TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 457
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....nd that the appellants have illegally recovered service tax from the insurance agent and the same is recoverable under Section 73A (3) of Finance Act, 1994. Three show cause notices dated 23.09.2013, 22.04.2016 & 11.04.2018 were issued to the appellants covering the period April 2008 to March 2013, April 2014 to March 2015 & April 2015 to June 2017 respectively demanding service tax of Rs. 3,53,33,07,408/-; 1,82,44,893/- and 8,73,39,908/- respectively. Show cause notices also proposed to impose penalty on that Section 76, 77 and 78 of Finance Act, 1994. All the three show cause notices were confirmed by the impugned order dated 30.08.2018. Accordingly, Appeal Nos. ST/89285/2018, ST/89288/2018 & ST/89310/2018 were filed by the appellants. Submissions on the includibility of various expenses 2. Shri Shridharan Senior Counsel along with Shri Sachin Mishra appeared on behalf of the appellant and submits as regards the alleged non inclusion of expenses that the appellants have entered in to agreements with individuals/corporate who act as the insurance by the appellants. The appellants are discharging service tax on reverse charge basis on the commission amount paid to the insur....
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....ble/ Renewal Training Expenses:- as per IRDA guidelines the licenses granted are valid only for 3 years; in case the agents wished to renew their licenses they need to undergo training; for this purpose the appellants engage the training institute to impart the training. 2.5 He submits that various vendors/training institutes raised the invoices in the name of the appellants and the appellants have paid for the same. The show cause notices alleged that an expense incurred by the appellants is on behalf of the agents and hence the same are includible in the taxable value in the service provided by the agents to the appellants in terms of Rule 5 & Rule 6 of the Service Tax (determination of value) Rules, 206. 2.6 He submits that in terms of IRDA Regulation 2002 insurance agents required to get trained before they are license and before their license is reissue after the expiry of 3 years. Therefore, the expenses incurred by the agents and reimbursed by the appellants this regards cannot be termed as commission for procuring insurance business. He further submits that various kinds of expenditure incurred by the appellant towards the recruitment trainee etc are normal bu....
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....unconstitutional in the case of International Consultants & Technocrats Pvt. Ltd. V/s UOI 2013- (29) S.T.R. 9 (Del.) (upheld by Supreme Court 2018- TIOL-76-SC-ST); Hon'ble Apex Court has held the same in the case of CST Vs. Bhayana Builders (P) Ltd. -2018 (10) GSTL 118 SC. He further submits that Apex Court in the case of Devi Dass Gopal Krishnan and others Vs. State of Punjab & Ors. (1967) 20 STC 430 held that the phrase 'other valuable consideration' would take color from the expression 'cash or deferred payment' and unless transfer is made for money consideration, such transfer will not be sale and is not liable to levy of tax under the provision of the Act. 6. Learned Senior Counsel also submits that the principle of noscitur a sociis is applicable with the case; clause 6 has expression like 'amount of premium charge', 'adjustment of deposit', 'any amount received' etc.; these clauses also suggest that what is liable to service tax his money consideration and nothing more. He relies on H. H. Sri. Rama Verma vs. CIT, (1991) 187 ITR 308 (SC) and Vijaipat Singhania vs. CIT, (1992) 193 ITR 274 (SC). 7. Learned Senior Counsel further submits that the extended period is....
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....the net amount arrived at after deducting service tax and TDS; it is a method of computing the commission amount' the appellants have not violated any provision of law; Hon'ble Apex Court has gone into the issue of agreement between parties which provided for the burden of taxes to be borne by the service provider in the case of Rashtriya Ispat Nigam Ltd vs. M/s. Dewan Chand Ram saran, 2012- TIOL-37-SC-ST and held that " The provisions concerning service tax are relevant only as between the appellant as an assesse under the statute and the tax authorities. This statutory provision can be no relevance to determine the rights and liabilities between the appellant and the respondent as agreed in the contract between two of them. Thus, he submits that there is no bar under the law for deducting the amount of service tax from the commission payable to the agents. The above case was relied upon by CESTAT in the case of Bajaj Life Insurance Company and Max Life Insurance Company (both supra). 10. Learned Senior Counsel submits that a close reading of Section 73 A of the Finance Act, 1994 makes it clear that sub section (1) covers a situation where a person liable to pay service tax....
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....ay service tax on the amounts, representing service tax and TDS, deducted by them from the commission payable to their agents. The appellants have engaged the services of various agents for procuring life insurance business; the agents or require to pay service tax under Section 65 (105) (zy) of the Finance Act, 1994 on the insurance auxiliary services; however, the appellants are paying such service tax on the basis of reverse charge mechanism. While paying the commission due to the agents the appellant have deducted the service tax paid by them and TDS amount from the commission; it is this amount representing the service tax recovered from the appellants, is sought to be recovered as service tax by the Revenue under provision of Section 73 (2) and Section 73 (3) of the Finance Act, 1994. It is alleged in the SCN that while paying the Commission to the Insurance Agents. Department is of the view that as per provisions of Section 68(2) of the Act read with Rule 2(1)(d)(ii) and Rule 2(1)(d)(i)(A) of the ST Rules read with Notification No. 36/2004 ST and 30/2012-St respectively, the Noticee is the person liable to pay service tax and they are not authorized to collect the service ta....
