TaxTMI 
TaxTMI 
2020 (8) TMI 786
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.... services' in rule 2(e) of CENVAT Credit Rules, 2004 can be stretched to deny the availment of credit of tax paid on 'input services' procured by providers of 'insurance service' before the transformation of the tax regime to the 'negative list' paradigm. 2. In the impugned order-in-original no. 55/ST-II/RS/2014 dated 31 July 2014, Commissioner of Service Tax-II, Mumbai has held that liability on taxable service during the relevant years had been discharged by debit of CENVAT credit that included such as were attributable to 'input services' that are not acceptable as having been utilised entirely to provide these services only. The appellant is a provider of 'life insurance service' and, in his preliminary submission, Learned Chartered Accountant appearing for the appellant drew attention to three principal offerings of the industry: plain or vanilla insurance policy, endowment policy and investment policy. The last of the three is generally known as 'unit linked insurance policy (ULIP)' involving choices offered to the insured from among investment packages and, other than the first, the products carry returns to the insured beyond mere coverage of risk. 3. The contours of ....
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....was also brought to our notice that '(zzzzf) any service provided or to be provided to policyholder, by an insurer carrying on life insurance business, in relation to management of investment, under unit linked insurance business, commonly known as Unit Linked Insurance Plan (ULIP) Scheme Explanation: for the purposes of this sub-clause: i) management of segregated fund of unit linked insurance business by the insurer shall be deemed to be the service provided by the insurer to the policyholder in relation to management of investment under unit linked insurance business; and ii) the gross amount charged by the insurer from the policyholder for the said services provided or to be provided shall be equal into the difference between; a) premium paid by the policyholder for the Unit Linked Insurance Plan policy; and b) the sum of premium paid for or attributable to risk cover, whether for life, health or other specified purposes, and the amount of segregated for actual investment.' was inserted in section 65 (105) of Finance Act, 1994 with effect from 16th May 2008. 4. It is common ground that proposers opt for a policy most a....
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....ining both risk cover and benefits of investment. ULIP being a combination product, premium paid under ULIP consists of risk premium and investment component. Risk premium may be for life or health or any other authorized purposes. Unlike in the case of traditional life insurance policies, policyholder of ULIP can choose portfolios for investment with different investment aims such as low, medium and high-risk category or combination thereof. ULIP enables the policyholder to take part in the scheme collectively and becoming the beneficiary like mutual funds. The investment risk is upon by the ULIP policyholder. 4.2.2 the funds available for investment is known as segregated fund. Insurance companies charge from the policyholder, initially and periodically, various charges, in addition to risk premium, relating to management of the segregated fund under various names, such as, premium allocation charges, fund management fees, fund switching charges, surrender charges etc. these are consideration for providing services relating to investment management. 4.2.3 the proposed service enables levy of service tax on services provided in relation to management of the inves....
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....tended period, allowed in section 73 of Finance Act, 1994, has restricted the present demand to the period from 1st April 2008 to 15th May 2008 when a portion of the premium ceased to be excluded from assessment. On the 'endowment policy', the dispute relates to the period up to 31st March 2011 as a portion of the premium continued to escape liability for assessment. In a nutshell, the coverage under 'exempted services' includes, as per Revenue, in the second leg of the definition, such services that, even though taxable subsequently, were among those for which consideration was included in the amount charged from the policy holder. The contention is that in identifiable service, though not taxed then, did exist and was rendered. 10. 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 ....
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....h is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable.' required appellant to be fastened with the liability and detriments in the impugned order for failure thereof. 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 Special Counsel 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 his submission that both 'endowment policies' and 'unit linked insurance policies' entice holders to these schemes with promise of returns in addition to coverage of risk. Alleging that discharge of tax liability on any one of the services does not entitle the appellant to the benefit of CENVAT credit on 'input services' in its entirety, reliance is placed on the decision of the Tribunal on Reliance Life Insurance Co Ltd v. Comm....
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....stantially 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 consumer and the prospect of a return of contribution, packaged as premium and comprehended as premium by the policy holder, impacts upon the marketability of the pro....
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....herefore, leave us with no option but to determine that legislative intent of 'services that are not leviable to tax under section 66 of Finance Act, 1994' to be those to which the Union cannot extend its taxing arm. The exclusion of a portion of the consideration in providing 'works contract service' under section 65(105)(zzzza) of Finance Act, 1994, as elaborated by the Hon'ble Supreme Court in Larsen & Toubro v. Commissioner of Central Excise, Kerala [2015 (39) STR 913 (SC)], with attendant impact on availment of credit under CENVAT Credit Rules, 2004, and the non-taxability of 'trading' as a service under Finance Act, 1994 in Orion Appliances Ltd v. Commissioner of Service Tax, Ahmedabad [2010 5 TMI 85 CESTAT Ahmedabad] are signposts to areas forbidden from tax by the Union. Not unnaturally, such service, unacknowledgeable in the tax jurisdiction, fails the test of utilization in rendering of further service. These, therefore, cannot be 'input services' and the inclusive portion of 'exempted services' must be construed as referring to such and not to services that, though not yet, may still be subject to levy. The proposition of Revenue that subsequent taxability imprints upon ....