TaxTMI 
TaxTMI 
2019 (2) TMI 868
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....e insurance services since 2016, and are covered under the taxing head of Section 65(105) (zx) of the Finance Act, 1994; the appellant is duly licensed by the Insurance Regulatory Development Authority of India (IRDA for short); avails CENVAT credit on the inputs and input services. During the period in question i.e. 2011-2012 to 2014-2015, appellant was providing two types of life insurance policies i.e. the traditional plan though pure risk insurance policies, participating and non-participating policies (endowment policies) and unit linked insurance plans (ULIP for short). In respect of Traditional Plan/Policy, the appellant assessee will pay out the sum assured only on the death of the policyholder within the policy term. In the event that the policyholder outlives the policy term, the insurer will not pay anything while in the case of endowment policy the insurer will pay out the sum assured under the policy along with all benefits that have accrued till date upon the death of the policy holder within the policy term or expiry of the policy term. While in the case of Unit Linked Insurance Plans (ULIP), allows the policy holders to direct part of their premium into investment i....
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....ate the surrender insurance policy and recover insurance money is an actionable claim has held by Apex Court in it is judgment in the case of Union of India Vs. Sri Sarada Mills Ltd., [1972 (2) SCC 877]; Sunrise Associates Vs. Government of NCT, Delhi [2006 (5) SCC 603] as also LIC of India Vs. Insure Policy Plus Services Pvt. Ltd., [2016 (2) SCC 507]. ii) Definition of 'Service' under Section 65B(44) specifically excludes from it is purview in transaction in money or actionable claim, consequently, exercise of the right by policy holder to receive insurance money (surrender value) is transaction in an actionable claim and not a service to be taxed under Finance Act. iii) Without prejudice to the submissions, the Tribunal in the case of Reliance Life Insurance Company Ltd., [2018 -TIOL-1308-CESTATMumbai] held that the surrender/discontinuance charges represent penalty or liquidated damages are cannot be considered as a consideration for any services. iv) Reliance placed by the Adjudicating Authority on Notification dated 01.07.2010 in terms of which IRDA had issued the Insurance Regulatory and Development Authority (Treatment of Discontinued Linked Insurance Policies) Regulation....
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....of June was understated by the amount. This error was corrected in the year April, 2013. C) regarding demand of service tax of Rs. 8,17,779/- It is his submission that neither notice nor the impugned order has suit out any head of taxable service under which the tax in respect of said amount was being demanded. It is settled law that without specifying the head of taxable service under which the demand is being raised, tax cannot be recovered. D) regarding reversal of tax as required under Rule 6 as sought in the Revenue's appeal. It is his submission that the appellant was not recovered any taxable or exempted services and has availed credit attributable to the inputs and input services were correctly availed and provisions of Rule 6 cannot be invoked in the case in hand. It is also his further submission that for the demand under Rule 6, it is partially beyond 5 years which is the maximum period prescribed as raising a demand and even otherwise the primary input service credit availed by the appellant assessee was in respect of insurance auxiliary service to which the restrict of for which tax liability does not apply as has been held by the Hon'ble Mumbai Tribunal in the cas....
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....938, even though, the amount may not be a liability which is immediately payable, the difference between the fund value as on the date of surrender vis-a-vis the amount paid as surrender value, is accounted as surrender charges in the books of account. 10. The issue which falls for consideration is whether the exercise of the right of the insurer to receive money is merely a transaction in actionable claim, so as to be out of the purview of service tax. The provisions of Finance Act, 1994 more specifically Section 65B(44) defines what would mean the service which we reproduce: "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fee....
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....ion 65B(44) excludes from its purview an activity which is construed merely a transaction in actionable claim. The term actionable claim is defined in Section 65B(2) (1) have the meaning assigned to it in Section 3 of the Transfer of Property Act, 1882 we reproduce the said relevant definition of the term "actionable claim." " 'Actionable Claim' is a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in possession either actual or constructive, of the claimant, which the civil courts recognise as affording grounds of relief whether such debt or beneficial interest be existent, accruing or conditional or contingent". It can be seen that actionable claim as defined under Transfer of Property Act means a claim to any debt, secured by any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant. From the definition of actionable claim, the insurance policy or the surrender value thereof would become an actionable claim or otherwise was a matter of dispute in the Apex Court in the case of Union of ....
