2008 (9) TMI 72 - AT - Service Tax

Activity of sale and purchase of units of mutual fund schemes - as the Business Auxiliary Service provided by a commission agent by way of sale and purchase of goods stands exempted under Notification No. 13/2003, the conclusion is irresistible that the respondents 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 refund claim was rightly accepted by Commissioner

Summary

Issues:
1. Whether the amount received as commission on the sale and purchase of units of mutual fund schemes is chargeable to service tax.

Analysis:
The appeal was filed by the revenue against the order setting aside the rejection of the refund claim of the respondent. The respondent, a financial services company, claimed a refund of service tax paid on the commission earned from the sale and purchase of mutual fund units. The issue revolved around whether mutual fund units are considered 'goods' and if the commission earned on their sale is chargeable to service tax.

The respondent argued that they were covered under 'Business Auxiliary Services' as per section 65(19) of the Finance Act, 1994 and were exempt from service tax under Notification No. 13/2003-ST. The Assistant Commissioner rejected the refund claim, citing that mutual fund units are not 'goods' and hence not eligible for the exemption. However, the appellate authority found that a circular by the Central Board of Excise & Customs (CBEC) was quashed by the Delhi High Court, indicating that the commission received on mutual fund units was not taxable during the relevant period.

The notification exempting 'Business Auxiliary Services' provided by a commission agent if engaged in the sale and purchase of 'goods' was crucial in this case. The definition of 'goods' under the Sale of Goods Act, 1930 was analyzed to determine if mutual fund units could be considered as such. The Tribunal concluded that mutual fund units are akin to stock and shares, falling under the definition of 'goods', making the commission earned on their sale exempt from service tax under Notification No. 13/2003-ST.

The Board's circular, which stated that service tax was applicable on the sale and purchase of mutual fund units, was challenged in the Delhi High Court and subsequently quashed. The Tribunal held that the activity of the respondent fell under the promotion or marketing of goods, making them eligible for the exemption under the notification. Therefore, the respondents were not liable to pay service tax on the commission earned from mutual fund units during the relevant period.

In light of the above analysis and the legal provisions, the Tribunal found no merit in the revenue's appeal and dismissed it, upholding the decision of the appellate authority in favor of the respondent.