Pan Bahar Ltd vs C.S.T., Delhi

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes

Application No.ST/STAY/60470/2013-CU[DB]

Appeal No.ST/59758/2013-CU[DB]

[Arising out of Order-in-Appeal 153/ST/DLH/2013, dated 24.06.2013 passed by the C.C.E. (Appeals), Delhi-I]

M/s. Ashok & Co.

Pan Bahar Ltd. Appellant

Vs.

C.S.T., Delhi Respondent

Appearance

Mr. Vishal Kumar, Advocate - for the appellant

Ms. Suchitra Sharma, DR - for the respondent

CORAM: Honble Justice G. Raghuram, President

Honble Mr. R.K. Singh, Member (Technical)

Final Order No.53013/2015, dated 07.08.2015

Per Mr. R.K. Singh :

Stay application along with appeal has been filed against Order-in-Appeal dated 24.06.2013, which upheld the Order-in-Original dated 29.02.2012 in terms of which service tax demand of Rs.11,48,657/- along with interest and penalties was confirmed on the ground that the appellant had received an amount of Rs.1,04,42,000/- from M/s. Zealous Financial Services (P) Ltd. as commission during the period 2007-08 for mobilising customers to invest in LIC Index Nifty Fund (LIC) and therefore was liable to pay service tax under Business Auxiliary Service (BAS) but did not do so.

2. The appellant has essentially contended that (i) it was an agent of M/s. Zealous Financial Services (P) Ltd., M/s. Zealous Financial Services (P) Ltd. was a LIC distributor and got brokerage from LIC out of which M/s. Zealous Financial Services (P) Ltd. gave mutually pre-agreed brokerage to the appellant for providing service of distribution of mutual fund and therefore the service tax liability was on the recipient of service under Rule 2(1)(d)(vi), which reads as under:-

Rule 2(1)(d)(vi) in relation to business auxiliary service of distribution of mutual fund by a mutual fund distributor or an agent, as the case be, the mutual fund or asset management company, as the case may be, receiving such service.

(ii) There was no suppression or wilful mis-statement on its part and therefore extended period of limitation cannot be invoked. It however admitted that as an agent/sub-agent, it was engaged in the business of mobilising the customers to invest in LIC and is not engaged in mutual fund distribution per se. (iii) It cited the judgement of CESTAT in the case of Foto Flash Vs. CST, Bangalore [2008 (9) STR 462 (Tri.  Bang.)] to state that if the main contractor discharges the service tax liability, there is no need for sub-contractor to pay the service tax. It also cited the judgement of CESTAT in the case of Synergy Audia Visual Workshop Pvt. Ltd. Vs. CST [2008 (10) STR 578] and some other familiar judgements with regard to non-invocation of extended period in the absence of wilful mis-statement/suppression of facts stating that it was under bona fide belief that it was not liable to service tax.

3. Ld. Departmental Representative, on the other hand, stated that the appellant was not a distributor of mutual fund or an agent of such distributor and therefore Rule 2(1)(d)(vi) is not applicable and there was no confusion about the taxability of service rendered by the appellant.

4. As the matter was heard extensively, both parties agreed that the appeal can be disposed of. Accordingly, we proceed to dispose of the appeal waiving the requirement of pre-deposit.

5. We have considered the contentions of both sides. We find that the appellant was receiving commission only for mobilising customers to invest in LIC Index Nifty Fund through M/s. Zealous Financial Services (P) Ltd. It was not in any way acting as an agent of M/s. Zealous Financial Services (P) Ltd. Indeed the appellant has not given any documentary evidence to the effect that it was a mutual fund distributor or agent thereof. The appellant was not registered as a mutual fund distributor or agent thereof as required under SEBI Regulations. Indeed, SEBI, vide Circular No.MFD/CIR/20/ 23230/2002, dated 28.11.2002 made registration of intermediaries compulsory for selling or marketing of mutual funds. The relevant portion of the said circular is reproduced below:-

As you are aware, SEBI circular No.MFD/CIR No.10/310/01 dated September 25, 2001 stipulates inter alia that all distributors and agents of mutual funds units should pass the AMFI certification examination and follow the provisions of SEBI (Mutual funds) Regulations and Guidelines including code of conduct. Further, SEBI Circular No.MFD/CIR/210/2002 dated June 26, 2002 inter-alia required them to also follow code of conduct as recommended by AFMI.

It has since been decided in consultation with AMFI that all intermediaries engaged in selling and marketing of mutual funds units (distributors, agents, brokers, sub-brokers or called by any other name, whether individuals or of any other organisation structure) shall be registered with AMFI by March, 31, 2003. Such registration shall be subject to passing of certification examination and adherence to guidelines as specified by SEBI and AMFI from time to time.

Thus, the appellant was not distributor of mutual fund or agent thereof. It was only promoting and marketing the services provided by M/s. Zealous Financial Services (P) Ltd. It was in no way involved in distribution of the said mutual fund. Thus, the service rendered by the appellant was covered under BAS [Section 65 (19) of Finance Act, 1994]. CESTAT judgement in the case of Raj Ratan Castings Pvt. Ltd. Vs. CCE, Kanpur [2012 (25) STR 481 (Tri.  Del.)] is not applicable in the present case because in that case, the commission was earned by a mutual fund distributor while the appellant was not a mutual fund distributor. Indeed vide letter dated 18.10.2010, the appellant had admitted that it was a commission agent and was availing the benefit of Notification No.13/2003-ST, which exempted BAS rendered by a commission agent from the whole of service tax. Obviously, with the rescinding of the said exemption Notification, the appellant became liable to pay service tax.

6. The fact that the appellant was availing of the benefit of Notification No.13/2003-ST on BAS provided by it being a commission agent, it was obviously aware that with the rescinding of the said Notification, the service rendered by it was no longer exempt. It is thus evident that it deliberately chose not to start paying service tax and its contention that it was under bona fide belief that it was not liable to service tax is totally untenable. Thus, suppression of facts with intention to evade service tax is established and evident in this case. In these circumstances, none of the judgements cited by it come to its rescue.

7. In the light of the foregoing analysis, we do not find any merit in the appeal and therefore the same is dismissed. The stay application filed by the appellant also stands disposed of.

(Justice G. Raghuram)

President

(R.K. Singh)

Member (Technical)

SSK

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