TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 600
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....f M/s Tata AIA Life Insurance Company Ltd against order-in-appeal no. 22/ST-VII/RS/2014 dated 20th January 2015 of Commissioner of Service Tax - VII, Mumbai confirming demand of Rs. 13,40,01,111/- under section 73 of Finance Act, 1994, along with applicable interest under section 75 of Finance Act, 1994, and imposing penalties under section 77 and 78 of Finance Act, 1994. In the impugned order, 'surrender charge' of Rs. 1,30,09,81,663/-, retained by the appellant upon withdrawal of 'insured' from 'unit linked insurance policies (ULIP)' between 1st April 2009 and 30th June 2010 and thereafter between 1st May 2011 and 31st March 2012, has been held as liable to tax for rendering of 'taxable services' enumerated in section 65(105) of Finance A....
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.... to be in the nature of penalty or liquidated damages and hence not liable to levy under Finance Act, 1994 though this order was recalled subsequently while disposing off application for rectification of mistakes and the outcome thereafter remains unknown. This was also one of the issues for consideration by the Tribunal in Shriram Life Insurance Company v. Commissioner of Customs, Central Excise & Service Tax, Hyderabad-IV [2019 (2) TMI 868-CESTAT HYDERABAD] and in Max Life Insurance Co India Ltd v. Commissioner of Central Excise & Service Tax (LTU), New Delhi [2019 (8) TMI 967 - CESTAT DELHI] in both of which there is reference to the order in re Reliance Life Insurance Company Ltd. 5. In re Bharti-AXA Life Insurance Company Ltd, the def....
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...., the purported service rendered in the past would have to be subject to tax then notwithstanding the deferment of consideration till the surrender of policy. There would, thus, be no reason for surrender of the policy to be the trigger for discharge of duty liability with failure thereto empowering proceedings under section 73 of Finance Act, 1994. 10. In re Shriram Life Insurance Company, the Tribunal examined the nature of 'surrender charge' before concluding that '11...... In our view, the amounts entered as surrender/discontinuance charges in the appellant assessee's books of accounts are not consideration for any service rendered by them, but it represents the amount that is retained by insurer on the insured, exercises the right....
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....t qualify as a service. In our view, the regulations 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 the services rendered a transaction in an actionable claim, as a service, liable to be taxed under the provisions of Finance Act, 1994. ' 11. In re MAX Life Insurance Co Limited, an identical dispute before the Tribunal also considered the nature of 'surrender charge' to be '32. Having considered the rival contentions, we are satisfied that surrender charges are permitted to be levied by IRDA, by way of penal charges towards recovery of initial expenses incurred by the insurer in marketing and d....
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....he Hon'ble High Court of Bombay. 13. We find that the recall order was actuated by the merit of the plea in rectification proceedings that taxability under one of the enumerations in section 65(105) of Finance Act, 1944 appeared to have been considered in the decision of the Tribunal that ruled in favour of the assessee. Rectification that calls for recall remains as under disposal and attains consummation with substitution of the recalled order. It would be presumption for Learned Authorised Representative to conceive that such recall must, inevitably, lead to a contrary opinion on the part of the Tribunal. Indeed, it could well be speculated that, owing to the challenge before the Hon'ble High Court of Bombay, the recall order is itself....
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....ontract of service even though such retention does not alter either that reality or that no additional consideration has passed from recipient to appellant while the provision of service subsisted. The 'premium' paid in the past by the recipient was in pursuance of contract providing for amortized payments towards the bundled service - each of which was assessed to tax on receipt by the appellant - over the contract period and obliging of repayment of the amounts, not attributable to service already rendered by coverage and investment, upon termination of contract of service may be treated as consideration only in a bizarre, and perverse, context that is out of touch with the reality of transactions in the insurance sector. This was the fin....