TMI BlogLeviability of Service Tax to (DICGC) has been reexamined in the light of observations received from Chief Commissioner (LTU), MumbaiX X X X Extracts X X X X X X X X Extracts X X X X ..... 9 and 13.04.2009 had earlier clarified that the activities of DICGC would not be leviable to service tax. The issue has been reexamined in the light of observations received from Chief Commissioner (LTU), Mumbai vide letter F.No. LTU/MUM/CX/DICGC/23/2008 Pt. I dated 21.07.2011. Background: 2. Section 65(105) (d) of the Finance Act, 1994 ( Finance Act, 1994 ) imposes service tax on "general insurance business". Section 65(49) of the Finance Act, 1994 states that the term "general insurance business" has the meaning assigned to it in Section 3(g) of General Insurance Business (Nationalization) Act, 1972. (GIBA, 1972). Section 3(g) of GIBA 1972 states. '"general insurance business' means fire, marine or miscellaneous insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory definitions, the letters from the Ministry dated 24.02.2009 and 13.04.2009 have concluded that the activities of DICGC do not fall within the ambit of the term "general insurance business". Three reasons have been adduced for reaching this conclusion: (i) Firstly, it has been concluded that the activity of DICGC cannot fall under Section 2 (13B) of the Insurance Act, 1938 because Section 43 of DICGC, Act, 1961 excludes application of Insurance Act, 1938 to DICGC. The reasoning then goes that if the activity does not Call under Section 2 (13B) of the Insurance Act, 1938 then it cannot fall under Section 3(g) of GIBA 1972 and consequently it cannot fall under Section 65(105)(d) of the Finance Act, 1994. (ii) Even if we are able t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on the activity of DICGC if the activity falls within the scope of Section 3(g) of GIBA, 1972. Section 36 (1) (e) of the GIBA, 1972 provides a strong basis for averring that the legislature has viewed the activity of DICGC as that of "general insurance business". Section 36 (1) (e) of the GIBA, 1972 is as follows: 36. Exemptions. (1) Nothing contained in this Act shall apply in relation to- (e) the insurance business carried on by the Export Credit and Guarantee Corporation Limited and the Deposit Insurance Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961) The very fact that legislature deemed it necessary to insert this exclusion in the GIBA, 1972 implies that the legislature was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1988. The DICGC Act gives no protection from the applicability of the Finance Act, 1994. Finance Act, 1994 has merely borrowed definitions from other legislations. The borrowed definitions, after the borrowing, constitute an integral part of the Finance Act, 1994 and when they are applied they are applied as provisions of Finance Act, 1994 and not as provisions of the legislation from which they have been borrowed. In the authoritative text "Principles of Statutory Interpretation" by G P Singh (ninth edition) page 273 it has been stated: "Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance business" given in Section 2 (13B) of the Insurance Act, 1988. This contention has sprung from a misapprehension of law. Supreme Court in a catena of judgments has determined transactions done under compulsion of law (statutory transactions) to be contractual transactions. The reasons for treating statutory transactions as contractual transactions are as follows: Firstly, consent as per- section 14 of the Indian Contract Act, 1872 is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake which are defined in sections 15, 16, 17, 18 respectively. Since compulsion of law is not coercion within the meaning of section 15, so under the provisions of Indian contract. Act, 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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