2024 (7) TMI 1401 - AT - Service Tax

Levy of service tax - insurance auxiliary services - insurance agent or not - Reverse Charge Mechanism in terms of rule 2(1)(d)(iii) of the Service Tax Rules 1994 - CENVAT Credit - input service - group health insurance for the employees - Service tax on short account of insurance premium income - Extended period of Limitation. Levy of service tax - insurance auxiliary services - insurance agent or not - Reverse Charge Mechanism in terms of rule 2(1)(d)(iii) of the Service Tax Rules 1994 - HELD THAT - The services rendered by an insurance agent who is duly licensed under section 42 of the Insurance Act to be so to an insurance company in relation to general insurance businesses are taxable as insurance auxiliary services . It is not the case of the department that the Bank is a holder of a license under section 42 of the Insurance Act to act as an insurance agent nor such a finding has been recorded by the Commissioner in the impugned order. In the absence of a license a person cannot be considered as an insurance agent for treating the activities as insurance auxiliary services . The appellant had correctly discharged service tax on business support services and therefore once this service tax stands paid on the transaction it is not open to the department to seek its recovery again. The reason stated by the appellant for discharging service tax under business support services is that the Bank had provided space to the appellant alongwith ancillary facilities such as chairs and desks and these infrastructural support services provided by the Bank are covered under business support services . This service is not liable to tax under Reverse Charge Mechanism. The demand that has been confirmed by the Commissioner under this head cannot be sustained. CENVAT Credit - input service - group health insurance for the employees - HELD THAT - This issue has been decided in favour of the appellant by a Larger Bench of the Tribunal in Reliance Industries Ltd. vs. Commissioner of Central Excise and Service Tax (LTU) Mumbai 2022 (4) TMI 1357 - CESTAT MUMBAI (LB) . Thus the demand confirmed under this head cannot also be sustained. Service tax on short account of insurance premium income - HELD THAT - The appellant has stated that as per the audited trial balance of the Regional Office at Delhi the total premium is Rs. 253, 63, 68, 125/- and because of an error in the Annexure the said trial balance has been recorded as 253, 72, 82, 715/-. The appellant has enclosed the audited trial balance from which it is clear that the total premium is Rs. 253, 63, 68, 125/- and therefore there is no short accounting of premium. The impugned order confirming the demand of service tax on insurance auxiliary service and short account of insurance premium income cannot be sustained nor can the CENVAT credit of group health insurance policy for the employees be denied to the appellant - It is not necessary to examine the contention raised by the learned counsel for the appellant on invocation of the extended period of limitation under the proviso to section 73(1) of the Finance Act. The order dated 15.05.2017 passed by the Commissioner is accordingly set aside - appeal allowed.

Summary

Issues:
1. Demand of service tax under 'insurance auxiliary service' for services received from the Bank.
2. Denial of CENVAT credit of Group Health Insurance policy for employees.
3. Demand of service tax on alleged short account of insurance premium income.

Analysis:

Insurance Auxiliary Service:
The Commissioner confirmed the demand under 'insurance auxiliary services' for the services provided by the Bank to the appellant. However, it was found that the Bank's role was limited to providing space to the appellant for soliciting insurance business, which does not fall under 'insurance auxiliary services' as defined by the Finance Act. The Bank was not licensed as an 'insurance agent' under the Insurance Act, and the appellant correctly discharged service tax under 'business support services'. Therefore, the demand under this head was unsustainable.

Health Insurance Service:
The appellant claimed CENVAT credit for group health insurance for employees, arguing it falls under 'input service'. This contention was supported by a Tribunal decision in Reliance Industries Ltd. vs. Commissioner of Central Excise and Service Tax, Mumbai, establishing that such services are eligible for CENVAT credit. Consequently, the demand for denial of CENVAT credit under this category was not sustainable.

Short Accounting of Insurance Premium:
The appellant refuted the allegation of short accounting of insurance premium, providing evidence of correct reporting in the audited trial balance. The discrepancy was attributed to a clerical error in the annexure, demonstrating that there was no actual short accounting of premium income. Therefore, the demand related to the alleged short accounting was found to be baseless.

Conclusion:
The order confirming the demand for service tax on insurance auxiliary service and the alleged short accounting of insurance premium income was set aside. Additionally, the denial of CENVAT credit for group health insurance policy for employees was overturned. The Tribunal concluded that the appellant's contentions were valid, rendering the impugned order unsustainable. The appeal was allowed, and the Commissioner's order dated 15.05.2017 was overturned on 22.07.2024.