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TMI Blog2024 (10) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 2(e) of the Credit Rules, the activity has to first qualify as a service . Section 65B(44) of the Finance Act stipulates that service means any activity carried out by a person for another for consideration, and includes a declared service, but excludes a transfer of title in goods or immovable property by way of sale or gift - there has to be a service provider who provides a service to the recipient in lieu of consideration. The department has failed to substantiate that investment in mutual fund by the appellant involves a service rendered by a service provider to a service recipient. Thus, the activity undertaken by the appellant would not amount to service under section 65B(44) of the Finance Act. It would, therefore, not be necessary to examine the alternative submissions raised by learned counsel for the appellant that reversal of proportionate credit of common input services utilized for rendition of exempted service along with interest, in terms of rule 6(3)(ii) read with rule 6(3A) of Credit Rules would be sufficient compliance of rule 6 of the Credit Rules. Extended period of limitation - HELD THAT:- The impugned order holds that it is because of the audit that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and redeemed it at the end of the same month. 3. An audit was conducted of the records of the appellant and it was noticed that the appellant was engaged in trading of mutual funds to the extent of Rs. 6,22,20,898/- as Dividend Income on Current Investment under the head of Other Income . The department formed a view that redemption of mutual funds qualifies to be trading of goods , which is an exempted service in terms of the exclusion under the negative list warranting proportionate reversal of credit availed on common input services such as chartered accountancy services , laptop and computer maintenance services , phone and internet services , and SAP IT services under rule 6 of the Credit Rules. 4. This led to the issue of a show cause notice dated 10.04.2018 to the appellant in earlier proceedings to recover CENVAT credit of Rs. 1,38,99,600/- with interest and penalty under the relevant provisions of the Finance Act for the period from April 2012 to March 2015. The present proceedings relate to the subsequent period from April 2015 to March 2016. The appellant filed a detailed reply to the said show cause notice and denied the allegations. The Additional Commissioner, by or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to be made. In support of this contention reliance has been placed on the following decisions: (a) M/s. Ambuja Cements Ltd. vs. Commissioner of Customs, Central Excise GST, Nagpur [2023 (5) TMI 806- CESTAT Mumbai]; (b) Ace Creative Learning Pvt. Ltd. vs. Commissioner of Central Tax, Bengaluru South GST Commissionerate [2021 (4) TMI 687 CESTAT Bangalore]; (c) M/s. Tata Sons Ltd. vs. Commissioner of Service Tax-I, Mumbai (vice-Versa) [2022 (11) TMI 325 CESTAT Mumbai]; and (d) Space Matrix Design Consultants Pvt. Ltd. vs. Commissioner of Central Tax, Bangalore North [2019 (4) TMI 1599 CESTAT Bangalore]; (ii) The activity of investment in mutual funds cannot be termed as a service for the purposes of the Finance Act; (iii) Reversal of proportionate credit of common input services utilized for rendition of exempted service along with interest, in terms of rule 6(3)(ii) read with rule 6(3A) of Credit Rules, has been held to be sufficient compliance of rule 6 of the Credit Rules; (iv) The extended period of limitation could not have been invoked; and (v) Penalties could not be imposed nor interest could be levied. 10. Shri Sanjeev Kumar Ray, learned authorized representative appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale and purchase of the securities. When the units of mutual funds are redeemed, the mutual funds units cease to exist. Thus, investment activities undertaken by the appellant would be different from trading in securities . 16. In this connection, reference can be made to the decision of the Tribunal in Ambuja Cements . The Tribunal noticed the view of the department in paragraphs 2.3 and 2.4 and the said paragraphs are reproduced below: 2.3 During the course of audit, from the Annual Reports of ACL for the period 2011, 2012, 2013 and 2014, it was noticed that they were engaged in 'Trading of Securities'. From ACL's cash Flow Statement it was evident that they purchase and sell current Investments viz., Mutual Funds ('Securities'), reflected in their Annual Reports under the Schedules for Current Investments and Non Current investments. 