance of final product, invoices of ISD cannot distribute credit of Service Tax in respect of trading activity Credit not admissible - Rules 2(1) and 7 of Cenvat Credit Rules, 2004. [paras 4, 4.2] 89.5 Without prejudice to the above, it is further seen that Section 66D of the erstwhile Finance Act, 1994 (as amended) w.e.f. 01-07-2012, which comprised the Negative list of various services which were listed thereunder including the subject services, namely '(e) trading of good'. It is thus, seen that the subject services, in respect of which, the Appellant sought to avail Cenvat Credit, are exempted services. 89.6 In view of the above discussion and findings, it is seen that, in the facts of the present case, use of the services, relating to Trading of Security' which is also 'Trading of Goods', has no nexus or integral connection with the business of manufacturing of Appellant's final product namely, 'Cement'. As such, it would be reasonable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue as to whether trading activity can be called a service, it is quite clear that since trading activity is nothing but purchase and sales and is covered under sales tax law, it may not be appropriate to call it a service. Therefore it has to be held that trading activity cannot be called a service and therefore it cannot be considered as an exempted service also. ii. Gulf Oil Corpn. Ltd. [2014 (33) STR 298 (T)] 3. I agree with the finding of the Commissioner (Appeals) as the input service definition as contained in Rule 2(l) of Cenvat Credit Rules is for use by a provider of a taxable service or for use by a manufacturer or in relation to manufacture of final product. In this particular case, the registered dealer is neither a manufacturer nor a provider of taxable service. Therefore, he will not come under definition and cannot avail the credit of Service Tax paid on transportation of the goods. This Bench has decided the issue in the case of Orion Appliances Ltd. v. CST, Ahmedabad - 2010 (19) S.T.R. 205 (Tri-Ahmd.), that trading activities can be called a service or not. It was held that it may not be appropriate to call it as a service because the trading activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of property in a thing in consideration of a sum of money. Wharton's Law Lexicon; 15th edition In order to constitute a sale there must be an agreement for sale of goods for a price and the passing of property therein pursuant to such an agreement, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods which of course presupposes capacity to contract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale. On the other hand to constitute a purchase of goods within this Entry, there must be an agreement for purchase of goods and the passing of property therein pursuant to such an agreement. TRADE Cambridge International Dictionary of English The activity of buying and selling, or exchanging, goods and/or services between people or countries. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the definitions as above, I am convinced that following are the ingredients 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. If we test 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'. 4.6 The issue has been considered by the tribunal in the decisions referred below and following has been held: ACE Creative Learning Pvt. Ltd. [2021 (51) GSTL 393 (T)]: 5. There is a restriction on the right to transfer unit and the appellant cannot transfer units to any other person. Further I find that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CENVAT Credit Rules 2004, applies in a case where credit on inputs and input services i.e. common to rendition on taxable and exempted services has been availed of, in the instant case the only service that the appellant is rendering is life insurance service, which is taxable entirely. Thus, it cannot be said that appellant has availed any credit on input and input services which is common or attributable to rendition of any exempted services. Even otherwise, since tax was paid on the entire premium recovered towards the service of managing investment in approved securities, appellant cannot be said to be rendering any exempted services. 13...In the case in hand, as the activity of managing investments suffers service tax liability under life insurance services, the same cannot be said to be an exempted service, warranting reversal of CENVAT Credit under Rule 6 of CENVAT Credit Rules 2004. 4.7 From the above since I find that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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