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Issues: (i) Whether reinsurance services provided by the appellant to Agricultural Insurance Company of India Ltd. under the Weather Based Crop Insurance Scheme and the Modified National Agricultural Insurance Scheme are eligible for exemption; (ii) Whether confirmation of service tax demand with interest and penalty invoking the extended period is sustainable.
Issue (i): Whether reinsurance services provided by the appellant to AICIL under WBCIS and MNAIS are covered by the exemption.
Analysis: The grant of exemption for reinsurance services for the relevant period was effected by statutory enactment in Section 135 of the Finance Act, 2025, which expressly provides that no service tax shall be levied or collected in respect of reinsurance services under WBCIS and MNAIS for the period 01.04.2011 to 30.06.2017 and mandates refund where tax was collected. The disputed period 2014-15 to 2016-17 falls within the period specified in Section 135. The statutory provision operates notwithstanding prior provisions of Chapter V of the Finance Act, 1994, and the omission of that Chapter.
Conclusion: Reinsurance services provided by the appellant to AICIL under WBCIS and MNAIS are covered by the retrospective exemption and thus exempt for the period 01.04.2011 to 30.06.2017.
Issue (ii): Whether the confirmation of demand with interest and penalty invoking the extended period is sustainable in view of the exemption.
Analysis: Section 135, by creating a retrospective exemption and providing for refund of tax collected for the specified period, removes the legal basis for the tax demand relating to that period. Where tax is rendered non-leviable by a statutory provision applicable to the disputed period, demands, interest and penalties premised on levy of that tax become unsustainable. The statutory refund mechanism and retrospective application of Chapter V for refund purposes further underpin the availability of relief.
Conclusion: The confirmation of service tax demand with interest and penalty for the disputed period is unsustainable and must be set aside.
Final Conclusion: The appeal is allowed and the impugned Order-in-Original confirming the demand is set aside with consequential reliefs as provided by law.
Ratio Decidendi: Section 135 of the Finance Act, 2025 grants a retrospective exemption for reinsurance services under WBCIS and MNAIS for 01.04.2011 to 30.06.2017 and requires refund of any service tax collected, thereby nullifying tax demands, interest and penalties based on levy of service tax for that period.
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