Custom, Excise & Service Tax Tribunal
N J India Invest Pvt Ltd vs Surat-I on 5 June, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
AHMEDABAD
REGIONAL BENCH, COURT NO. 2
SERVICE TAX APPEAL NO. 11758 OF 2014
(Arising out of OIO-SUR-EXCUS-001-COM-049-13-14 dated 31/12/2013 passed by
Commissioner of Central Excise-SURAT-I)
N J INDIA INVEST PVT LTD
902, 8th Floor, Tower-b,
Udhna Udyog Nagar Commercial Complex, Road No. 10, Appellant
Udhna,
Surat, Gujarat.
Vs.
COMMISSIONER OF CENTRAL EXCISE-SURAT-I Respondent
New Building...Opp. Gandhi Baug, Chowk Bazar, Surat, Gujarat-395001 Appearance:
Present for the Appellant :MS. Puloma Dalal, Chartered Accountant Present for the Respondent: Shri Tara Prakash, Deputy Commissioner (AR) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER ( JUDICIAL ) HON'BLE MR. C. L. MAHAR, MEMBER ( TECHNICAL ) Final Order No. 11148/2024 DATE OF HEARING: 08.02.2024 DATE OF DECISION: 05.06.2024 RAMESH NAIR The brief facts of the case are that the appellant primarily involved in the activity of marketing and distribution of mutual fund units the appellant received the Commission in relation to sale of the mutual fund of various asset management Company. In addition to the normal Commission they also get incentive for promotion and marketing of mutual fund. The case of the Department is that other than the normal Commission in relation to distribution of mutual fund on behalf of the asset management company, the incentive received by the appellant is liable to Service Tax under business auxiliary service. The second issue is that the Appellant also
2|Page ST/11758/2014 -DB publish 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. For this magazine appellant received advertisement from the mutual fund, in this case the department's case is that since, the appellant has given advertisement service by selling of space in their magazine they are liable to pay Service Tax under the category of sale of space or time for advertising sales. The appellant apart from the above activity also under taking training session for the distributors when they are enrolled. The department has demanded Service Tax on activity under commercial or coaching service.
2. Ms. Puloma Dalal, Learned Chartered Accountant appearing on behalf of the appellant submits that as regards the demand on incentive /marketing support received from AMC it is nothing but in relation to distribution of mutual fund of various Asset Management Company (AMC). Therefore, in this case it is the AMC who are required to pay Service Tax under reverse charge mechanism in terms of Section 68 of the Finance Act, 1994 read with the Rule 2(1) (d) (v) of Service Tax Rules. Therefore, the appellant is not liable to pay Service Tax on the incentive received from AMCs, she also submits that after effort made by the Appellant some of the letters were received from AMCs where by it was certified that AMC's are paying Service Tax. Therefore, there cannot be double taxation one is at the recipient and other is from service provider. As regards the Service Tax demand under sale of space for advertising Service, she submits that the advertisement is published in the in house magazine which is exempted as print media therefore, the Service Tax is not payable on these activity. Regarding demand under commercial training or coaching services, she
3|Page ST/11758/2014 -DB submits that the Appellant have provided training with their own network of sub distributors who being enrolled underwent training by way of introductory course which would help them to be self-employed as sub- distributors and therefore the training is in the nature of vocational training which is exempted under Notification No. 24 of 2004-ST dated 10/09/2004. Accordingly, demand under this head is not sustainable. She further submits that the impugned order has confirmed the demand for extended period. However, in the present case all the three issues are legal issue and based on interpretation of various legal provisions, all the transactions have been recorded in the books, the appellant had bona fide belief that they are not required to pay Service Tax therefore in such case there is no suppression of fact or misstatement, etc. with intent to evade Service Tax on the part of the appellant. Therefore, demand for the extended period is not sustainable on the ground of time bar also. She also submits that the penalties are not imposable in the facts of the present case invoking Section 80 of the Finance Act, 1994. In Support of her above submissions she placed Reliance on the following Judgments:-
Raj rattan Casting Pvt. ltd vs. commr. of Cus. & C. Ex., Kanpur 2012 (25) STR 481 (Tri.-Del.) Shrestha Leasing & Finance Ltd. Vs. Commr. of C. Ex. & S.T. Surat-I2023 (68) GSTL 143 (Tri.- Ahmd.) In Re: Shanthala Finance Pvt. Ltd. 2016 (41) S.T.R. 360 (Commr. Appl.) Aker Solutions India Sdn. Bhd. Vs. Pr. Commissioner, Kakinada Commr, Visakhapatnam 2022 (64) G.S.T.L. 240 (Tri. - Hyd.) Reliance Securities Ltd. Vs. Commr. of Service Tax, Mumbai- II2019 (20) G.S.T.L. 265 (Tri. - Mumbai) Commr. Of Cgst & Central Excise Vs Rama Sales And Services 2018 (12) G.S.T.L. 286 (All.) Commr Of Central Excise, Nagpur Vs Media World Enterprises 2015-TIOL-375-CESTAT-MUM
4|Page ST/11758/2014 -DB Fertiplant Engg. Co. Pvt. Ltd. Vs. Commr. of Central Excise, Raigad 2017 (3) G.S.T.L. 312 (Tri. Mumbai) Ashu Export Promoters (P) Ltd. Vs. Commr. Of Service Tax, New Delhi 2012 (25) S.T.R. 359 (Tri. - Del.) WLC College India Ltd. Vs. Commr. Of Service Tax, Delhi 2012 (27) S.T.R. 377 (Tri. - Del.) Vasanth Color Laboratories Ltd Vs. Commissioner Of Service Tax 2022-TIOL-437-CESTAT-BANG Kirloskar Oil Engines Ltd. Vs. Commissioner Of Central Excise, Nasik 2004 (178) E.L.T. 998 (Tri. - Mumbai) Rolex Logistics Pvt. Ltd. Vs. Commissioner Of Service Tax, Bangalore 2009 (13) S.T.R. 147 (Tri. - Bang.) Cabcon India Pvt Ltd Vs. Commr. Of Central Excise, Kolkata-III 2022-TIOL-573-CESTAT-KOL Commissioner Vs. Polycab Wires Pvt. Ltd. 2010 (260) E.L.T. 49 (Guj.) Commissioner Vs. Polycab Wires Pvt. Ltd. 2011 (269) E.L.T A58 (S.C) CCE vs. Shree Soap & Chemical Ind. 2008 TIOL 950 CESTAT-Ahm-
