2013 (11) TMI 49 - AT - Service Tax

Exemption from commission income - Benefit of Notification NO. 13/2003-S.T. - Classification of goods - Distribution of mutual funds - Held that - Benefit of Notification NO. 13/2003-S.T. is available to mutual funds since they are goods. The hon ble High Court of Andhra Pradesh in the case of Karvy Securities Ltd. 2004 (9) TMI 604 - ANDHRA PRADESH HIGH COURT , has set aside the circular dated 05/11/2003 issued by the CBEC and there is no stay obtained by the Revenue against the said order of the hon ble High Court of Andhra Pradesh. In view of the above, the decision of the hon ble High Court of Andhra Pradesh is the law prevailing today - Decided against Revenue.

Summary

Issues:
1. Appeal against Orders-in-Appeal extending benefit of Notification NO. 13/2003-ST to appellants.
2. Interpretation of definition of 'goods' under Sale of Goods Act, 1930 in relation to mutual funds.
3. Validity of circular NO. 66/15/2003-S.T. in light of Andhra Pradesh High Court's decision.

Analysis:
1. The Revenue appealed against Orders-in-Appeal No. PIII/029/06 and P-III/028/06 passed by the Commissioner of Central Excise (Appeals), Pune -II, extending the benefit of Notification NO. 13/2003-ST to the appellants, distributors of mutual funds on a commission basis. The appeal memorandum contended that the department challenged the Andhra Pradesh High Court's decision in the case of Karvy Securities Ltd. vs. Union of India, which struck down circular NO. 66/15/2003-S.T. The impugned orders were sought to be set aside on this ground.

2. The Tribunal analyzed the definition of 'goods' under clause (7) of Section 2 of the Sale of Goods Act, 1930, which includes movable property excluding actionable claims and money, asserting that mutual funds fall under this definition. Referring to the Andhra Pradesh High Court's decision in the Karvy Securities Ltd. case, the Tribunal noted that the court invalidated the circular stating mutual funds are not 'goods,' thus allowing the benefit of Notification NO. 13/2003-ST to commission agents of mutual funds. As no stay was obtained by the Revenue against the High Court's decision, the Tribunal upheld the validity of the High Court's interpretation as the prevailing law.

3. With none appearing for the respondents, the Tribunal dismissed the Revenue's appeals, finding no merit in their contentions. The Tribunal's decision was based on the interpretation of the definition of 'goods' and the precedence set by the Andhra Pradesh High Court's ruling, emphasizing that mutual funds qualify as 'goods' under the Sale of Goods Act, 1930. Consequently, the Tribunal upheld the extension of the benefit of Notification NO. 13/2003-ST to the appellants, distributors of mutual funds, in line with the prevailing legal interpretation.