2019 (12) TMI 1127

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he assessee for rendering services - taxable as well as non-taxable - in proportionate to the latter. At stake is Rs.1,08,26,44,321, pertaining to 'endowment policies' and 'ULIP scheme policy', which is sought to be recovered as ineligible credit availed for the period from 1st April 2008 to 31st March 2011 following the impugned order. In addition, penalty of like amount imposed under section 78 of Finance Act, 1994, by invoking rule 15 of CENVAT Credit Rules, 2004, and further penalty under section 77 of Finance Act, 1994 are also under challenge. 3. The appellant offers many insurance products which are broadly categorised as: 'term policy', 'endowment policy' and 'unit linked insurance policy (ULIP scheme)' and the proceedings initiated by service tax authorities are restricted to the latter two. The tax liability on 'life insurance business' defined in section 2 (11) of Insurance Act, 1938, as incorporated in section 65 (51) of Finance Act, 1994, was legislated by the amending section 149 of Finance Act, 2002 by the insertion of '(zx) to a policy holder, by an insurer carrying on life insurance business in relation to life insurance business;' in section 65(105)....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... continued to escape liability for assessment. The demand of tax on the former is Rs. 4,93,60,166 and on the latter Rs.103,32,84,155 and it is against the confirmation of these demands that the challenge of the appellant lies. 6. Before adverting to the submissions of Learned Counsel for the appellant, it would be appropriate for us to take stock of the relevant statutory provisions that have been relied upon by the service tax authorities. Rule 3 of CENVAT Credit Rules, 2004 allows a 'provider of taxable service' to take credit of service tax leviable under section 66 of Finance Act, 1994 (along with attendant cess) that has been paid on any 'input service' received for providing 'output service' and the expressions employed therein have been defined in rule 2 of the said rules thus '(r) "provider of taxable service" include a person liable for paying service tax;' '(l) "input service" means any service,- (i) used by a provider of taxable service for providing an output service; or....' '(p) "output service" means any taxable service,..., provided by the provider of taxable service to..., as the case may be, and the expressions 'provider' and....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....thereby, rendering rule 6 of CENVAT Credit Rules, 2004 to be applicable, it is the primary submission of the appellant that such vivisection of a composite consideration for a particular service is not the intent of the said Rules. 8. Detailing the objections to the findings in the impugned order, Learned Counsel for the appellant insists that they are in the business of providing 'life insurance service' which, legally, and in practice, envisages a single contract with each recipient as contained in the policy and that, all along, the statute intended a single service of which the entire was exempt for a period with a portion taxable thereafter for a further period. With the peculiarity of assessment of the non-excluded portion of the premium received from holders of 'endowment' policy having been overcome by taxing the entire premium, under rule 6(7A) of Service Tax Rules, 1994, at 1% as representing the 'risk cover' in specific circumstances of non-identification of the latter, Learned Counsel argues that the single service, contemplated in the statute, remains undisturbed. Furthermore, according to him, the investment of some portion of the premium is not intended to benefit....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....(Tri-Mumbai)]. We are in agreement that the taxable service is not wholly exempt. 10. Learned Counsel further submits that the deeming provision of taxability as a service does not suffice to exclude it from the sphere of tax on 'life insurance business' and, thereby, is precluded from inclusion among services that were not leviable to tax prior to the date of incorporation. Suggesting that the investment portion is not liable to treated as consideration for rendering of any service, reliance is placed by him on the decision of the Tribunal in Max Life Insurance Co Ltd v. Commissioner of Central Excise [2018-VIL-126-CESTAT-DEL-ST]. 11. While placing emphasis on the definition of 'exempted services' which includes services that are not leviable to tax, it is the contention of Learned Authorized Representative that subsequent rendering of taxability of a service is indicative of absence of leviability before such date and that legislative intent to tax only 'risk cover' from 10th September 2004 with other services rendered liable separately and subsequently implies the existence of several services within the same bundle offered to the same recipient. It is her submission that ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....d. There is no separate identifiable service attributable to the investment portion of the premium in the present case. In other words the premium amount received was invested substantially and for managing such investment, administration charges are collected and Service Tax paid.......' leading to the inevitable conclusion that invested portion of the premium does not represent a service. 14. Though it is submitted by Revenue, in relation to the demand for the period from 1st April 2008 to 15th May 2008 on non-taxability of a portion of the premium paid on 'unit linked insurance policy', we cannot but take note that the provider and recipient in section 65(105)(zx) and section 65(105)(zzzzf) of Finance Act, 1994 remain the same and, that but for the exemption notification no. 9/2002-ST dated 1st August 2002, the whole of the premium would have been liable to tax under the former; even the subsequent amendment in 2004, by which 'risk cover' was subjected to tax, cannot erase the essential integrity of the product offered in the course of 'life insurance business' to extract a new service. Life insurance policies with limited risk cover may not have much appeal for the Indian....