Aurtus Consulting LLP’s articles from Aurtus Consulting LLP are most popular:
- within Corporate/Commercial Law topic(s)
Aurtus Consulting LLP are most popular:
- within Corporate/Commercial Law, Energy and Natural Resources, Government and Public Sector topic(s)
Activity of subscription and redemption of units of Mutual Funds cannot be said to be an activity of sale and purchase of the securities and hence does not attract CENVAT Credit reversal.
BRIEF FACTS OF THE CASE
- The assessee was engaged in the business of manufacturing goods and providing services. The surplus profit earned by the assessee was invested in various schemes of Mutual Funds. The assesseemade redemptions as and when required.
- The department confirmed the demand for recovery of CENVAT credit along with interest and penalties observing that the redemption of Mutual Funds is an exempted service as it falls under the ambit of Trading of Goods'' as provided under section 66D(e) of the erstwhile Chapter V of the Finance Act, 1994 warranting reversal of CENVAT credit thereon in terms of Rule 6(3)(i) of the CENVAT Credit Rules 2004.
- Aggrieved by the demand order, the assessee preferred an appeal before the CESTAT, New Delhi.
KEY OBSERVATIONS OF THE TRIBUNAL
- The Tribunal referred to the ruling delivered by the Division Bench of Delhi CESTAT in the case of M/s. Siegwerk India Pvt. Ltd1, wherein it was held that the activity of subscription and redemption of the units ofmutual 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 fund units cease to exist. Thus, investment activities undertaken by the appellant would be different from 'trading in securities'.
- According, it was held that the activity of subscription and redemption of units of Mutual Funds cannot be said to be an activity of sale and purchase of the securities. It would, therefore, not be an activity relating to trading and securities. The activity undertaken by the assessee 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 bemade.
- Thus, the appeal was allowed in favour of the assessee.
To view the full article please click here.
Footnote
1. M/s. Siegwerk India Pvt. Ltd. vs. Commissioner, CGST, Commissionerate, Alwar [ST Appeal No. 53816 of 2018 decided on 01.10.2024 (Tri.-Del.)]
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
