TaxTMI 
TaxTMI 
2020 (3) TMI 1295
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.... companies in respect of these insurance policies and it has been availing CENVAT credit of service tax paid on such reinsurance services. The impugned orders passed by the Adjudicating Authority have denied the said CENVAT credit on such re-insurance services. The Appeals have been filed to assail these three orders. 3. The table below give details of each of the three service tax appeals. Appeal No. Date of Show Cause Notice Date of Order Period CENVAT Credit denied ST/54096/2014 26.11.2012 19.05.2014 Oct, 08 to March, 2012 115,78,81,098/- ST/52874/015 21.05.2014 28.02.2015 April, 12 To March, 2014 42,39,38,615/- ST/50690/2017 08.04.2016 23.01.2017 April, 2014 to March, 2015 2,27,37,344/- 4. The common reasons given in the impugned orders for denying the CENVAT credit on service tax paid on re-insurance services are as follows:- (a) Re-insurance service is not essential for providing insurance service as the Appellant can provide insurance service without obtaining re-insurance service; (b) Re-insurance services were obtained by the Appellant after issuance of insurance policies to the customers, ....
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....not affect the eligibility of the Appellant to avail CENVAT credit on re-insurance services. The general insurance services relating to motor vehicles have been excluded from the purview of "input service‟, but this exclusion clause cannot be the read to cover re-insurance services since they are not insurance services in respect of a motor vehicle; (iii) The Appellant is eligible to avail CENVAT credit on re-insurance services provided by member companies under the Indian Motor Third Party Insurance Pool (Insurance Pool) that has been created under section 34 of the Insurance Act; (iv) In Service Tax Appeal No. 52874 of 2015, there is a duplication of demand to the extent of CENVAT credit of Rs. 6,12,340/- and, therefore, confirmation of demand in the impugned order to that extent is liable to be set aside on this ground; and (v) In any view of the matter, the extended period of limitation could not have been invoked nor could penalties have been imposed in the facts and circumstances of the case. 6. The learned Authorised Representative of the Department has, however, supported the impugned orders and has contented that they do not suffer from ....
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....en established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act 1999 IRDA Act. The Government of India has constituted IRDA with a view to protect the interest of holders of insurance policies and to regulate, promote and ensure orderly growth of the insurance industry. The Appellant claims that because of the requirement set out under section 101A of the Insurance Act and as a prudent business practice it has been availing re-insurance services from Indian as well as foreign reinsurance companies in respect of the insurance policies. 9. Section 114A of the Insurance Act empowers the IRDA to make regulations in respect of various matters including matters relating to re-insurance under sections 101A and 101B of the Insurance Act. In due exercise of the aforesaid powers, IRDA has issued the Re-insurance Regulations for re-insurance of general insurance business. 10. Section 146 of the Motor Vehicles Act, 1988 MV Act mandates taking of an insurance cover against third party risks by a person using a motor vehicle in a public place. The rate for third party insurance premium is regulated by the Insurance Act. It is stated that problems....
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....y the Appellant under the reverse charge. 14. In the course of audit of the records of the Appellant for the period from April, 2010 to March 2011 that was carried out between November, 2011 to March, 2012 it was inter alia, pointed out that re-insurance is not an "input service‟, as the same is not essential for providing "output service‟ and is received after providing "output service‟. The Appellant was, accordingly, issued three show cause notices dated November 26, 2011, May 21, 2014 & April 8, 2016 for the period October, 2008 to March, 2012, April, 2012 to March, 2014 and April, 2014 to March, 2015 respectively. These three show cause notices resulted in three impugned orders dated May 19, 2014, February 28, 2015 and January 23, 2017. The aforesaid three appeals have, accordingly been filed to assail these impugned orders. 15. The first issue that arises for consideration in these three appeals is as to whether re-insurance services are used for provision of insurance services and, therefore, would qualify as "input service‟ for the Appellant. Section 65 (58) of the Finance Act, 1994 Finance Act defines "insurer‟ to mean any person carryin....
