Statutory insurance by a State department is not a taxable service when performed under mandatory service rules.

Life insurance and group insurance provided by the State Insurance Department under Rules 22A and 22B of Part I Kerala Service Rules were treated as statutory functions performed under a mandatory legal mandate, not as services rendered to individual recipients for consideration. On that basis, the activity was held to fall outside the scope of taxable service under the Finance Act, 1994. The analysis also noted that the Board circular distinguished sovereign or public authority functions performed under statutory obligation from non-statutory services supplied for consideration, with only the latter attracting service tax.

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Issues: Whether life insurance and group insurance provided by the State Insurance Department under Rules 22A and 22B of Part I Kerala Service Rules constitute a taxable service liable to service tax under the Finance Act, 1994.

Analysis: The insurance coverage was found to be provided pursuant to a statutory mandate under Rules 22A and 22B of Part I Kerala Service Rules. The activity was therefore treated as a mandatory statutory function performed by a State Government department, not as a service rendered to any particular individual for consideration. The circular issued by the Central Board of Customs and Excise clarified that activities performed by sovereign or public authorities under statutory obligations do not amount to taxable service, though non-statutory services for consideration may attract tax.

Conclusion: The insurance activity under Rules 22A and 22B is outside the purview of service tax and is not exigible to tax.

Final Conclusion: The challenge to the single Judge's view failed, and the appeals were dismissed.

Ratio Decidendi: An activity compulsorily undertaken by a public authority under a statutory mandate is not a taxable service when it is a statutory function and not a service rendered for consideration.

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