2.4 The activity of purchase and sale, i.e., trading, of units of mutual fund schemes and equity shares by ACL is nothing but trading of Securities'. Now, as 'goods' include 'Securities' and 'trading of goods' is an exempted service w.e.f. 01.07.2012 as per Section 66D of the Finance Act, 1994, the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reversal of credit was not required to be made. 20. Even otherwise, the activity of investment in mutual fund cannot be termed as service under the Finance Act. For an activity to fall under the ambit of exempted service under rule 2(e) of the Credit Rules, the activity has to first qualify as a service . Section 65B(44) of the Finance Act stipulates that service means any activity carried out by a person for another for consideration, and includes a declared service, but excludes a transfer of title in goods or immovable property by way of sale or gift. Thus, there has to be a service provider who provides a service to the recipient in lieu of consideration. The department has failed to substantiate that investment in mutual fund by the appellant involves a service rendered by a service provider to a service recipient. Thus, the activity undertaken by the appellant would not amount to service under section 65B(44) of the Finance Act. 21. It would, therefore, not be necessary to examine the alternative submissions raised by learned counsel for the appellant that reversal of proportionate credit of common input services utilized for rendition of exempted service along with interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words eighteen months , the words five years had been substituted. 27. It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within eighteen months from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice. 28. The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had suppressed facts with an intent to evade payment of service tax was clearly upon the department. It was necessary for the department to illustrate any positive act on the part of the appellant. According to the appellant, it was under a bonafide belief that it was not liable to pay service tax and the matter also involved interpretation of various provisions of the Finance Act as well as the services rendered to the SEZ Units and to the STPI Units. The appellant had been filing the service tax returns and an audit of the records of the appellant had also been conducted in 2010 for the period 2006-07 to 2009-10. The show cause notice was, however, issued on 19.10.2011 after a substantial lapse of time. 31. In this connection, it would be pertinent to refer to the judgment of the Supreme Court in Commissioner of C. Ex. Customs vs. Reliance Industries Ltd. [2023 (385) E.L.T. 481 (S.C.)] . The Supreme Court held that if an assessee bonafide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be malafide. If a dispute relates to interpretation of legal provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d period of limitation can be invoked. 33. It is not possible to accept this contention as such a contention was repelled by the Tribunal in M/s. GD Goenka Private Limited vs. Commissioner of Central Goods and Services Tax, Delhi South [2023 (8) TMI 995 CESTAT New Delhi] . The relevant portions of the order are reproduced below: 19. It has also been pointed out that but for the audit, the allegedly irregularly availed CENVAT credit would not have come to light. It is incorrect to say that but for the audit, the alleged irregular availment of CENVAT credit would not have come to light. It is undisputed that the appellant has been self-assessing service tax and filing ST-3 Returns. Unlike the officers, the assessee is not an expert in taxation and can only be expected to pay service tax and file returns as per its understanding of the law. The remedy against any potential wrong assessment of service tax by the assessee is the scrutiny of the Return and best judgment assessment by the Central Excise Officer under section 72. This section reads as follows: 72. Best judgment assessment. If any person, liable to pay service tax, (a) fails to furnish the return under section 70; (b) havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportance of scrutiny of returns was also highlighted by Dr. Kelkar in his report on Indirect Taxation [Report of the Task Force on Indirect Taxation 2002, Central Board of Excise and Service Tax, Government of India. ] . The observation made in the context of Central Excise but also found to be relevant to Service Tax is reproduced below: It is the view that assessment should be the primary function of the Central Excise Officers. Self assessment on the part of the taxpayer is only a facility and cannot and must not be treated as a dilution of the statutory responsibility of the Central Excise Officers in ensuring correctness of duty payment. No doubt, audit and anti-evasion have their roles to play, but assessment or confirmation of assessment should remain the primary responsibility of the Central Excise Officers. (emphasis supplied) 22. Therefore, to say that had the audit not been conducted, the incorrect availment of CENVAT credit would not have come to light is neither legally correct nor is it consistent with the CBEC s own instructions to its officers. (emphasis supplied) 34. The impugned order, therefore, cannot be sustained. It is, accordingly, set aside and the appeal i ..... 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