Case Details: Godfrey Phillips India Ltd. vs. Commissioner, Central Tax, New Delhi (2026) 39 Centax 6 (Tri.-Del)
Judiciary and Counsel Details
- Justice Dilip Gupta, President & Shri P.V. Subba Rao, Member (T)
- S/Shri S.C. Vaidyanathan & Shivam Batra, Advocates, for the Appellant.
- Shri Aejaz Ahmad, Authorised Representative, for the Respondent.
Facts of the Case
The appellant-assessee was providing various taxable services and was registered as an Input Service Distributor with the service tax department. It availed CENVAT credit on common input services and distributed such credit to its manufacturing units in terms of the Cenvat Credit Rules, 2004, after undertaking proportionate reversal as per Rule 6(3)(ii) read with Rule 6(3A). The assessee had invested surplus funds in mutual fund schemes. During the audit, the department observed that activities relating to the redemption of such mutual funds were undertaken without maintaining separate accounts. A show cause notice was issued alleging that redemption of mutual funds constituted an exempted service in the nature of trading of securities under section 66D (e) of the Finance Act, 1994, and proposing recovery of CENVAT credit, along with interest and penalty, by invoking the extended period of limitation. The adjudicating authority confirmed the demand and imposed penalties, holding that such activity amounted to trading of goods. The assessee challenged the findings and contended that the redemption of mutual funds did not constitute trading in securities, placing reliance on judicial precedents. The matter was accordingly placed before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
CESTAT Held
The CESTAT held that the activity of subscription and redemption of mutual fund units could not be regarded as an activity of sale and purchase of securities and therefore could not be treated as trading. It observed that such activity would not fall within the scope of trading of goods or securities so as to qualify as an exempted service under section 66D(e) of the Finance Act, 1994. The tribunal held that, consequently, the assessee was not required to undertake proportionate reversal of CENVAT credit under Rule 6 of the Cenvat Credit Rules, 2004. It further held that the extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994 could not have been invoked in the facts of the case. In view of the binding precedent relied upon, the tribunal concluded that the adjudicating authority had erred in confirming the demand along with interest and penalty. Accordingly, the impugned order was set aside and the appeal was allowed.
List of Cases Cited
- Ace Creative Learning Pvt. Ltd. v. Commissioner — 2021 (51) G.S.T.L. 393 (Tribunal) — Noted [Para 13]
- Ambuja Cement Ltd. v. Commissioner — 2023 (5) TMI 806-CESTAT Mumbai — Noted [Para 12]
- Siegwork India Pvt. Ltd. v. Commissioner — (2024) 23 Centax 118 (Tri.-Del) — Followed [Paras 9, 11, 15, 16]
- Space Matrix Design Pvt. Ltd. v. Commissioner — 2019 (4) TMI 1599-CESTAT Bangalore — Noted [Para 13]
- Tata Sons Ltd. v. Commissioner — 2022 (11) TMI 225-CESTAT Mumbai — Noted [Para 13]
