2026-VIL-868-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Investment in Mutual Fund Units - Reversal of CENVAT Credit - Whether investment in and redemption of mutual fund units constitutes trading of goods under Section 66D(e) and an exempted service under Rule 2(e) of the CENVAT Credit Rules, 2004, thereby rendering the assessee liable to reverse CENVAT Credit availed on common input services – HELD – Before any activity can be classified as an “exempted service? under Rule 2(e) of the CENVAT Credit Rules, 2004, it must first constitute a “service” within the meaning of Section 65B(44) of the Finance Act, 1994. The service must involve an activity carried out by one person for another for consideration, requiring two distinct parties and a service provider-recipient relationship. The mere investment in mutual fund units and their subsequent redemption involves no rendering of any activity for any other person for consideration. The Revenue failed to identify any other party to whom the assessee rendered a service – Further, upon redemption, mutual fund units cease to exist rather than being transferred to any third party, and therefore no transfer of title, which is essential to trading, takes place - The extended period of limitation is inapplicable. The activity in question does not amount to a service under Section 65B(44) of the Finance Act, 1994, and consequently cannot be classified as an exempted service under Rule 2(e) of the CENVAT Credit Rules, 2004 – The demand for service tax reversal of CENVAT Credit, interest, and penalty is set aside. The appeal is allowed
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GSTAT Appeal filed wrongly...
By CA Vivek Jalan

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