9911796707
TMI Blog2022 (10) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... t availed and utilized by Ms Bajaj Allianz General Insurance Company Limited as discussed above under the provisions of Rule 14(1)(ii) of the CENVAT Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994 and order recovery of the same from the assessee M/s. Bajaj Allianz General Insurance Company Limited, under Section 73(2) of the Finance Act, 1994. b) I confirm the demand of interest on the amount of CENVAT Credit confirmed as detailed in Sr. No. (a) above at the applicable rates, and order recovery of the same from the assessee M/s. Bajaj Allianz General Insurance Company Limited, under the provisions of Rule 14(1)(i) of the CENVAT Credit Rules, 2004 read with Section 75 of Finance Act, 1994. I accordingly order for its recovery. c) I impose penalty of Rs. 94,65,20,833/- (Rupees Ninety four crores sixty five lakhs twenty thousand eight hundred thirty three only) on the assessee, i.e. M/s Bajaj Allianz General Insurance Company Limited, under the provisions of Rule 15 (3) of the CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act 1994. I accordingly order for its recovery. d) However, I give an option to M/s Bajaj Allianz General Insurance Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. (b) above as well as the reduced 25% penalty, within 30 days of the date of communication of this order. e) I refrain from imposing Penalty under the provisions of Section 78(1) of the Finance Act, 1994, read with Rule 15 (3) of the CENVAT Credit Rules, 2004 for the reasons discussed in Para 27.9 above." 2.1 Appellant is a general insurance company and is providing general insurance including motor vehicle insurance services. 2.2 Acting on intelligence that the appellant had availed Cenvat credit on ineligible input services on the strength of bogus input credit invoices issued by the automobile dealers of various automobile manufacturers which were not actually provided by them. Investigations were carried on by the DGCEI, Chennai. From the investigation, following was observed, as stated in the impugned order:- "16.2. From the Scrutiny of documents of Dealers/ BAGIC and the statements as mentioned above, it appeared that * Automobile Dealers collect premium from the customers and issue policies to them by accessing the portals of the Insurance Brokers. For insuring the vehicles the Dealers / Manufacturers are given PAYOUT calculated at an agreed percentage on OD Premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d; (ii) Service Tax of Rs 49.26.42.431/- (Rs. Forty Nine Crore Twenty Six Lakh Forty Two Thousand Four Hundred Thirty One Only) for the period from July 2015 to September 2018 should not be demanded and recovered from them under proviso to Section 73 (1) of Finance Act 1994; (iii) Interest as applicable should not be demanded and recovered from them on the amount demanded as at Sr. No. B) above under Section 75 of Finance Act 1994; (iv) Penalty should not be imposed on them under the provisions of Section 76 and Section 78 of the Finance Act 1994." 2.6 The show cause notice and the demand notice have been adjudicated as per the impugned orders. Aggrieved appellant have filed these appeals. 3.1 We have heard Shri Gajendra Jain with Shri Sachin Mishra, Advocates for the appellant and Shri Nitin Ranjan, Deputy Commissioner, Authorised Representative for the Revenue. 3.2 Arguing for the appellant, learned counsel submits:- * The dealers are indeed providing services to the appellant and service tax has been correctly discharged on the said services. Therefore, Cenvat credit cannot be denied to the appellant under any circumstances. Contractual supply is the essence of applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tata Motors Ltd. [2015 (318) ELT 437 (Tri.-Mumbai)] PB Nair C&F Pvt. Ltd. [2015 (318) ELT 437 (Tri.-Mumbai)] Shoppers Stop Ltd. [2018 (8) GSTL 405 (Tri.-Mumbai)]. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 For confirming the demand against the appellant, the Commissioner has after quoting the provisions observed as follows:- "23.8 CENVAT scheme was mainly introduced to avoid cascading effect of tax for making the product competitive in that in the domestic market as well as in international market, indigenous goods. the end user does not pay the price which is including tax paid at multiple stages. CENVAT Scheme under Central Excise and service tax allows credit of specified duties/ service tax paid on eligible Inputs, Capital goods and Input services. CENVAT credit can be availed by Manufacturer of dutiable goods and provider of taxable output service. It can be availed on physical receipt of Inputs and Capital Goods in the factory of manufacturer/premises of Service provider with specified duty paying documents and input service received with prescribed invoice after receipt of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hly commission payable by BAGIC for the insurance business provided by them to BAGIC during the month. It was also informed that the emails invariably contained an attachment of the Invoice, prepared by TBSS, which has to be downloaded and printed on their Invoice format and sent back to BAGIC for claiming the insurance commission from them. The description of service provided was mentioned as "Reimbursement of Infrastructure expenses towards office space. trained & dedicated manpower. provision of dedicated computers & printers provided to you in various Insurance services being offered by you at our Dealership". 25.2 From the statements of the Officials of the Dealers and BAGIC and relevant documents recovered from the Dealers and BAGIC it was noticed that the Car Dealers collect the total amount towards on-road price of the car from the customers which included the amount towards insurance premium which ore being remitted to the Insurance Companies by issue of cheques. The Car Dealers are being paid a percentage of Own Damage Premium as PAYOUT by the insurance companies. The Car Dealers are neither providing any service to the insurance company nor are they authorized to sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc" on BAGIC for recognizing BAGIC as a Preferred Insurance Company (PIC) for Honda cars on which the CENVAT Credit has been availed by BAGIC and no services are rendered by such Automotive Manufacturers. 