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....ce availed by the insurer is co-terminus with the original risks assumed by the insurer. 18. In this connection it will be useful to refer to a decision of the Karnataka High Court in PNB Met Life Insurance Co Ltd. The issue that came up for consideration before the Karnataka High Court was whether an assessee can avail CENVAT credit of service tax paid on reinsurance services by treating the said service as an "input service". PNB Metlife India Insurance Company was carrying on life insurance business and on the insurance policy issued by it, service tax was charged from the customers. It also procured re-insurance service from overseas insurance companies and availed CENVAT credit of service tax paid on such services received by it. This CENVAT credit was denied by the Department for the reason that re-insurance service cannot be considered as an "input service" since it takes place after the insurance policy is issued. The Karnataka High Court examined whether CENVAT credit availed and utilized by the insurance company on service tax paid for re-insurance service is an "input service" for the "output service" of insurance that the company was providing and held that the proce....
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....nsurance policy by insurer, and then taking of reinsurance by it, is a continuous process, and in the facts of the present case, it cannot be said that the same would not be an "input service‟ eligible for CENVAT credit within the meaning of Rule 2(l) of the CENVAT Credit Rules, 2004. 7. We may further add that the Service Tax is levied for certain service rendered and the provision of giving the CENVAT credit is so that there may not be double taxation. If a person has collected service tax, no doubt the same has to be deposited, but if in the process of the same transaction he has paid some service tax, which is necessary for its business, then he is entitled to the CENVAT credit to the extent of service tax which has been paid by it. In the present case, if the entire Service Tax which is collected by the Insurer, while selling its insurance policies, has to be deposited without being given the credit of the tax which is paid by it while procuring a policy of reinsurance as (mandatorily required in law), the same would be against the ethos of CENVAT credit policy, as the same would amount to double taxation, which is not permissible in law." 19. It needs ....
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....he period April, 2015 to March, 2016 as per details given in Annexure- "A‟ to the impugned show cause notice by contravening the provisions of Rule 2&3 of the CENVAT Credit Rules, 2004 as per facts stated below: 2. Whereas, during the course of audit of the records of the assessee, it was noticed that the assessee had availed CENVAT Credit of service tax paid on re-insurance services pertaining to other than Motor Vehicle. Whereas re-insurance services pertaining to other than Motor Vehicles did not appear to be covered under the ambit of "input service‟ as defined under Rule 2(l) of CENVAT Credit Rules, 2004. xxxxxxxxxxxxxxxx 29. The discussion up to this stage can be summarized to conclude that reinsurance is a statutory obligation and the reinsurance is integrated with the insurance policy and therefore has nexus with the output service of insurance. This aspect has also been clarified by CBEC New Delhi in its Circular No. 120(a)/2/2010-S.T. dated 16.04.2010. Further in the said circular it is also clarified that, it is the reinsurer which provides insurance service to the insurance company. Thus there is no doubt that re-insurance service is an ....
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..... April 1, 2012 does not affect the eligibility of the Appellant to avail the CENVAT credit on re-insurance service. The relevant portion of the order of the Commissioner is reproduced below:- " 21. The closer and deeper scrutiny of said exclusion clause reveals that within the said exclusion clause which among others restrict the CENVAT credit of general insurance business relating to motor vehicle (which is not a capital goods), exception has been made to the general insurance services, if used by an insurance company, in respect of a motor vehicle insured or reinsured by such person. Thus, the main exclusion is related to general insurance services related to the Motor vehicle and within this exclusion exception has been granted to an insurance company in respect of motor vehicle insured or reinsured by them. Meaning thereby that this exclusion and its exception are not in any way restricting the CENVAT credit of general insurance services pertaining to "Other than Motor vehicle‟ which in real terms is not a subject matter of said exclusion and its exception clause. It may further be added that the exclusion to the definition of "input service‟ has been intr....