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....ce provided or agreed to be provided by an insurance agent to any person carrying on the insurance business, the recipient of the service. (iv). Section 73A of the Act, reads as Service tax collected from any person to be deposited with Central Government. (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made there under, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made there under from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. (2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government. (3) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (2) and the same has not been so paid, the amount, a notice requiring him t....
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....ty was on the service provider. The provisions concerning service tax are relevant only as between the appellant as an assessee under the statute and the tax authorities. This statutory provision can be of no relevance to determine the rights and liabilities between the appellant and the respondent as agreed in the contract between two of them. There was nothing in law to prevent the appellant from entering into an agreement with the respondent handling contractor that the burden of any tax arising out of obligations of the respondent under the contract would be borne by the respondent. 17. Moreover, we find that as submitted by the Senior Counsel for the appellants, the issue is no longer Res Integra. This Tribunal has gone in to the case, with identical facts, in respect of HDFC Standard Life Insurance Co 2017 (49) S.T.R. 301 (Tri. - Mumbai), and held relying on Rashtriya Ispat Nigam Ltd (Supra) that such Tax which is paid and recovered is not again Taxable. Tribunal held that 9. In service tax levy, too, the person liable to pay the tax is required to deposit the tax amount irrespective of the quantum or stage of recovery from the person who bears the burden of tax....
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....case the appellants have discharged the duty on reverse charge mechanism. On this count also, such amounts recovered by the appellants, who are service recipients, cannot be taxed in the scheme of service Tax. Therefore, we hold that on both these counts the demand on amount of service tax recovered by the appellants from their agents cannot be sustained. Thus, the demand of Rs 344, 39, 75,575 is liable to be set aside. As the demand itself is held not sustainable, the question of Interest and penalty does not arise at all. 19. Coming to the various expenses incurred by the appellant for training of the insurance agents and business promotion expenses, the appellants have submitted that these are business related expenses and have no connection with the consideration paid/payable to the insurance agents by the appellants for the services availed; Rule 5 and 6 of the Valuation Rules are not applicable as the appellants have been discharging service tax on the commission paid to the insurance agents by way of reverse charge mechanism and that without prejudice to the above Rule 5 of the Service Tax Valuation Rule has been held ultra wires by the Apex Court in the case of inter....
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.... Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be necessarily a consideration for the service provided which is taxable under the Act. By using the words "for such service provided" the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67. The cost of free supply goods provided by the service recipient to the service provider is neither an amount "charged" by the service provider nor can it be regarded as a consideration for the service provided by the service provider. In fact, it has no nexus whatsoever with the taxable services for which value is sought to be determined" 13. A plain meaning of the expression 'the gross amount charged by the service provider for such service provided or to be provided by him' would lead to the obvious conclusion that the value of goods/material that is provided by the service recipient free of charge is not to be inc....
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.... free is a form of payment and, therefore, should be added. We fail to understand the logic behind the aforesaid argument. A plain reading of Explanation (c) which makes the 'gross amount charges' inclusive of certain other payments would make it clear that the purpose is to include other modes of payments, in whatever form received; be it through cheque, credit card, deduction from account etc. It is in that hue, the provisions mentions that any form of payment by issue of credit notes or debit notes and book adjustment is also to be included. Therefore, the words 'in any form of payment' are by means of issue of credit notes or debit notes and book adjustment. With the supply of free goods/materials by the service recipient, no case is made out that any credit notes or debit notes were issued or any book adjustments were made. Likewise, the words, 'any amount credited or debited, as the case may be', to any account whether called 'suspense account or by any other name, in the books of accounts of a person liable to pay service tax' would not include the value of the goods supplied free as no amount was credited or debited in any account. In fact, t....
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....as per the provisions of Section 67 of the Act. 22. Section 66 of the Act is the charging Section which reads as under: "there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed." 23. Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various sub- clauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the 'value of taxable services'. Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24. In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other amou....
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....nsurance agents. 20. We find that CESTAT in the case of Max Life Insurance Co (Supra) followed the above judgment and held that 17. Further, reliance is placed on Bajaj Allianz Life Insurance Co. Ltd. v. Commissioner of C.E. & S.T., Pune-III, Final Order No. A/86013-86023/2019 wherein Hon'ble CESTAT held that expenses incurred in pre-recruitment training and post license training of insurance agents by the Appellants cannot form part of the gross taxable value of commission paid to the Insurance Agents in determining the service tax liability. 21. It was also held in Edelweiss Tokio Life Insurance Company Ltd (Supra) that 9. As far as the first issue is concerned, the expenses incurred by the insurance agents are proposed to be included and under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 which was in force during the relevant time. The said Rule 5(1) has been struck down by the Hon'ble Delhi High Court as ultra vires to Section 66 and 67 of Finance Act, 1994 and the said judgment has been upheld by the Hon'ble Supreme Court in Intercontinental Consultants and Technocrats Pvt Ltd case (supra). 22. In view of the above, we have no ....