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2019 (12) TMI 121

..... applicability of Section 73A (2) of Finance Act, 1994 - whether assessee can enter into a contract to shift the incidence of his service tax liability? - HELD THAT:- 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 - What is the objective and purport of the said provision is that any amount in excess of the tax leviable is collected, the said amount should be deposited with the Govt. and the excess amount 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, 1 .....

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..... ed - decided in favor of appellant. - Service Tax Appeal No.52191 of 2015 - Final Order No. 51498/2019 - 15-11-2019 - HON BLE MR. BIJAY KUMAR, MEMBER (TECHNICAL) AND HON BLE MRS. RACHNA GUPTA, MEMBER (JUDICIAL) Mr. Sanjeev Sachdeva, Advocate for the Appellant Mr. Vivek Pandey, Authorised Representative for the Respondent ORDER RACHNA GUPTA: The appellant has assailed the order of Original Adjudicating Authority bearing No.40/2014 dated 29.01.2015. The relevant facts for the adjudication of this appeal are that the appellants are engaged in the business of providing life insurance services and are also registered for Management Consultant Services, Insurance Auxiliary Services, Life Insurance Services, Sponsorship Services and Management of Investment under Unit Linked Insurance Services. Based on an intelligence that the appellants are engaged in under-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, 20 .....

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..... . Union of India (1997) 5 SCC 536 and also the decision of Larger Bench of this Tribunal in the case of Unison Metals Ltd. Vs. CCE, Ahmadabad-I - 2006 (4) S.T.R. 491 (Tri. LB) to impress upon that with respect to the demand it has already been held that the contributions partial or entire, to the tax liability in an agreement with the provider of service is not forbidden by law. Applying the same principle to the present facts, it becomes clear that there can be no demand from the appellant who had paid the Service Tax, however, has entered into an agreement for it to be recovered from its agents. 5. The ld. Counsel relied upon the following Circular and case law:- 1. Circular No. IRDA/F&I/CIR/AML/158/09/2010 dated 24.09.2010; 2. Ruling in M/s HDFC Standard Life Insurance Company Ltd. dated 11.02.2014 passed by the Chairman, IRDA. 6. The demand on 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 p .....

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..... excisable goods or has collected any amount as representing duty of excise on any excisable goods which are wholly exempt or are chargeable to nil rate of duty from any person in any manner, shall forthwith pay the amount so collected to the credit of the Central Government. 9. In addition, we need to know that Section 66 of the Finance Act is the charging Section, which provides for levy of service tax. Now, analyzing the scheme of relevant provisions prescribed under Section 73A of Finance Act, 1994, it is clear that under Sub- section (1) any person who is liable to service tax collects any amount in excess of the service tax assessed and paid, then such excess amount ought to be deposited with the Government. Sub- section (2) prescribes that any person who collects any amount which is not required to be collected from any other person in any manner, 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 S .....

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..... the buyer of goods as representing duty of excise shall be paid over to the State; even if the tax collected by the manufacturer from his purchaser is more than the duty due according to law, the whole amount collected as duty has to be paid over to the State; if on the assessment being made it is found that the duty collected and paid over by the manufacturer is more than the duty due according to law, such surplus amount shall either be credited to the Fund or be paid over to the person who has borne the incidence of such amount in accordance with the provisions of Section 11B. It is obvious that if in a given case, the manufacturer has collected less amount as representing the duty of excise than what is due according to law, he is not relieved of the obligation to pay the full duty according to law. This is the general purport and meaning of Section 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 Stan .....

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..... to the tax authorities, but it is open to the seller, under his contract with the buyer, to recover the Sales Tax from the buyer, and to pass on the tax burden to him. Therefore, though there is no difficulty in accepting that after the amendment of 2000 the liability to pay the service tax is on the appellant as the assessee, the liability arose out of the services rendered by the respondent to the appellant, and that too prior to this amendment when the liability was on the service provider. The provisions concerning service tax are relevant only as between the appellant as an assessee under the statute and the tax authorities. This statutory provision can be of no relevance to determine the rights and liabilities between the appellant and the respondent as agreed in the contract between two of them. There was nothing in law to prevent the appellant 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 manne .....

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..... ion of India[2018 (10) G.S.T.L. 401 (S.C.)] by the Supreme Court. 17. Further, reliance is placed on Bajaj Allianz Life Insurance Co. Ltd. v. Commissioner of C.E. & S.T., Pune-III, Final Order No. A/86013-86023/2019 wherein Hon ble CESTAT held that expenses incurred in pre-recruitment training and post license training of insurance agents by the Appellants cannot form part of the gross taxable value of commission paid to the Insurance Agents in determining the service tax liability. 18. In the light of these case laws, 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 exclusively for the mandatory training. Hence the such cost and expenses incurred by the appellant cannot 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 servic .....

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..... y the appellant was regularly filing its service tax returns. Not only this, the audit of the appellant was conducted by the Office of Commissioner of Service Tax, LTU in 2008 and subsequently, in August, 2012. During the said audit, the Department was made aware of the practice adopted by the appellant as far as sharing of burden to the insurance agents and debit adjustments in the commission paid to the insurance agents are concerned. The original adjudicating authority has even mentioned in the impugned order about their knowledge that the corporate agents are paid in the form of marketing expenses, advertising expenses, non-compete fee etc. and individual insurance agent in the form of context amount, gifts etc. facilitating them to attend seminars and attire allowance. In the light of this fact, it cannot be held that appellant indulged in suppression of facts or had made any willful misstatement as is alleged by the Department. It rather stands clarified that the issue, as has been alleged as the violation on the part of the appellant, was in the knowledge of the Department since the year 2008. The show cause notice in the present case has been issued on 22.04.2013, which is .....

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