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TMI Blog2025 (5) TMI 1918X X X X Extracts X X X X X X X X Extracts X X X X ..... d refer them to their clients i.e. M/s Unifam Insurance Services Ltd, M/s Unique Health Care and M/s. Unique Insurance Services, who in turn close the policies and these policy holders ultimately become customers of the respective insurance companies i.e. M/s. Max New York, M/s. Bajaj Allianz and M/s Life Insurance Corporation of India; these insurance companies then issue the insurance policies to these clients; the appellants receive a portion of the commission received by the corporate agents from Insurance Companies, in respect of insurance policies sold by them; the appellants were further paying part of the commission received to their workers (down line members) working in this marketing set up run and operated/managed by the appellant; the part of the commission received by the appellant has been reflected as referral income in their Balance Sheets. 2.1. Special Cell of Central Excise Commissionerate, Ludhiana visited the premises of the Appellant on 05.02.2010; scrutiny of various records and the Balance Sheets of the Appellant, revealed that the appellants received three types of incomes on account of providing different services falling under the category of taxable ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential part of the sale of insurance policy; it is not disputed that the referral income received by the appellant was only a commission against the sale of insurance policies, which was ultimately paid by insurance companies though passed on by M/s. Unifam Insurance Services Ltd., M/s. Unique Health Care & M/s. Unique Insurance Services; the appellants are further paying part of this commission to their members working in this multilevel marketing network/chain system, run and operated/managed by them. 3.1. Learned Counsel for the Appellants submits further that normally, it is the person who provides the taxable service, on receipt of service charges, who is responsible for paying the service tax under Section 68(1) of the Finance Act, 1994; however, for the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service tax is to be paid by the Insurance Company; it was clarified by Board Circular No. B. 11/1/2002-TRU, dated 1-8- 2002 that in relation to Insurance Auxiliary Service provided by the insurance agents, the service tax shall be paid by the Insurance Company (Insurer); therefore, in the instant case, the insurance companies who provided the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cheque, which is reissued.; BC Transfer Fee, is to be charged from the workers when they he transfer Business Centre to any other person; all charges were deducted by the present appellant from the payments due to their down line members; these amounts have not been collected from anyone for any service; as no service is involved, demand of service tax on these incomes are not justified in the eyes of law. 5. Learned Counsel submits, as far as income on accounts of CBT charges, that the amounts received were part of expenses of training given to their employees in different places; training is educational in nature to develop various skills to enhance their employability; there was no profit motive; if any amount received for a profit motive can be included in the taxable value; these are only expenses borne by the appellant in giving training and conducting seminars at different place and was deducted from the payment of commission payable to their down line members; the activity cannot be covered under Commercial Training and Coaching Centre Service; judgement of Larger Bench in the case of Great Lakes Institute of Management Ltd 2013 (32) S.T.R. 305 (Tr. LB) is not applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Auxiliary Service; the appellants argued that the Service Tax in case of Insurance Auxiliary Services has to be paid by the Insurance Company as per Circular No. B. 11/1/2002-TRU, dated 1- 8-2002l; the appellants argued that as per the provisions of Service Tax Rules, the insurance companies were liable to pay Service Tax on commission paid to their corporate agents, thus the Service Tax stands already paid on the amount of commission received by them; the appellants argued that they are not further liable to pay any Service Tax on the amount of referral charges received by them. 7.2. Learned Authorized Representative submits also that the Appellant has agreed to the fact of providing services; however, they have contended that the services provided by them are covered under the category of "Insurance Auxiliary services". He takes us through the definition of the "Insurance Auxiliary Service", as provided by Section 65(55) of finance Act, 1994 and Section 2 of the Insurance Act, 1938 and submits that seen in the light of definitions, any services could be termed as "insurance auxiliary services" only if the same are provided or are to be provided - to a policy holder or any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service" in as much as, the Appellant was providing such services in order to supplement the business of the corporate agents; these services are of the nature of incidental and auxiliary to the services provided by the Appellant to the corporate agents of Insurance Companies; Thus, these services are covered under the definition of Business Auxiliary Service. 