TMI Blog2022 (1) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... he said section. The expression any person was inserted in Section 65 (105) (zx) by the Finance Act, 2006 to levy service tax on re-insurance activities carried by Life Insurance Company. Re-insurance is nothing but the services provided by the insurance company to mitigate the risk of the insurer while providing the insurance cover to insured - From the nature of charges, we are not in position to find any nexus between these charges and the life insurance services provided by the appellant to the policy holders, or to any other person as reinsurer. In absence of any such nexus such charges cannot be added to the value of taxable services provided by the appellant under the category of life insurance services. Appeal allowed - decided in favor of appellant. - Service Tax Appeal No. 88448 of 2014 - A/85007/2022 - Dated:- 6-1-2022 - MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) AND DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Shri Mehul Jiwani, Chartered Accountant, for the Appellant Shri Nitin Ranjan, Deputy Commissioner, Authorised Representative for the Respondent ORDER This appeal is directed against the Order in Appeal No PD/532/ST-I/2014 dated 26.05.2014 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2 It was observed that appellant was recovering the charges in nature of, - (i) agency processing fees (examination fees, license fees), (ii) back dating, altering charges, (iii) lapse charges, (iv) look in charges and (v) policy reinstatement charges. These charges though reflected in their book of accounts were not included by the appellant for determining their tax liability. 2.3 A show cause notice dated 3.10.2012 was issued to the appellant demanding service tax in respect of the above referred charges, not paid by the appellant during the period 2011-12 and amounting to ₹ 35,84,582/-. This show cause notice was adjudicated by the Additional Commissioner as per the order referred in para 1, above. Aggrieved by the order of Additional Commissioner appellant preferred this appeal before the Commissioner (Appeal) which was dismissed by the Commissioner (Appeal) as per the impugned order. 2.4 Aggrieved by the impugned order, appellant has preferred this appeal. 3.1 We have heard Shri Mehul Jiwani, Chartered Accountant for the appellant and Shrin Nitin Ranjan, Deputy Commissioner, Authorised Representative for the Revenue. 3.2 Arguing for the appellant, learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any service provided or to be provided to a policy holder or any person, by an insurer, including reinsurer carrying on life insurance business in relation to the risk cover in life insurance After 1-5-2011 Taxable service means any service provided or to be provided to a policy holder or any person, by an insurer, including reinsurer carrying on life insurance business 4.3 Life Insurance Business has been defined in section 2(11) of Insurance Act as follows: life insurance business means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency depending on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include a. the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance; b. the granting of annuities upon human life; and c. the granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. Back dating interest - In case if a conventional policy is required to be backdated, the appellants collect interest for the time gap between the date of receipt of proposal and the risk commencement date. These amounts are collected in addition to the premium which is paid by the policyholder. c. Look-in Charges- As per regulation 6(2) of IRDA (Protection of Policy Holders Interest) Regulations 2002 every policy holder is provided a period of 15 days from the date of receipt of policy document to review the terms and conditions of the policy. In case he is not satisfied with the terms and conditions, he can return the policy. The premium, after deducting the amount of risk premium for the period covered is returned. The expenses incurred on medical examination and stamp duty is recovered. 4.6 Adjudicating authority and Commissioner (Appeals) both have recorded in their order that the Show Cause Notice under consideration, is a periodic show cause notice issued in continuation to earlier demands made for the past period. Adjudicating Authority has observed as follows; 16) Before going into the evaluation of the allegations and defence contentions of the Noticee, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et, 2011, it was further clarified that the scope of the levy is being extended to cover all services including in relation to management of investment. Thus, from the budget-speech of the Hon'ble Finance Minister and the circulars issued by the Board at various points of time, what emerges so far as the life insurance is concerned is that prior to 1.5.2011 the Service Tax was leviable on the risk premium and nothing else. If that be so, we do not understand how the various charges collected by the insurer in addition to the risk premium can be taxed under Life Insurance Service'. 5.3 The various contentions raised by the appellant have not been examined in detail by the adjudicating authority, who has simply made a sweeping observation that the agency processing fees, lapse charges, backdating alteration charges and policy reinstatement charges were recovered in relation to the life insurance service provided by the noticee and these charges are linked to the risk cover of the policy. This sweeping observation of the adjudicating authority is without examining the matter in detail and without taking into account the IRDA guidelines on the subject and hence cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other person was added. This has also been explained in TRU letter wherein following has been stated:- 4. SCOPE OF CERTAIN EXISTING SERVICES IS BEING EXTENDED OR CLARIFIED AS FOLLOWS: 1) . 5) Life Insurance service, to include service provided to a policy holder or any person by an insurer, including a reinsurer; 5.2 Exemption provided to re-insurance vide Notification No.3/94-Service Tax dated 30.6.1994 has been withdrawn. To make it explicit, it is mentioned that insurer includes re-insurer. 4.9 From the nature of charges, as explained above we are not in position to find any nexus between these charges and the life insurance services provided by the appellant to the policy holders, or to any other person as reinsurer. In absence of any such nexus such charges cannot be added to the value of taxable services provided by the appellant under the category of life insurance services. The argument advanced by the revenue to effect that Section 67 provides for determining the taxable value on the basis of the gross amount received for providing the taxable service, for inclusion of these charges in taxable value cannot be acceded to, in view of Hon ble Supreme Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprise and, therefore, takes care of those amounts which are received by the associated enterprise for the services rendered by the service provider. 4.10 In case of Shilpa Color Labs, referred to by the appellant following have been held:- 8.2 The question is how to value the services rendered by the appellants. Section 67 of the Finance Act deals with Valuation of taxable services for charging Service Tax. It is stated that for the purpose of this Chapter, the value of any taxable service shall be the gross amount charged by the service provider for such service, rendered by him. A careful reading of the above mentioned provision reveals that the amount charged by the service provider for such service is normally taken for purposes of calculating tax. The service provider may charge certain amounts for purposes other than the service rendered by him. In such a case, those charges would not form part of the value of taxable service. Hence, one should not assume that any amount charged by the service provider would be liable for Service Tax. 4.11 In view of the discussions as above we do not find ourselves in agreement with the findings recorded in the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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