TMI Blog2020 (10) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... ation without going beyond the premium and the latter, too, not only did not travel beyond the premium but also remained within life insurance as the activity under coverage. Hence, new identifiable taxable services were not the subject of the impugned levy. Even if these were to considered as new taxable services the question of harmonizing the proposition of Revenue with the scheme of tax arises. Finance Act, 1994 is concerned with taxable service and not service and it is only upon incorporation within section 65(105) that that a new taxable service can be acknowledged. Rule 6 of CENVAT Credit Rules, 2004 is concerned with exempted service to the extent that input services are deployed for rendering such exempted services and credit has been availed thereon. The legislative intent of the inclusive aspect of exempted service did not contemplate subsequent incorporation as the test of exemption. Nevertheless, we must travel on to ascertain the legislative intent. There are certain activities that may well be beyond the competence of the Union to tax and, thereby, beyond contemplation for inclusion in section 65(105) of Finance Act, 1994. Trading is one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o those in the business of setting money to work, it would be the enormous annual inflows. To the taxman, it appears to be the premium contributed by the policy holder. However, as in the famous poem of John Godfrey Saxe, in which each was partly in the right, and all were in the wrong! , the elephant in the room remains glaringly unnoticed. Essentially, a life insurance policy is financial instrument that represents the individual contribution to a pool of such mammoth proportions in which the certainty of ultimate extinction of the individual is eclipsed by the probability of perpetual existence of the whole. Implicitly, the pooled fund is mobilized for keeping the premium within reach of sufficiently large number of individuals. The life insurance companies, by this very expertise in investments, are best suited to offer their competency and financial clout for ramping up returns for policyholders who may need persuasion other than payout after death. The variants of endowment and investment policies achieve that end. The difference between the two, promising more than risk cover, is the facility of opting for one among the broadly constructed portfolios. Nonetheless, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received as premium for 2008-09, 2009-10 (till 30th June), for the rest of 2009-10, 2010-11 and 2011-12 respectively and fastened with liability of ₹ 17,38,12,097 under rule 14 of CENVAT Credit Rules, 2004 read with proviso to section 73(1) of Finance Act, 1994, along with interest thereon under section 75 of Finance Act, 1994, and penalty of like amount under rule 15 of CENVAT Credit Rules, 2004 while dropping demand of another ₹ 80,88,53,089 proposed in the show cause notice. In like manner, the grievance of M/s HDFC Standard Life Insurance Co Ltd is the confirmation of liability of ₹ 13,06,61,840 under section 73 of Finance Act, 1994, along with interest thereon under section 75 of Finance Act, 1994, and penalty of like amount under section 78 of Finance Act, 1994 while dropping demand of ₹43,85,43,480 proposed in the show cause notice. The demands were confirmed in accordance with the scheme, in rule 6 of CENVAT Credit Rules, 2004 for neutralization of ineligible credit, on the difference between the premium collected on investment policies and value subjected to self-assessed tax and on the difference between the premium collected on endowment polici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are 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 manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable. (3) No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year. (5) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services. (6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either- (i) cleared to a unit in a special economic zone; or to a developer of a special economic zone for their authorized operation; or (ii) cleared to a hundred per cent. export-oriented undertaking; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax leviable thereon and includes services on which no service tax is leviable under section 66 of the Finance Act. In the light of submissions made on behalf of the appellants that the portion of the premium on which tax has not been paid is not consideration for exempted services , as defined, we do not, unless requited to, propose to delve into the issue of the adjudicating authority having appropriated the exercise of the option available in rule 6 of CENVAT Credit Rules, 2004. 10. Considering the amount involved in the disputes and the rigidity of adversarial stances adopted by either side, the profusion and verbosity of arguments as well as the citation of several judgements in support of nuances postulated as favourable to one side or the other was not unexpected. We, however, are fortunate enough not to be excluded from the discipline of judicial consistency and precedent that affords us the privilege of discarding many of these to restrict our findings in accordance with the law, as settled, since the impugned orders came to be challenged. 11. It is the contention of Learned Chartered Accountant, appearing for the two appellants, that the allegation of inel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to management of investment under unit linked insurance business implying that the legal fiction cannot be stretched to assert the existence of such deemed service prior to 15th May 2008. It was also contended that the computation of value of exempted service by reverse deduction includes the amount invested in accordance with the regulations issued by the Insurance Regulation Development Authority. 