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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 ..... 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 - 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual funds 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proportionate reversal of CENVAT credit is required 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, the activity of subscription and redemption of the units of mutual funds cannot be said to be an activity of 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' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities. The activity undertaken by the appellant would, therefore, not be an exempted service in terms of section 66D(e) of the Finance Act and proportionate 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 submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." (emphasis supplied) 30. The burden of proving that the appellant 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's action of including the value of deemed exports within the value of domestic clearances." (emphasis supplied) 32. The impugned order holds that it is because of the audit that the correct facts came to the notice of the department and so the extended 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility for ensuring that correct amount of service tax is paid rests on the officer even in a regime of self-assessment was clarified by the Central Board of Excise and Customs [CBEC] in its Manual for Scrutiny of Service Tax Returns the relevant portion of which is as follows: 1.2.1A The importance 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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