25.3 The Officials of BAGIC have in their statements admitted that the rates are not fixed according to the services mentioned in the invoices but calculated on the basis of the percentage on Own Damage Premium and the dealers are paid payout accordingly and that the dealers have not provided the services as mentioned in their Invoices: the payout is determined based on the policies generated by the Automobile Dealers, the amount payable and the nature of services to be incorporated in their Invoices are communicated to the dealers as a standard practice and in a standard template by BAGIC; it is the general practice followed in the insurance industry to settle the payouts, to the dealers by way of raising such invoices: that they follow the similar practice to settle the payouts to all their dealers: As per normal trade practice in the insurance industry and in order to run the business, in lieu of the stiff competition, they were compelled to issue payout to the dealers: the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a method by which the IRDA Commission/ORC payable to the car dealers and twowheeler dealers for the insurance business sourced by them were passed on as 'Display charges and Transaction Fees, the services which both the car dealers and the officers of BAGIC Regional office at Chennai have categorically denied as discussed in Paras above. Further the dealers have denied having incurred any expenditure towards the reimbursement of infrastructure charges as described in the invoices they had raised on BAGIC. Therefore find that amount passed on to the dealers by the insurance companies as Display charges and Transaction Fees and reimbursement of infrastructure charges as described in the invoices is nothing but the IRDA Commission/Over-riding Commission given to them for procurement of Insurance business by the dealers. 25.5 Further, Shri. Milind C Choudhari Chief Financial Officer (CFO) of BAGIC was evasive on the questions of the nature of actual services provided by the car dealers and the two-wheeler dealers, by merely stating that that the exact position in respect of the services actually provided by the dealers is known only to the Regional Office as they are dealing with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the agent or broker in respect of the business in respect of which he is paid agency commission or brokerage". 25.8 The officials of BAGIC in their voluntary statements have stated that as per the IRDA circular, only the brokers/licensed agents can solicit and procure insurance business on behalf of the insurance companies and hence to reiterate that these dealers should not involve in these activities, the clause "the Vendor shall not negotiate, accept any business, issue policies or other documents in the name of or for and on behalf of BAGIC and shall not make any promise, representation or negotiate with clients in respect of any business or claim..... except those provided by BAGIC or approved by BAGIC in writing" is mentioned in the agreement entered into with dealers; that the commission/remunerations are paid to the agents and brokers as per the IRDA guidelines. The Automobile Dealers have in their voluntary statements stated that they were not registered as Insurance Agent or Insurance Broker according to IRDA regulations. Since the Dealers of Motor Vehicles are not Agents/Brokers/ Intermediaries of the Insurance Companies, they are not permitted to do insurance busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il ineligible CENVAT 25.10 From the Scrutiny of documents of Dealers/ BAGIC and the statements it is clear that Automobile Dealers collect premium from the customers and issue policies to them by accessing the portals of the Insurance Brokers. For insuring the vehicles the Dealers / Manufacturers are given PAYOUT calculated at an agreed percentage on OD Premium by the Insurance Companies. The invoices raised by Automotive Dealers and Automotive Manufacturers to BAGIC were in the format specified by BAGIC and have been raised towards Infrastructure expenses incurred as Office Space. Manpower used, Dedicated computers and printers used etc and display charges and transaction fees etc". Automobile Dealers in their statements have admitted that though they have not provided only service as mentioned in the invoices, they issued the same as per the directions of BAGIC. The Officials of BAGIC have in their statements admitted that the rates are not fixed according to the services mentioned in the invoices but calculated on the basis of the percentage on OD Premium and the dealers are paid payout accordingly and that the Dealers have not provided the services as mentioned in their Invoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put service in terms of Rule 2(1)(1) of the CCR, 2004. BAGIC have not maintained any documentary evidences for having received the input services hence they have contravened the provisions of Rule 4(1) of the CCR, 2004. Thus, it is not disputed that services covered by the said invoices were never received by BAGIC and were never provided by the Dealers. 