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2019 (12) TMI 121

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..... 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, 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 pr .....

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..... rship 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, 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 Notic .....

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..... 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 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, t .....

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..... 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 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 refun .....

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..... 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 Standard Life Insurance Company vs. Commissioner, Central Excise reported as 2017 (49) S.T.R. 301 (Tribunal- Mumbai) wherein the fact .....

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..... ecover 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 manner warranting recourse to Section 73A of Finance Act, 1994. 1 .....

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..... on 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: .....

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..... partment to invoke the extended period of limitation, it is observed and held that apparently and admittedly 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 Departm .....

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