TMI Blog2019 (12) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed as the principal component, does not require restatement. It is obvious the legislature had not intended superfluity in incorporating the services that are not leviable to tax in the definition. There is no definition of service in Finance Act, 1994 and, therefore, forecloses an ascription that is non-existent. Consideration, though essential to determination of value of taxable service, is not the sole indicator of existence of a service. The presumption against superfluity in interpretation of statutes binds us to search for, and determine, the nature of inclusion. As we are dealing with the schema of mechanism for avoiding the cascading effect of taxation upon the final customer who bears the burden of indirect tax levy, it can be posted that there is a recipient of service with whom the buck stops. Such stoppage could be owing to lack of further commercial engagement of the service or because of the non-existence of such service within the jurisdiction to tax. Tax laws have nothing to do with the last consumer in the market chain. It would, therefore, leave us with no option but to determine that legislative intent of services that are not leviable to tax under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant offers many insurance products which are broadly categorised as: term policy , endowment policy and unit linked insurance policy (ULIP scheme) and the proceedings initiated by service tax authorities are restricted to the latter two. The tax liability on life insurance business defined in section 2 (11) of Insurance Act, 1938, as incorporated in section 65 (51) of Finance Act, 1994, was legislated by the amending section 149 of Finance Act, 2002 by the insertion of (zx) to a policy holder, by an insurer carrying on life insurance business in relation to life insurance business; in section 65(105) of Finance Act, 1994, by which such service was made taxable along with services provided to policy holders by certain other specified players in the sector. Though the amending section came into effect from 16th August 2002, by notification no. 8/2002-ST dated 1st August 2002, the taxable service of the defined provider to policyholders was exempted by notification no. 9/2002-ST dated 1st August 2002. 4. That changed with issue of notification no. 23/2004-ST dated 10th September 2004 rescinding the exemption notification allu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows a provider of taxable service to take credit of service tax leviable under section 66 of Finance Act, 1994 (along with attendant cess) that has been paid on any input service received for providing output service and the expressions employed therein have been defined in rule 2 of the said rules thus (r) provider of taxable service include a person liable for paying service tax; (l) input service means any service,- (i) used by a provider of taxable service for providing an output service; or . (p) output service means any taxable service, , provided by the provider of taxable service to , as the case may be, and the expressions provider and provided shall be construed accordingly; As the eligibility to take the credit on procurement of services by the appellant is not in contention, that aspect need not detain us. According to the impugned order, the appellant herein was excluded from levy of tax on management of investment of funds placed by the policyholder under the unit linked insurance policy and on some portion of the premium paid by the holder of endowment till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding life insurance service which, legally, and in practice, envisages a single contract with each recipient as contained in the policy and that, all along, the statute intended a single service of which the entire was exempt for a period with a portion taxable thereafter for a further period. With the peculiarity of assessment of the non-excluded portion of the premium received from holders of endowment policy having been overcome by taxing the entire premium, under rule 6(7A) of Service Tax Rules, 1994, at 1% as representing the risk cover in specific circumstances of non-identification of the latter, Learned Counsel argues that the single service, contemplated in the statute, remains undisturbed. Furthermore, according to him, the investment of some portion of the premium is not intended to benefit the policyholder but to facilitate the appellant who was contractually bound to make good the commitment of return therein. For these reasons, he submitted that the service remains single and indivisible as life insurance business and, hence, not within the ambit of rule 6 of CENVAT Credit Rules, 2004. 9. It is further submitted by Learned Counsel that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eviable to tax prior to the date of incorporation. Suggesting that the investment portion is not liable to treated as consideration for rendering of any service, reliance is placed by him on the decision of the Tribunal in Max Life Insurance Co Ltd v. Commissioner of Central Excise [2018-VIL-126-CESTAT-DEL-ST]. 11. While placing emphasis on the definition of exempted services which includes services that are not leviable to tax, it is the contention of Learned Authorized Representative that subsequent rendering of taxability of a service is indicative of absence of leviability before such date and that legislative intent to tax only risk cover from 10th September 2004 with other services rendered liable separately and subsequently implies the existence of several services within the same bundle offered to the same recipient. It is her submission that both endowment policies and unit linked insurance policies entice holders to these schemes with promise of returns in addition to coverage of risk. Alleging that discharge of tax liability on one of the services will not entitle the appellant to the benefit of CENVAT credit on all input services in its entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leading to the inevitable conclusion that invested portion of the premium does not represent a service. 14. Though it is submitted by Revenue, in relation to the demand for the period from 1st April 2008 to 15th May 2008 on non-taxability of a portion of the premium paid on unit linked insurance policy , we cannot but take note that the provider and recipient in section 65(105)(zx) and section 65(105)(zzzzf) of Finance Act, 1994 remain the same and, that but for the exemption notification no. 9/2002-ST dated 1st August 2002, the whole of the premium would have been liable to tax under the former; even the subsequent amendment in 2004, by which risk cover was subjected to tax, cannot erase the essential integrity of the product offered in the course of life insurance business to extract a new service. Life insurance policies with limited risk cover may not have much appeal for the Indian consumer and the prospect of a return of contribution, packaged as premium and comprehended as premium by the policy holder, impacts upon the marketability of the products. It is, therefore, intrinsic to life insurance business that there be some recompense for hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax under section 66 of Finance Act, 1994 to be those to which the Union cannot extend its taxing arm. The exclusion of a portion of the consideration in providing works contract service under section 65(105)(zzzza) of Finance Act, 1994, as elaborated by the Hon ble Supreme Court in Larsen Toubro v. Commissioner of Central Excise, Kerala [2015 (39) STR 913 (SC)], with attendant impact on availment of credit under CENVAT Credit Rules, 2004, and the non-taxability of trading as a service under Finance Act, 1994 in Orion Appliances Ltd v. Commissioner of Service Tax, Ahmedabad [2010 5 TMI 85 CESTAT Ahmedabad] are signposts to areas forbidden from tax by the Union. Not unnaturally, such service, unacknowledgeable in the tax jurisdiction, fails the test of utilization in rendering of further service. These, therefore, cannot be input services and the inclusive portion of exempted services must be construed as referring to such and not to services that, though not yet, may still be subject to levy. The proposition of Revenue that subsequent taxability imprints upon it the description of non-leviable under section 66 of Finance Act, 1994 fails and, with it, the support for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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