Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home

2019 (12) TMI 121

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... would be dealt with by the Govt. either being refunded to the person who bears the burden or being transferred to the consumer welfare Fund - The contractual obligation to reimburse the tax paid by the person designated to do so by law is, thus, not tax collected in any manner warranting recourse to Section 73A of Finance Act, 1994 - The demand under Section 73 A (2) confirmed qua the amount recovered from the agent as service tax is held not sustainable and as such is liable to be set aside. Demand of service tax - reimbursements paid to the insurance agents of expenses for trainings and overseas trainings - period of 2007-08 to 2012-13 - HELD THAT:- A combined reading of Section 67 of Finance Act and Clause (ix) of Rule 6(1) of the Valuation Rules makes it evident that only such value or commission or fee would form part of the gross amount, subject to Service Tax, which is in relation to the insurance auxiliary service provided by the insurance agent - it becomes clear that even the overseas expenditure in the nature of training and cost /expenses incurred by the appellant in relation to the same cannot be said to be for solicitation or procurement of insurance business, but exc .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... er-valuation of taxable services as well as of Unauthorized Collection of Service Tax from their agents that the matter was investigated. Department observed as follows:- (1) Service tax amounting to ₹ 100,05,78,705/- as was recovered by the appellants from their Insurance Agents as Service Tax for the period 2006-07 upto June, 2012 has not been deposited in the Government Exchequer. As is otherwise required under Section 73A (2) of Finance Act, 1994. (2) The Service Tax amounting to ₹ 12,17,50,892/- in respect of reimbursements paid to the insurance agents of expenses for trainings and overseas trainings during the period of 2007-08 to 2012-13 was also not paid. (3) The Department also alleged that an amount of ₹ 2,27,17,491/- has not been paid by the appellants due to 4% debit adjustment from the insurance commission paid to their insurance/corporate agents during the year 2012-13. Three of these amounts were proposed to be recovered from the appellant vide a Show Cause Notice bearing No. 1874 dated 22.04.2013. Recovery of interest at the appropriate rate and imposition of penalty was also proposed vide the said show cause notice. The said proposal was fully con .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... n this aspect is therefore prayed to be set aside. Learned Departmental Representative while rebutting these arguments has submitted that taxable service in case of life insurance is defined under Section 65 (105) (zy) and Section 65 (55) of the Act defines insurance auxiliary services. Both these provisions make it clear that service provider for the services is the insurance agent and the recipient thereof is either policy holder or the insurer or reinsurer. As per Rule 2 (1) (d) (A) it is the recipient of Insurance Auxilliary Service who is liable to pay the service tax which otherwise is the principle of economic theory. None of these provisions provide for any contract about sharing the service tax liability. Hence the moment there is a contract of sharing the amount of service tax paid it is Section 73 A (2) which comes into picture. As a result, there is no infirmity in the demand confirmed. 7. After hearing both the parties qua this issue we are of the opinion as follows:- 8. From the arguments of both the parties to this demand, we opine that the issue to be adjudicated herein is : whether assessee can enter into a contract to shift the incidence of his service tax liabili .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... er, representing service tax, is required to be deposited with the Government. Sub-section (6) lays down where any service tax amount left after adjustment, such amount either be credited and deposited in Consumer Welfare Fund or be refunded to the person who has borne the incidence of said amount, in accordance with the provisions of Sec.11B of the said Act and such person may make an application under that section within six months from the date of public notice to be served by the central excise officer for refund of the such surplus amount. 10. A careful reading of the said self contained provisions of Sec. 73A, and in particular Sub. Sec.(6), it can be safely inferred that the Government cannot retain the amount in excess of applicable service tax collected and deposited with the Govt., but after adjustment of the tax levied and payable in relation to the service either by the service provider or the service recipient, required to transfer the excess amount to the Consumer Welfare Fund or refund it to the person who borne the incidence of duty. In other words, in the event, initially the service tax has been paid by the service receiver and later it has been collected from the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ion 11D. These may be case where goods are removed/cleared without effecting their sale. In such a case, Section 11D is not attracted. It is attracted only when goods are sold. The purport of this section is in accord with Section 11B and cannot be faulted. 11. Similar issue has been adjudicated by this Tribunal in the case of HDFC Standard Life Insurance Company vs. Commissioner, Central Excise reported as 2017 (49) S.T.R. 301 (Tribunal- Mumbai) wherein the facts were similar to the one in the present case and the Department also had raised demand of service tax recovered from the insurance agents. The Tribunal while setting aside the demand held contribution partial or entire, to the tax liability in an agreement with the provider of service is not forbidden by law to the extent that the contributor has not ventured to avail credit of such contributions and there is no detriment to the public revenue. These kind of observations have already been settled by Hon ble Apex Court and even by Larger Bench of this Tribunal in the case of Mafatlal Industries (supra) and Unison Metals (Supra) though with respect of Section 11D of Central Excise Act, 1944. The Section 11 D of Central Excis .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nt from entering into an agreement with the respondent handling contractor that the burden of any tax arising out of obligations of the respondent under the contract would be borne by the respondent. 12. The contractual obligation to reimburse the tax paid by the person designated to do so by law is, thus, not tax collected in any manner warranting recourse to Section 73A of Finance Act, 1994. 13. Thus, we observe that the impugned issue is no more res-integra as already discussed above. Resultantly, we are of the opinion that the demand under Section 73 A (2) confirmed qua the amount recovered from the agent as service tax is held not sustainable and as such is liable to be set aside. (B) The Service Tax amounting to ₹ 12,17,50,892/- in respect of reimbursements paid to the insurance agents of expenses for trainings and overseas trainings during the period of 2007-08 to 2012-13 was also not paid. 14. Ld. Counsel to the appellant has submitted that the reimbursement of expenses for attending training is not liable to Service Tax under reverse charge because training is provided to the insurance agent as per the statutory mandate of Regulation 5 of IRDA Regulation. As per this .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... be said to be treated as a consideration for service. The proposed demand for ₹ 12,17,50,892/- for the period from October 2007 to March, 2013 is therefore, not sustainable. Accordingly, is set aside. (C) No Service Tax is payable on 4% debit adjustment made by the appellant: 19. Ld. Counsel for the appellant submitted that service tax is consumption base tax and is imposed upon gross value of consideration for services. In the present case insurance agents never owed any amount to the appellants which were set of against the commission paid to the insurance agents. The 4% debit adjustment from the commission to be paid to such agent is akin to the discount as per the agreed terms with such agents, as such, cannot be made taxable. It is impressed upon that Rule 3 of Valuation Rules is not applicable in the instant case. Ld. Counsel has relied upon Mccann Erickson (India) Pvt. Ltd. v. Commr of Service Tax. [2008 (10) S.T.R. 365 (Tri. - Del.)] & Bharti Infotel Ltd. v. CCE, Bhopal, [2006 (1) S.T.R. 107 (Tri.- Del.)] 20. Ld. D.R. while rebutting these arguments has submitted that debit adjustment of commission paid subsequently as discount that too selectively cannot be allow .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Site Map - Recent || Site Map ||