9. Learned Authorized Representative submits that appellants in their reply, with respect to the receipt of CBT charges, says that they were not providing the above services in an organized manner and even if they admitted that they had provided such services, the value of such services was much below, in respective financial years, the SSI exemption limit, they were not required to pay any Service Tax on the income' He submits that the Appellant imparted training for a consideration to the willing candidates, who acted as their down line members, and who acted to further generate business for them and their clients; such an activity would be covered under Commercial Coaching or Coaching Centre Service' as defined under Section 65 of the Act; the contention of the Appellant for SSI exemption is not tenable here as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Whether appellants rendered 'Commercial Training and Coaching Centre Service' in imparting Certified Business Training to their down line members? were covered under or not? (iv) Whether the extended period is invokable in the facts and circumstances of the case? (v) Whether penalties under Section 76, 78 & 77 imposable on the appellant and Shri Kulwant Singh? 12. Coming to the issue (i) as above, we find that the appellants claim that they are rendering the services as insurance agents; the sub-agents who get the tax paid commission from insurance companies, share the same with the appellants and that they are promoting the Business of the Insurance Companies rather than of the sub-agents and as such they cannot be said to have rendered 'Business Auxiliary Service' to the sub-agents. On the other hand, the adjudicating commissioner finds that the appellants are not insurance agents as per the definitions, both under Finance Act,1994 and the Insurance Act 1938; any services could be termed as "insurance auxiliary services' only if the same are provided or are to be provided to a policy holder or any person] or [insurer, including re-insurer) by an actuary or intermediary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided on behalf of the client, or (iv) procurement of goods or services, which are inputs for the client; or [Explanation. For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client: ((v) production or processing of goods for, or on behalf of the client; or] (vi) Provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent. [but does not include any activity that amounts to "manufacture" of excisable goods.] [Explanation. For the removal of doubts, it is hereby declared that for the purposes of this clause, (a) "commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellants to their clients, i.e. the sub-agents which could be taxable under "Business Auxiliary Services'; we find that non-registration of the appellants as insurance agent does not alter the nature of the services rendered by the appellants to sub-agents. It can be understood from the scheme of the things that the appellants and the sub-agents are rendering the same service to the insurance companies and are sharing the commission paid by the insurance companies to the sub-agents. We find that there is no such bar under the service tax law prohibiting such joint rendering of the service. We find that Tribunal had decided an issue involving identical facts in the case of Popular Vehicles & services Ltd 2010(18) STR 493(Tri-Bang) and held as follows. We find that in the case on hand, tax was paid on the commission paid by the insurance company and by the banks/finance companies. Once service tax is paid by MIBL/MUL on commission paid by their clients for provision of the respective services, no liability survives under BAS on any work carried out by an intermediary which contributed to the same outcome. Moreover, if any service tax is paid by the appellants on commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal expenses recovered or income generated in the course of business of the appellant and therefore cannot be held to the exigible to service tax. Therefore, we find that no case has been established against the appellants on this account. 19. Coming to the other issue, raised at (iii) in Para 11 above, of demand on account of Certified Business Training (CBT), the adjudicating authority finds that they are covered under "Commercial Training and Coaching Centre Services". The appellants submit that the training provided by them is an in-house training for the benefit of their down the line members to improve their marketing skills and cannot be construed strictly to be "Commercial Training and Coaching Centre Services". The appellants also take the plea that even if they are considered as taxable service, their total turnover on this account will not be more than 10 lakhs the appellants are entitled to the benefit of SSI exemption. We find that the so-called training given by the appellants is not an open training given to the general public for a consideration. Even though, certain amounts are taken as fees, the training is only to their down line members in order to improve thei ..... 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