Section 80 invoked-penalty deleted CCE vs. Louis Berger International 2008 TIOL 1758 CESTAT-Del Sharvin vs. CCE, Bhopal 2008 TIOL 1167 CESTAT-Del
3. Shri Tara Prakash, learned Deputy Commissioner (AR) appearing on behalf of the revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both sides and perused the records. We find that as regard to demand on incentive received from various asset management companies against promotion and marketing of mutual fund we find 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
5|Page ST/11758/2014 -DB appellant have referred Rule 2(1)(d)(vi) of Service Tax Rules which is reproduced below :-
"2(1) in these rules, unless the context otherwise requires
(d) Person liable for paying the "Service Tax" means
(vi) in relation to business auxiliary service of distribution of mutual fund by a mutual fund distributor or an agent, as the case may be, the mutual fund or asset management company, as the case may be receiving such service".
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.
4.1 The case of the Department is that the only normal Commission received for distribution of mutual fund is taxable in the hand of the service recipient but in the present case it is additional incentive which is on account of promotion and marketing of the mutual fund, in that case the Service Tax is payable by the appellant being provider of service. We find that as per the 2(1)(d) (vi) there is no distinction given to the normal Commission or fix Commission towards the distribution of the mutual fund and the incentive received for promotion or marketing of the mutual fund. So long any business auxiliary service is provided which is in relation to
6|Page ST/11758/2014 -DB distribution of mutual fund in such case the service provider is not liable to pay Service Tax.
4.2 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, we are of the view that 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.
4.3 The second issue to be decided by us is 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'. The appellant have also submitted a copy of such magazine, on going through the same we find that 'FUNDS WATCH' magazine is for private circulation where in details of various mutual fund is provided for general public in such magazine the advertisement is published. 4.4 The appellant have submitted that under the said head in the fact of the present case Service Tax is not payable in terms of clause (zzzm) Section 65 (105) of the Finance Act, 1995 which reads as under:-
7|Page ST/11758/2014 -DB
65. Definition.-
In this Chapter, unless the context otherwise requires, (105) "taxable service" means any service provided,- (zzzm) to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation.
Explanation 1.- the purposes of this sub-clause, "sale of space or time for advertisement" includes,-
(i) providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones, automated teller machines, internet;
(ii) selling of time slots on radio or television by a person, other than a broadcasting agency or organisation; and
(iii) aerial advertising.
Explanation 2.- the purposes of this sub-clause, "print media" means "book" and "newspaper" as defined in sub-section (1) of section 1 of the Press and Registration of Books Act, 1867;
On the close reading of the above sub clause (zzzm) we find 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.
4.5 The case of the department is that the book published by the appellant where in the sale of space was made trade catalogue as per the encyclopedia the meaning of trade catalogue is given as under :-
"A catalogue designed to present a line of products and to provide information to facilitate the ordering process." 'Catalogue' (source: Advanced Law Lexicon volume 1).
8|Page ST/11758/2014 -DB "A list of books etc.", a complete numeration of items arranged systematically in a pamphlet".
4.6 The trade catalogue designs to present a line of products not to provide information facility, the ordering process. From the above definition of trade colleague, it is clear that any company who wants to give the details of their products such as different quality of products specification thereof to facilitate their prospective Customer for ordering the product for sale is the book which is called trade catalogue. 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, in our considered view 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.
4.7 As regard the third issue that the Revenue has demanded Service Tax under commercial training or coaching service, we find 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,
9|Page ST/11758/2014 -DB 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. Our view is supported by the following Judgments:-
Ashu Export Promoters (P) Ltd. Vs. Commr. Of Service Tax, New Delhi 2012 (25) S.T.R. 359 (Tri. - Del.) WLC College India Ltd. Vs. Commr. Of Service Tax, Delhi 2012 (27) S.T.R. 377 (Tri. - Del.) 4.8 Since, all the 3 issues have been decided by us on merit we are not addressing any other issues raised by the appellant and the same are left open. As per our above discussion and finding the demand confirmed in the adjudication order is not sustained.
5. Accordingly, the impugned order is set aside. Appeal is allowed.
(Pronounced in the open court on 05.06.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) Arpita