TaxTMI 
TaxTMI 
2022 (10) TMI 1165
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....and thirty three only) being the ineligible CENVAT Credit availed and utilized by Ms Bajaj Allianz General Insurance Company Limited as discussed above under the provisions of Rule 14(1)(ii) of the CENVAT Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994 and order recovery of the same from the assessee M/s. Bajaj Allianz General Insurance Company Limited, under Section 73(2) of the Finance Act, 1994. b) I confirm the demand of interest on the amount of CENVAT Credit confirmed as detailed in Sr. No. (a) above at the applicable rates, and order recovery of the same from the assessee M/s. Bajaj Allianz General Insurance Company Limited, under the provisions of Rule 14(1)(i) of the CENVAT Credit Rules, 2004 read with Section 75 of Finance Act, 1994. I accordingly order for its recovery. c) I impose penalty of Rs. 94,65,20,833/- (Rupees Ninety four crores sixty five lakhs twenty thousand eight hundred thirty three only) on the assessee, i.e. M/s Bajaj Allianz General Insurance Company Limited, under the provisions of Rule 15 (3) of the CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act 1994. I accordingly order for its recovery. ....
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....AT Credit, as determined & confirmed at Sr. No. (a) above, along with interest payable thereon as ordered in Sr. No. (b) above as well as the reduced 25% penalty, within 30 days of the date of communication of this order. e) I refrain from imposing Penalty under the provisions of Section 78(1) of the Finance Act, 1994, read with Rule 15 (3) of the CENVAT Credit Rules, 2004 for the reasons discussed in Para 27.9 above." 2.1 Appellant is a general insurance company and is providing general insurance including motor vehicle insurance services. 2.2 Acting on intelligence that the appellant had availed Cenvat credit on ineligible input services on the strength of bogus input credit invoices issued by the automobile dealers of various automobile manufacturers which were not actually provided by them. Investigations were carried on by the DGCEI, Chennai. From the investigation, following was observed, as stated in the impugned order:- "16.2. From the Scrutiny of documents of Dealers/ BAGIC and the statements as mentioned above, it appeared that * Automobile Dealers collect premium from the customers and issue policies to them by accessing the portals of th....
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....l Goods & Service Tax Act. 2017 should not be invoked for taking recourse to the provisions of erstwhile Finance Act, 1994 and the Rules made there under as if the same have not been so repealed; (ii) Service Tax of Rs 49.26.42.431/- (Rs. Forty Nine Crore Twenty Six Lakh Forty Two Thousand Four Hundred Thirty One Only) for the period from July 2015 to September 2018 should not be demanded and recovered from them under proviso to Section 73 (1) of Finance Act 1994; (iii) Interest as applicable should not be demanded and recovered from them on the amount demanded as at Sr. No. B) above under Section 75 of Finance Act 1994; (iv) Penalty should not be imposed on them under the provisions of Section 76 and Section 78 of the Finance Act 1994." 2.6 The show cause notice and the demand notice have been adjudicated as per the impugned orders. Aggrieved appellant have filed these appeals. 3.1 We have heard Shri Gajendra Jain with Shri Sachin Mishra, Advocates for the appellant and Shri Nitin Ranjan, Deputy Commissioner, Authorised Representative for the Revenue. 3.2 Arguing for the appellant, learned counsel submits:- * The dealers are indeed prov....
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.....3 Arguing for the Revenue, learned AR while reiterating the findings recorded in the impugned orders relied upon the following decisions:- Aanex Services [2012 (28) STR 139 (Tri.-De.)] Hira Steels Ltd. [2011 (273) ELT 370 (Chhattisgarh)] Karan Agencies [2014 (36) STR 667 (Tri.-Mumbai)] Tata Motors Ltd. [2015 (318) ELT 437 (Tri.-Mumbai)] PB Nair C&F Pvt. Ltd. [2015 (318) ELT 437 (Tri.-Mumbai)] Shoppers Stop Ltd. [2018 (8) GSTL 405 (Tri.-Mumbai)]. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 For confirming the demand against the appellant, the Commissioner has after quoting the provisions observed as follows:- "23.8 CENVAT scheme was mainly introduced to avoid cascading effect of tax for making the product competitive in that in the domestic market as well as in international market, indigenous goods. the end user does not pay the price which is including tax paid at multiple stages. CENVAT Scheme under Central Excise and service tax allows credit of specified duties/ service tax paid on eligible Inputs, Cap....
