TMI Blog2020 (8) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... s cannot be taxed by recourse to List I of the Seventh Schedule in the Constitution of India. That was considered to be the only harmonious construct of the definition taken in totality. As the receipts excluded from computation of assessable value are not consideration for exempt services or may even lie outside the scope of inclusion as consideration, by being returnable to the policy holder, the disputed input services does not come within the ambit of rule 6 of CENVAT Credit Rules, 2004. Appeal allowed. - Service Tax Appeal No: 89917 of 2014 - Final Order No: A/85594/2020 - Dated:- 21-1-2020 - Hon ble Mr C J Mathew, Member (Technical) And Hon ble Mr Ajay Sharma, Member (Judicial) For the Appellant : Shri SS Gupta, Chartered Accountant For the Respondent : Shri KM Mondal, Special Counsel ORDER PER: C J MATHEW In this appeal of M/s TATA AIG Life Insurance Company Ltd, against invoking of rule 6 (3A) of CENVAT Credit Rules, 2004 for confirmation of demand of ₹ 1,71,89,614 pertaining to the period from 1st April 2008 to 15th May 2008 and ₹ 60,34,23,035 for the period from 1st April 2008 to 31st March 2011 respectively on two differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole of the products on offer, the potential for overenthusiastic recovery was sought to be curbed with the insertion of (7A) An insurer carrying on life insurance business liable for paying the service tax in relation to the risk cover in life insurance provided to a policyholder shall have the option to pay an amount calculated at the rate of one percent of the Cross amount of premium charged by such insurer towards the discharge of service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V of the Act: PROVIDED that such option shall not be available in cases where- a) the entire premium paid by the policy holder is only towards risk cover in life insurance; or b) the part of the premium payable towards the risk cover in life insurance is shown separately in any of the documents issued by the insurer to the policyholder. in rule 6 of Service Tax Rules, 1994 with effect from 10th September 2004 making it amply evident that the object of the levy was only the insurance element in the product bouquet and that the composition scheme was limited to such policies in which the risk element could not be easily identifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y part thereof. It is further contended, as an extension of this argument, that the adjudicating authority could not have considered a component of the endowment policy to be a distinct service in view of the clarification contained in circular no. 334/1/2008-TRU dated 29th February 2008 of Central Board of Excise Customs explaining the budgetary changes effected by Finance Bill, 2008 that 3.4 Seven services are being separately defined as taxable services. Specifying a service separately as taxable service does not necessarily mean a suggest that services falling within the scope of newly specified service were not earlier classifiable under anyone at the existing taxable services. Grouping of services under a specific taxable service may change. The scope and coverage of taxable service are to be determined strictly in accordance with the language of the relevant statutory provision existing during the material. 6. In the course of his submissions, Learned Special Counsel pointed out that the elaborate exposition, in the very same circular, of investment management services , taxable under section 65 (105) (zzzzf) of Finance Act, 1994, would overcome the general caut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for each. Revenue asserts it to be so from the chronology of taxation and the cycle of initial exclusion completed with the subsequent inclusion. If that hypothesis finds favour, the legal obligation under rule 6 of CENVAT Credit Rules, 2004 to maintain separate accounts of utilisation of some of the input services or to discharge liability on the value of the exempted service binds the appellant. 8. In ordinary understanding, the insured pays a consolidated premium as obligation to keep the contract alive. During the tenor of the policy, the insured is assured of the policy value should the contingency covered occur. In addition, the holders of endowment and unit linked investment plan policies would be beneficiaries of accrued returns generated by deploying some portion of the premium in the financial market. These, then, is the business of insurance companies. 9. All the three product offerings enumerated in the proceedings comprise, or include, coverage of risk to life which were subjected to tax from 10th September 2004. The unit linked insurance policy , consisting of risk cover and returns from investment of that, or some, portion of the premium not attributabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the handling of investments to enable contractually committed returns to the policyholder. This, according to the adjudicating authority, transformed the appellant as provider of exempted services , defined by (e) taxable services which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act; in rule 2 of CENVAT Credit Rules, 2004 and, which being covered by exclusion in rule 6 therein, by (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub- rule (2). (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, and manufacture such final products or provides such output service which is chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to holders and that the most evident demonstration of being within the ambit of the inclusive portion of exempted services in rule 2(e) of CENVAT Credit Rules, 2004 is the incorporation of a new taxable service in relation to unit linked insurance policy from 2008 and the taxability of the entire premium received from holders of endowment policies from 2011. 13.Even if it assumed that tax liability did arise subsequently on disaggregation of service offered to policy holders, one of the options available on such provision of taxable and exempted services, without having to reverse credit of input services in proportion to the latter, is the payment at the rate prescribed in rule 6(3) of CENVAT Credit Rules, 2004 which cannot be based on the entire invested amount as it includes the contribution of the holder that is returned along with some accretion; neither can the incremental return be the value of exempted service. There is no legislated measure for isolation of value or of such service, if it be one and, as held in re Max Life Insurance Co Ltd, 8 .We note that in the present arrangement the appellant-assessee is providing Service of ULIP for the insured. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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. It fell upon the Hon ble Supreme Court, in All India Federation of Tax Practitioners v. Union of India [2007 8 TMI 1 SC], to unravel the appropriate description of service and, thereafter, subject the taxability thereof to constitutional validity. That an amount from the consideration was added to the taxable component will not suffice as the epiphany of a new taxable event. 16. At the same time, 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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