2024 (6) TMI 249 - AT - Service Tax

Levy of service tax - business auxiliary service - normal Commission in relation to distribution of mutual fund on behalf of the asset management company - sale of space or time for advertising sales - in house monthly /quarterly letter/ magazine title 'FUNDS WATCH' for private circulation among their clients sub- distributors network informing investors about available financial products and mutual funds scheme in operation - commercial or coaching service - training session for the distributors when they are enrolled. Demand on incentive received from various asset management companies against promotion and marketing of mutual fund - HELD THAT - The submission of the appellant is that since it is related to distribution of mutual fund it is not taxable in hand of the appellant. Being provider of service in this case Service Tax is payable by the recipient of service under reverse charge mechanism, the appellant have referred Rule 2(1)(d)(vi) of Service Tax Rules - From the plain reading of the above Rule 2(1)(d) (vi), it can be seen that on business auxiliary service in relation to distribution of mutual fund by mutual fund distributors or agent as the case may be it is the mutual fund or asset management company who are liable to pay Service Tax as recipient of service. In the present case demand was admittedly made under business auxiliary service. The activity of promotion and marketing of mutual fund is also in relation to distribution of mutual fund therefore, there is no difference between the incentive received towards promotion and marketing of mutual fund and/or Commission received towards the distribution of mutual fund. Therefore, even the incentive received for promotion in marketing of mutual fund from various AMCs also covered under Rule 2(1)(d) (vi). Accordingly the service recipient is the person who is liable to pay the Service Tax. Therefore, as per statutory provision under Section 68(2) to of the act read with the Rule 2(1)(d) (vi) of Service Tax Rules, 1994. The appellant is not liable to pay Service Tax under business auxiliary service. Whether the appellant is liable to pay Service Tax of sale of space or time under advertising service in respect of the advertisement published in their magazine namely FUNDS WATCH ? - HELD THAT - It is found that the sale of space for advertisement in print media is excluded for the purpose of levy of Service Tax and as per the definition of print media given in above explanation-2 the book is exempted other than the business directories, yellow pages and trade catalogue which are primarily for commercial purpose - The facts of the present case from the magazine FUNDS WATCH it is clear that these magazine does not contain a particular company s product details for the purpose of sale of the same to their customer. The magazine contains various news matters and also details of mutual funds of various AMC'S. Therefore, these magazine cannot be categorized as trade catalogue. Accordingly, clearly falls under the exclusion category of book provided under the sub clause (zzzm) of Section 65 (105) of Finance Act, 1995. Therefore, the same cannot be taxed under the head of sale of space for time for advertisement as the demand on this count is also not sustainable. Levy of Service Tax under commercial training or coaching service - HELD THAT - The appellant are providing training programmer to the sub distributors in order to facilitate Sub distributors to involve in the business/profession /job of selling the mutual fund. Therefore, training is clearly to enable the trainees that to carry out their profession /job by taking such training. Therefore, such training clearly falls under vocational training and the vocational training is exempted under Notification No. 24/2004-ST. Accordingly, the Service Tax under the head of commercial training or coaching service is also not sustainable. The impugned order is set aside - Appeal is allowed.

Summary

Issues involved:
The issues involved in this case are:
1. Liability of Service Tax on incentive received from Asset Management Companies (AMCs) for promotion and marketing of mutual funds.
2. Liability of Service Tax on sale of space for advertising in the magazine 'FUNDS WATCH'.
3. Liability of Service Tax on commercial training or coaching services provided to sub-distributors.

Issue 1: Liability of Service Tax on incentive received from AMCs:
The Appellant argued that the incentive received from AMCs is related to the distribution of mutual funds and thus falls under the reverse charge mechanism, making the AMCs liable to pay Service Tax. They cited Section 68 of the Finance Act, 1994 and Rule 2(1)(d)(v) of Service Tax Rules to support their stance. The Tribunal agreed, stating that under Rule 2(1)(d)(vi), the AMCs are responsible for paying Service Tax on business auxiliary services related to the distribution of mutual funds. Therefore, the Appellant is not liable to pay Service Tax on the incentive received.

Issue 2: Liability of Service Tax on sale of space for advertising in 'FUNDS WATCH' magazine:
The Department claimed that the sale of space in the magazine constitutes a taxable service under advertising services. However, the Tribunal found that the magazine 'FUNDS WATCH' is for private circulation and contains details of mutual funds, not specific product details for commercial purposes. As per Section 65(105) of the Finance Act, 1995, the sale of space for advertisement in print media is exempt from Service Tax. Therefore, the demand for Service Tax on this count was deemed unsustainable.

Issue 3: Liability of Service Tax on commercial training provided to sub-distributors:
The Tribunal determined that the training provided by the Appellant to sub-distributors aimed at enabling them to carry out their profession falls under vocational training, which is exempted under Notification No. 24/2004-ST. Citing relevant judgments, the Tribunal concluded that the demand for Service Tax under commercial training or coaching services was not sustainable.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal based on the merits of the three issues discussed and decided upon.