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....mmissioner is satisfied. then he may allow the CENVAT Credit on the same. 25.1 I find that E-mails were received by the dealers from M/s. Tata Business Support Services Ltd. (hereinafter referred to as "TBSS") for preparation of Invoices on BAGIC for claiming Insurance commission. On enquiry with the dealers, it was informed that they use to receive such e-mails at the end of every month from TBSS indicating the monthly commission payable by BAGIC for the insurance business provided by them to BAGIC during the month. It was also informed that the emails invariably contained an attachment of the Invoice, prepared by TBSS, which has to be downloaded and printed on their Invoice format and sent back to BAGIC for claiming the insurance commission from them. The description of service provided was mentioned as "Reimbursement of Infrastructure expenses towards office space. trained & dedicated manpower. provision of dedicated computers & printers provided to you in various Insurance services being offered by you at our Dealership". 25.2 From the statements of the Officials of the Dealers and BAGIC and relevant documents recovered from the Dealers and BAGIC it was notice....
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....during the past period also on the said Insurance company, as if services were provided to the said insurance company, only to get the payouts/commission from them as per their communication (by e-mail): Automobile Manufacturer M/s. Honda Cars India limited have also been raising computer generated invoices quoting reimbursement of Infrastructure expenses incurred as Office Space, Manpower used. Dedicated computers and printers used etc" on BAGIC for recognizing BAGIC as a Preferred Insurance Company (PIC) for Honda cars on which the CENVAT Credit has been availed by BAGIC and no services are rendered by such Automotive Manufacturers. 25.3 The Officials of BAGIC have in their statements admitted that the rates are not fixed according to the services mentioned in the invoices but calculated on the basis of the percentage on Own Damage Premium and the dealers are paid payout accordingly and that the dealers have not provided the services as mentioned in their Invoices: the payout is determined based on the policies generated by the Automobile Dealers, the amount payable and the nature of services to be incorporated in their Invoices are communicated to the dealers as a stand....
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....ribed in such invoices in violation of the CCR, 2004. The car dealers and the persons of BAGIC at their Regional Office at Chennai, have admitted to the fact that the dealers have not provided any service as mentioned in the invoices raised by them to BAGIC, it emerges that BAGIC are wrongly availing the input services CENVAT credit based on such invoices of car dealers in violations of Rule 4(1) of the CCR, 2004. BAGIC have deliberately devised a method by which the IRDA Commission/ORC payable to the car dealers and twowheeler dealers for the insurance business sourced by them were passed on as 'Display charges and Transaction Fees, the services which both the car dealers and the officers of BAGIC Regional office at Chennai have categorically denied as discussed in Paras above. Further the dealers have denied having incurred any expenditure towards the reimbursement of infrastructure charges as described in the invoices they had raised on BAGIC. Therefore find that amount passed on to the dealers by the insurance companies as Display charges and Transaction Fees and reimbursement of infrastructure charges as described in the invoices is nothing but the IRDA Commission/Over-rid....
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....mmission or otherwise for soliciting or procuring insurance business in India to any person except an insurance agent or an intermediary or insurance intermediary. As per IRDA Circular Ref: 011/IRDA/ Brok. Comm/August 2008 dated 25-08-2008 issued under Section 14 of IRDA Act 1999, which limits the payment of Commission or Brokerage to 10%. The Circular specifically states, "No payment of any kind including administrative or servicing charges" is permitted to be made to the agent or broker in respect of the business in respect of which he is paid agency commission or brokerage". 25.8 The officials of BAGIC in their voluntary statements have stated that as per the IRDA circular, only the brokers/licensed agents can solicit and procure insurance business on behalf of the insurance companies and hence to reiterate that these dealers should not involve in these activities, the clause "the Vendor shall not negotiate, accept any business, issue policies or other documents in the name of or for and on behalf of BAGIC and shall not make any promise, representation or negotiate with clients in respect of any business or claim..... except those provided by BAGIC or approved by BAGIC ....
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....y. Since, for any Automotive Dealer, issue of insurance policy is incidental to the business of selling cars, the insurance Companies are compelled to give Commission as PAYOUT to Automotive Dealers who are in turn compelled to raise fictitious documents as fabricated by BAGIC as per their requirements for availing CENVAT Credit. In view of the above, all the documents mentioned above are 'make-believe documents prepared merely to mislead the exchequer with the sole aim to avail ineligible CENVAT 25.10 From the Scrutiny of documents of Dealers/ BAGIC and the statements it is clear that Automobile Dealers collect premium from the customers and issue policies to them by accessing the portals of the Insurance Brokers. For insuring the vehicles the Dealers / Manufacturers are given PAYOUT calculated at an agreed percentage on OD Premium by the Insurance Companies. The invoices raised by Automotive Dealers and Automotive Manufacturers to BAGIC were in the format specified by BAGIC and have been raised towards Infrastructure expenses incurred as Office Space. Manpower used, Dedicated computers and printers used etc and display charges and transaction fees etc". Automobile De....