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....ning of Section 3 of the Transfer of Property Act and is not a mere right to sue. In a policy of life insurance the sum insured is certain, the premium, or the consideration for its payment is certain and the time when its payment is to become due is certain to come. Even the present value of the policy which is called the surrender value can be calculated. A policy of insurance is a present contract in the hands of the assured of which he has a present right to the benefit although the fruits are to be enjoyed in future. A life assurance policy as such would be property. Coitton, L.J. in (Tucan)2, (1888) 40 Ch. D5 remarked "It was contended that the policies did not come within the term 'property' but in my opinion, they may be considered as acquired by purchase during his life. They are contracts by which the policy holder has a right to recover certain sums of money from the insurance office in certain events, and the premium which he pays may be considered as an investment so as to obtain for him a benefit of the policy holder." Life policies are now construed not as contracts of indemnity but to pay a certain sum in a certain event depending on the duration of human life." Th....
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.... the Adjudicating Authority that the amounts recorded as surrender/discontinuance charges are consideration for services rendered and such charges are designed to recoup the expenses already incurred towards procurement administration of the policy and incidental thereto. The finding of the Adjudicating Authority are premised entirely are incorrect reading of the IRDA (treatment of discontinuance linked insurance policy) regulations, 2010 and overlooking the first principle and fundamental position that for an activity to be taxed as service under provisions of Finance Act, 1994, the activity has to first qualify as a service. In our view, a regulation framed by IRDA with the aim of protecting of the insured by providing for a yardstick for computation for the surrender and the consequent discontinuance charges cannot be read and applied out of services rendered a transaction in an actionable claim, as a service, liable to be taxed under the provisions of Finance Act, 1994. In any case, the said regulation will apply only to the policy issued after 01.07.2010 and does not apply to the policy prior thereto. 14. In view of the above findings, we hold that the demand of service....
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....nd of Rs. 8,17,779/-, we find that the demand for the period needs to be upheld as appellant assessee is not able to show from the records that they had indicated the amount as other income in the service tax returns. Accordingly, we find the arguments put forth by the Learned Counsel on this point do not merit any acceptance and we uphold the confirmation of demand of Rs. 8,17,779/- along with interest. We set aside the penalties imposed on them on this count also. 18. In so far as the appeal filed by the Revenue is concerned, show cause notice issued to the appellant assessee has alleged that the policy administration charges, premium allocation charges, surrender charges which are recovered as a part of management of ULIP services did not paid tax during the period 16.10.2006 to 15.05.2008 & 01.07.2010 till 31.03.2011 and consequently were to be treated as exempt services, thereby the notification of CENVAT credit Rules, we find that the Adjudicating Authority has concluded that services rendered by the appellant assessee are only taxable services in as much, no taxable service rendered by them is exempt from whole of tax leviable on them nor was had rendering non taxable servi....
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....r charges, funds administration charges are only to be excluded and therefore exclusion of such value and such excluded value cannot be considered as attributable to exempted services. However, he fairly agrees that this issue had been considered by this Tribunal in the case of ING Vysya Life Insurance Co. Ltd., Vs. CCE, C & ST, Bangalore [Misc. Order No. 2088-20882/2014 dt. 01/04/2014, and we had taken a prima facie view in favour of the Revenue. However in view of the fact that the issue as to whether the portion of such leviable amount can be considered as exempted service or not is a debatable issue and therefore the appellant could not be found fault with if they had not opted to pay proportionate credit attributable to such value. This Tribunal in the case of ING Vysya had allowed such option to be exercised now and accordingly took a view that appellant should reverse the proportionate credit attributable to such values. The learned counsel submits that according to their own calculation the amount of proportionate credit reversible would come to about Rs. 86 lakhs. 14. The observations hereinabove would show that prima facie, we have not found a case in favour of the appel....