2011 (4) TMI 502 - AT - Service Tax

Tax liability - Is income from mutual funds is a taxable event under the category of Business Auxiliary Service or not - exempted under Notification No.13/2003-S.T - Assessee engaged in the business of Stock Brokers services and also engaged in providing the services in Banking & Other Financial activities - As per the Principal Bench of this Tribunal in the case of CST Delhi Vs. P.N. Vijay Financial Services Pvt.Ltd. 2008 -TMI - 31722 - CESTAT NEW DELHI held that the respondent were not liable to pay any service tax for service rendered as commission agent in connection with sale and purchase of units of mutual fund schemes during the relevant period - Decided in favour of assessee.

Summary

Issues:
1. Whether the income from mutual funds is subject to Service Tax under the category of Business Auxiliary Service.
2. Jurisdiction of Commissioner(Appeals) in confirming the demand on commission received as a mutual fund distributor.
3. Applicability of exemption under Business Auxiliary Service category for mutual funds as "Stock and Shares."
4. Validity of Board's circular No.66/15/2003-ST.

Analysis:
1. The appellant, engaged in Stock Broker services, was issued a Show Cause Notice for not paying Service Tax on income from mutual funds, categorized under Business Auxiliary Service. The original adjudicating authority confirmed the demand, penalty, and interest. The Commissioner(Appeals) rejected the appeal and accepted the Revenue's appeal on the penalty imposition.

2. The appellant challenged the Commissioner(Appeals)'s order, arguing against the jurisdiction in confirming the demand on commission received as a mutual fund distributor. They relied on Circular No.66/15/2003-ST, which was challenged in a High Court case and quashed. The appellant contended that they never rendered such services and claimed exemption under Notification No.13/2003-ST for mutual funds as "Stock and Shares."

3. The Tribunal referred to a previous case where mutual fund units were considered 'goods' falling under the promotion or marketing of goods category, exempting commission agents under Notification No.13/2003-ST. The Tribunal found the appellant's arguments forceful and sustainable, allowing the stay and dispensing with the pre-deposit of Service Tax, interest, and penalty.

4. The validity of Board's circular No.66/15/2003-ST was challenged in the High Court of Delhi, seemingly quashed, further supporting the appellant's position. The Tribunal concluded in favor of the appellant, highlighting the exemption under Business Auxiliary Service category for mutual funds as goods, leading to the allowance of the stay and removal of the pre-deposit requirements.