ULIP service tax on policy administration and switching charges was rejected for the pre-1.5.2011 period.

For the period before 1.5.2011, policy administration charges, front end load and switching charges collected under unit linked insurance plans were held not taxable under the management of investment under ULIP entry. The Tribunal relied on the contemporaneous statutory framework, the Board's TRU circular and an earlier coordinate bench ruling, and treated the circular as binding on departmental officers. As a result, the Department could not recharacterise those charges differently for the relevant period, and the demand, interest and penalties were not sustainable.

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Issues: Whether service tax was leviable, for the period prior to 1.5.2011, on policy administration charges, front end load and switching charges collected in relation to unit linked insurance plans under the management of investment under ULIP service.

Analysis: The taxable entry for management of investment under ULIP was construed in the light of the contemporaneous statutory framework and the Board's TRU circular. The earlier coordinate bench decision holding that, prior to 1.5.2011, policy administration charges and similar charges were not taxable was followed. The circular was treated as binding on departmental officers, and the Tribunal held that the Department could not take a contrary stand when the contemporaneous clarification placed such charges under life insurance service rather than under the ULIP management entry for the relevant period.

Conclusion: Service tax was not payable on the disputed charges for the period 1.7.2010 to 30.4.2011, and the demand, interest and penalties could not be sustained.

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