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TMI Blog2024 (9) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... he disputed period. A sample of the financial statement for the year 2010-11 has been extracted above. In such financial statement the amount invested in mutual funds is shown under the heading purchase of money market mutual funds . The profit received from sale of mutual funds is shown as proceeds from sale of money market mutual funds . These fall under the main heading cash flow from investing activities . The appellant has no where accounted the income from purchase and sale of securities under the head of trading . In the present case, the appellant has invested their income in shares / mutual funds and also sold certain investments. They have acted like any individual who would invest funds in shares / securities. The appellant is not engaged in the business of trading of shares / securities as provided under Section 105 (zzzzg) of the Act ibid. It requires to be stressed that the activity of engaging in sale and purchase of securities for another is a taxable service under Finance Act, 1994. Only a licensed person or agent can engage in doing such activity of sale and purchase of shares. The department seems to have confused purchase and sale of shares as an investment with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or mortuary services including transportation of the deceased. 3. Since trading of goods is listed in the negative list of services, no service tax is leviable on trading of goods . This implies that trading of goods continues to be an exempted service as per Rule 2 (e) of Cenvat Credit Rules, 2004 even after 01.07.2012. 4. As per Section 65 (50) of the Finance Act, 1994, which was in vogue prior to 01.07.2012, the definition of goods reads as under : goods has the meaning assigned to it in clause (7) of Section 2 of Sale of Goods Act, 1930 (3 of 1930). 5. As per clause (7) of Section 2 of Sale of Goods Act, 1930 goods means every kind of movable property other than auctionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale under the contract of sale. 6. With effect from 01.07.2012 Section 65B (25) of the Finance Act, 1994 defines goods as follows :- goods means every kind of movable property other than auctionable claim and money and includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for (a) the receipt, consumption and inventory of inputs used .. (b) the receipt and use of input service (i) in or in relation to the manufacture of exempted goods and their clearance upto the place of removal; (ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal; (iii) for the provision of exempted services; and (iv) for the provision of output services excluding exempted services and shall take Cenvat credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b) 12. According to Department, the appellant has availed cenvat credit of service tax paid on common input services such as Banking and Other Financial Services, Chartered Accountant Service, telecommunication Service, Security Agency Service etc. used for providing taxable services (ITSS) as well as exempted service (trading of secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice has been issued on a misconception of facts and law, alleging that the appellant is engaged in the business of trading. The appellant does not engage in buying or selling of securities for any other person. They only invest their income by buying and selling of shares. All these investments is appropriately disclosed in their financial statements. Their financial statements for the year ending 31st March 2011 which was referred to by the Ld. Consultant to substantiate their argument that they have only invested money in mutual funds is as under : 16. The show cause notice alleges that the buying and selling of shares / mutual funds is an activity of trading done by the appellant. The appellant engages other brokers / agents for sale and purchase of their shares in the stock exchange. They do not engage in any activity of trading of goods / securities for other and is not providing any such service. As the appellant is not providing any exempted services, they are not liable to maintain separate accounts. The demand raised alleging that the appellant is also engaged in providing exempted services is factually and legally erroneous. 17. It is submitted that the issue stands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant for the disputed period. A sample of the financial statement for the year 2010-11 has been extracted above. In such financial statement the amount invested in mutual funds is shown under the heading purchase of money market mutual funds . The profit received from sale of mutual funds is shown as proceeds from sale of money market mutual funds . These fall under the main heading cash flow from investing activities . The appellant has no where accounted the income from purchase and sale of securities under the head of trading . 23. The appellant is engaged in providing Information Technology Software Servies and Business Support Services. They are not engaged in providing purchase and sale of mutual funds / securities. They are not licensed for engaging in such activities and do not have permissions from the Stock Exchange or SEBI for engaging in the activity of trading or shares / securities of others. The income received by the appellant is construed by the department as consideration received from trading of securities / shares. It is not a consideration received for providing any service. It is the surplus (capital gains) received from investment of income. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot engaged in trading of goods / securities. 25. The issue stands decided by the Tribunal in the case of M/s. Instakart Services Pvt. Ltd. (supra) . The Tribunal after detailed discussion has held that the investment income cannot be held to be trading of goods so as to demand 6% value under Rule 6 (3) (iii) of CCR 2004. The relevant paras reads as under : 5. Heard both sides and perused the records. The issues involved in the present appeal for determination are: (i) whether the amount 6% or 7% on is payable on the differential value of mutual fund investment and realization under Rule 6(3)(i) of CCR, 2004 being an exempted service; (ii) amount recovered from the employees in lieu of service period on leaving the employment is leviable to Service Tax. 6. The appellants are investing their surplus in mutual funds and not traded the same as securities. The Revenue considering such investment in mutual fund which later sold by the appellant, as trading in goods, accordingly is an exempted service, hence demanded 6% / 7% of the value under Rule 6(3)(i) of the CCR, 2004 as common input services were used in providing taxable services and exempted service. We find that this issue is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided all the records to the Department during the course of investigation and has not suppressed any material fact from the Department and in view of the various decisions relied upon by the appellant, extended period cannot be invoked where the Revenue s case is based on Balance Sheet and income return and other records of the assessee. In view of my discussion above, I am of the considered view that the impugned order is not sustainable in law and the same is set aside by allowing the appeal of the appellant. 6.1 The laid down principle has been followed subsequently by the Tribunal in Ambuja Cement Ltd. s case (supra) and United Racing and Blood Stock Breeders Ltd. (supra). No contrary decision has been placed by the Revenue. 6.2 Thus, following the said precedents, it can safely be inferred that the investment in mutual funds by the appellant cannot be considered as an activity involving exempted services nor sale/trading of exempted goods. Thus, the demand on this count cannot be sustained. 26. Similar view was taken by the Tribunal in the case of M/s. Ponni Sugars Erode Ltd. (supra). Relevant paras read as under : 3. On the issue of earning dividend income from the invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than those in the negative list, which are provided or agreed to be provided, by one person to another. Exempted service, although exempted , nevertheless should satisfy the ingredients of service in the first place. 14. It is clear from Rule 6(1) of the Cenvat Credit Rules, that reversal of CENVAT Credit is warranted only where the output is an exempted service . In this regard, it is important to note that for an activity to qualify as exempted service , it should first be a service . Prior to the negative list tax, was leviable not on any service but only on a taxable service , as referred by the Finance Act, 1994. With the introduction of the negative list service was defined under Section 65 B(44). Section 65B (44) of the Finance Act, is reproduced hereunder for ready reference: Section 65B. Interpretation- In this Chapter, unless the context otherwise requires:- (44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely, (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner 15. In this case, by making ..... X X X X Extracts X X X X X X X X Extracts X X X X
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