25.14 It is pertinent to mention here that after booking the cases on insurance companies by the DGCE for fraudulent availment of CENVAT Credit on the basis of invoices issued by the Automobile Dealers, the insurance regulator. Insurance Regulatory and Development Authority (IRDAI) formed a committee for bringing clarity and transparency in payouts. Based on the examination of the report of the committee and the interaction held with insurers and other stakeholders, IRDAI issued Guidelines on Motor Insurance Service Provider under Section 34 of the Insurance Act, 1938 and Section 14 of the IRDA Act, 1999 vide Ref:IRDA/INT/GDL/ MISP/202/08/20 17 dated 31-08-2017 and effective from 01 11-2017 with a object to recognize the role of the automotive dealer in distributing and servicing motor insurance policies so as to have regulatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther the maximum brokerage/commission payable for selling insurance policies is also capped at 10% of the premium. To circumvent these regulations, BAGIC asked the car dealers to raise invoices to show that the car dealers have provided services such as advertisement, renting of computers/ printers, training. arranging customer awareness program etc. to BAGIC. The invoice raised by the Automotive Dealers and Automotive Manufacturers on BAGIC does not contain the true description of the Service, thus the requirements of Rule 4A of the Service Tax Rules, 1994 is not fulfilled. Since the description of the service has not been mentioned correctly in terms of Rule 4A cited above, the services mentioned in the invoice cannot qualify as input service in terms of Rule 2(1)(1) of the CCR. 2004. Further, BAGIC have not maintained any documentary evidences for having received the input services thereby contravening the provisions of Rule 4(1) of CCR, 2004. 27.2 The services mentioned in the invoices have never been provided to BAGIC by the dealers. BAGIC having not received any services from the Automobile dealers and manufacturers as mentioned in the invoices raised by such dealers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant to the dealers on the OD premium collected by the dealers from the customers is camouflaged as service provided by the dealers to the appellant; that therefore, the services contained in the invoices have actually not been provided by the dealers to the appellant and thus, Cenvat credit is not eligible. 7.1 Though in the Show Cause Notice the main allegation is that the description of services in the documents on which credit has been availed is not correct, at the time of adjudication, the main finding is that no services have been provided by the dealers to the appellant and that therefore credit is not eligible. At this juncture, it needs to be pointed out that the Department has no dispute with the Service Tax collected from the appellant by the dealer and remitted to the Government. The assessment of Service Tax paid at the dealer's end has not been disturbed/questioned by the Department; only the credit availed at the service recipient's end has been questioned by issuing the present Show Cause Notice. 7.2 If the Department contends that no service has been provided, the crucial question arises as to why Service Tax was collected from the dealer. The dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. BIL" for short). The appellants were job workers for M/s. BIL. The services were utilized by M/s. BIL for communicating and retrieving the data from the appellant's therein. The Department alleged that the services were rendered by BSNL and Reliance Communications Ltd. to M/s. BIL and that M/s. BIL had raised invoices on the appellants claiming reimbursement under these invoices as MPLS charges along with Service Tax. The Department was of the view that the invoices were raised for reimbursement of expenses and that no service was rendered by M/s. BIL to the appellants and that the appellants were not eligible for credit. The appellants therein had contended that M/s. BIL are retrieving data relating to the assessees from the server and are further processing the same for their end use and therefore, M/s. BIL is rendering the service. It was also explained by the appellant therein that but for M/s. BIL retrieving the data, the appellant would have retrieved the data and passed on the same to M/s. BIL. The Hon'ble High Court, after analysis of the issue, observed as under : "11. The short question, which falls for consideration, is whether the department as well as Tribunal co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have been done by the Appellate Authority in the light of the settled position with regard to the Service Tax liability admitted and paid by BIL. Therefore, unless and until, the assessment on BIL had been reopened, the nature of transaction as referred by BIL has to be held to be wrong and the Commissioner (Appeals) could not have given a different interpretation to the nature of claim made by the BIL from the assessees by interpreting the terminology used in the invoice. The correct test, which ought to have been applied by the Adjudicating Authority, Appellate Authority and the Tribunal, is as to what is the character of payment made by the assessees on which they have availed the Cenvat credit. 16. In the instant cases, it is not in dispute that whatever the portion of Service Tax component which was collected from the assessees by BIL was only the amount on which the Cenvat credit has been claimed by the assessees. Therefore, unless and until the assessment made on BIL was revised, which obviously could have been done, at this juncture, on account of the expiry of the period of limitation, the interpretation given by the Commissioner (Appeals) as well as the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period vide decision reported in 2021 (3) TMI 24- CESTAT Chennai. The Tribunal had followed the decision of the Hon'ble jurisdictional High Court in Modular Auto Ltd. Vs. CCE, Chennai-2018 (8) TMI 1691 Madras High Court. The relevant paragraph of the decision of the Tribunal reads as under:- "6.1 The allegation of the Department is that no services have been provided by the dealers to the appellant as per the invoices and therefore, the appellant is not eligible to avail credit of the Service Tax reflected in this invoice. In paragraph 31 of the Order-in-Original dated 30.01.2017, the crux of the allegations of the Department has been recorded by the Original Authority, as under "31. On careful consideration of the statements of personnel of M/s Chola and Dealers, I find that (i) The payment made by M/s. Chola to Ms. Hyundai / Dealers of Motor Vehicles is only a percentage of OD premium collected and the said payout details are calculated by the Head Office of M/s. Chola and communicated to the Dealers; (ii) M/s. Chola could not term such payout as commission (which would be in violation of IRDA guidelines) and hence the Dealers were given prescribed format to raise inv ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
