2021 (7) TMI 735 - CESTAT MUMBAI - Service Tax

Head Note / Extract:
Valuation - life insurance business - treatment of surrender value’ exacted, on premature exit, from holders of ‘unit linked insurance policy (ULIP)’as consideration for provision of service - whether the ‘surrender charge’ is consideration for a service that comes within the ambit of the levies pertaining to the insurance sector during the period of dispute? HELD THAT:- It is common ground that upon an insured ceasing to comply with the obligation to pay the premium at stipulated intervals, the policy is deemed to be surrendered and the holder entitled to ‘surrender value’ representing the portion of the receipts that had been invested in the appropriate funds. There is also no dispute that the amount disbursed is lesser than the value of the funds on the date of surrender. The proposition of Learned Authorized Representative is that the amount so withheld is consideration for services rendered in connection with the fund during the period of investment. The recall order was actuated by the merit of the plea in rectification proceedings that taxability under one of the enumerations in section 65(105) of Finance Act, 1944 appeared to have been considered in the decision of the Tribunal that ruled in favour of the assessee. Rectification that calls for recall remains as under disposal and attains consummation with substitution of the recalled order. It would be presumption for Learned Authorised Representative to conceive that such recall must, inevitably, lead to a contrary opinion on the part of the Tribunal - Mere reference to the recalled decision does not, ipso facto, render the finding to be bereft of value as precedent. Reliance placed in the case of SHRIRAM LIFE INSURANCE COMPANY VERSUS CC, CE & ST, HYDERABAD -IV AND CC, CE & ST, RANGAREDDY -GST (VICE-VERSA) [2019 (2) TMI 868 - CESTAT HYDERABAD] where it was held that the transaction in question is not a service at all but the transaction in a actionable claim hence could not have been by any stretch of imagination covered under any of the specified taxable heads of service even for the period prior to 01.07.2012 - the demand of service tax on the surrender charges for the period in question is unsustainable. Appeal allowed - decided in favor of appellant.