14. Our attention is also drawn to the decisions of the Tribunal in Reliance Life Insurance Co Ltd v. Commissioner of Service Tax, Mumbai [2017-TIOL-3839-CESTAT-MUM] and in Sahara India Life Insurance Co Ltd v. Commissioner of Central Excise Service Tax, Lucknow [final order no. 70810/2018 dated 22 February 2018] and that order of the Commissioner of CGST CEX, Mumbai Central dated 28th December 2017, dropping proceedings in an identical dispute, has been accepted by Revenue. 15. Learned Authorized Representative, providing us with a background of the dispute, stated that M/s Birla Sun Life Insurance Company Ltd offered unit linked insurance policy in which the risk cover and management of investment were taxable since 10th September 2004 and 16th May 2008 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le is to be considered as exempted service and the credit of input or input services is not available to the service provider... he contends that the law so settled should not be disturbed. We must here state that, in our view, the context in which that observation was made therein does not validate it as a precedent for resolving the present dispute: the scheme under consideration was Traditional Golden Year Plan which did not offer risk cover and remained entirely out of the tax net. Pointing out that circular no. 354/9/2011-TRU dated 12th July 2011 of Central Board of Excise Customs (CBEC) has clearly addressed the scope of the composition scheme in rule 6(7A) of Service Tax Rules, 1994, he submits that the claim of partial exemption put forth on behalf of the appellants is not tenable. He further contends that this very circular again makes it abundantly clear that 2 Consequently, the said companies were providing taxable as well as exempt it services till 1-5-2011, attracting, thereby the provisions of Rule 6 of CENVAT Credit Rules . and places the issue beyond dispute. As the circulars issued by Central Board of Excise Customs (CBEC) appears to car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fold. It is interesting to note that, just this once, is the expression service, found in Finance Act, 1994, and the attendant rules, without the crutch of taxable to support it and devoid of any meaning assigned to it. That Finance Act, 1994 does not is understandable as the taxing provision can be enforced, in the classificatory regime, without having to define service for undertaking enumeration of taxable service in section 65 therein. 19. It is not within the sphere of subordinate legislation to expand the scope of a concept that is non-existent in the parent statute. In like manner, an interpretation of subordinate legislation should not venture where the notified Rules have not forayed. It is clear that the articulation of the inclusive aspect thus within the definition of exempted service in rule 2 of CENVAT Credit Rules, 2004 is neither accidental nor redundant or superfluous. That this could be deliberate, and with particular intent, does not appear to have crossed the minds of the tax authorities. That there is an inherent illogicality in their proposition also does not have appeared to crossed the mind of the tax authorities. Indeed, it is that very illogic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73 for recovery is restricted only to such consideration that was legally subject to tax for the period of dispute and retrospective taxability, or non-taxability, as in this case, is not contemplated therein. Hence, we can reasonably deduce that legislative intent of the inclusive aspect of exempted service did not contemplate subsequent incorporation as the test of exemption. Nevertheless, we must travel on to ascertain the legislative intent. 21. There are certain activities that may well be beyond the competence of the Union to tax and, thereby, beyond contemplation for inclusion in section 65(105) of Finance Act, 1994. Trading is one which comes to mind immediately and yet another is works contract with a catena of decisions based on exclusion of competence to tax by the Union. Such services being beyond the realm of taxation are, acknowledgedly, existent by negation of jurisdiction. It is but natural that the incidence of tax on inputs and input services employed for rendering such services must be borne by the provider of the service and recovered through pricing instead of being privileged to neutralize it by set off of taxes paid. The deliberate addition of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the whole of it was made taxable and which constituted consideration for the handling of investments to enable committed returns to the policyholder. This, according to the adjudicating authority, made the appellant to be a provider of exempted services , defined as xxxx in rule 2 of CENVAT Credit Rules, 2004 and, which being covered by exclusion in rule 6 therein, as xxxxx required appellant to be fastened with the liability and detriments in the impugned order for failure thereof. 1. The exclusions from assessment for the different periods in the two categories of policies is common ground. However, while Revenue asserts these to be covered by the inclusive component of exempted services and, thereby, rendering rule 6 of CENVAT Credit Rules, 2004 to be applicable, it is the primary submission of the appellant that such vivisection of a composite consideration for a particular service is not the intent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 having survived the policy term with nothing to show for it. Moreover, as pointed out by Learned Counsel, an activity that has to be deemed to be a service, as per Explanation (i) therein, despite being taxable thereafter, will not conform to the expression service in rule 2(e) of CENVAT Credit Rules, 2004. 15. For further elucidation, it would not be out of place to peruse the inclusive component of the definition of exempted service which pertains to services th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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