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.... (iv) the service tax payable thereon required to be shown in an invoice. 25.13 in the present case, the invoice raised by the Automotive Dealers and Automotive Manufacturers on BAGIC does not contain the true description of the Service; a mandatory requirement, as such the requirements of Rule 4A of the Rules was not fulfilled. Further, the description of the service has not been mentioned correctly in terms of Rule 4A of the Rules, as such the services mentioned in the invoice cannot qualify as input service in terms of Rule 2(1)(1) of the CCR, 2004. BAGIC have not maintained any documentary evidences for having received the input services hence they have contravened the provisions of Rule 4(1) of the CCR, 2004. Thus, it is not disputed that services covered by the said invoices were never received by BAGIC and were never provided by the Dealers. 25.14 It is pertinent to mention here that after booking the cases on insurance companies by the DGCE for fraudulent availment of CENVAT Credit on the basis of invoices issued by the Automobile Dealers, the insurance regulator. Insurance Regulatory and Development Authority (IRDAI) formed a committee for bringing clarit....
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.... Forty Nine Crores Twenty Six Lakhs Forty Two Thousand Four Hundred and Thirty One only) being the ineligible CENVAT Credit availed by BAGIC based on invoices raised on BAGIC by Automotive Dealers and Automotive Manufacturers and TBSS on the Services which were not rendered by them is therefore liable to be demanded and recovered from them under Rule 14 of CCR. 2004. 27.1 The IRDA regulations do not allow any person other than insurance agents and insurance brokers approved by IRDA, to sell vehicle insurance policies. Further the maximum brokerage/commission payable for selling insurance policies is also capped at 10% of the premium. To circumvent these regulations, BAGIC asked the car dealers to raise invoices to show that the car dealers have provided services such as advertisement, renting of computers/ printers, training. arranging customer awareness program etc. to BAGIC. The invoice raised by the Automotive Dealers and Automotive Manufacturers on BAGIC does not contain the true description of the Service, thus the requirements of Rule 4A of the Service Tax Rules, 1994 is not fulfilled. Since the description of the service has not been mentioned correctly in terms of ....
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.... furniture and fixtures, consumables, salary of staff, computers, printers, electronics and electricity"; (iii) the Dealers accordingly raised invoices on the insurance companies in the format provided to them and (iv) the Dealers have not provided the services as mentioned in the description of the invoices. In other words, the description of the services contained in the invoices used for availing Cenvat Credit do not reflect the true description of the services." 6.2 From the above, it can be seen that the case of the Department is that the payout paid by the appellant to the dealers on the OD premium collected by the dealers from the customers is camouflaged as service provided by the dealers to the appellant; that therefore, the services contained in the invoices have actually not been provided by the dealers to the appellant and thus, Cenvat credit is not eligible. 7.1 Though in the Show Cause Notice the main allegation is that the description of services in the documents on which credit has been availed is not correct, at the time of adjudication, the main finding is that no services have been provided by the dealers to the appellant and t....
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....y them to the appellant. (b) Is the Tribunal not in error in refusing credit to the appellant for service tax paid by them to service provider when payment of service tax by the appellant for the service rendered by service provider is not in dispute and that it is settled, the assessment to tax at the hands of the service provider end cannot be questioned in the hand of service receiver (appellant in this case)?" 8.2 The brief facts of the said case are that the appellant therein had availed input service credit on "Multi Protocol Label Switching" (MPLS) service based on the invoices issued by M/s. Brakes India Ltd., Chennai ("M/s. BIL" for short). The appellants were job workers for M/s. BIL. The services were utilized by M/s. BIL for communicating and retrieving the data from the appellant's therein. The Department alleged that the services were rendered by BSNL and Reliance Communications Ltd. to M/s. BIL and that M/s. BIL had raised invoices on the appellants claiming reimbursement under these invoices as MPLS charges along with Service Tax. The Department was of the view that the invoices were raised for reimbursement of expenses and that no service was rend....
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....essees pays Rs. 22/- to BIL, on which Rs. 2/- is the Service Tax paid. The assessees have taken Cenvat credit on the said Rs. 2/- paid by it as Service Tax to BIL. Therefore, the question would be as to whether the department can dispute the nature of transaction at this juncture, more particularly, when the assessment made on the BIL and the collection of Service Tax on them has not been reopened. 15. From the reasons assigned by the Commissioner (Appeals), we find that the Commissioner (Appeals) has travelled beyond the scope of allegation made in the show cause notices. By giving a different interpretation to the nature of transaction, which, in our considered view, could not have been done by the Appellate Authority in the light of the settled position with regard to the Service Tax liability admitted and paid by BIL. Therefore, unless and until, the assessment on BIL had been reopened, the nature of transaction as referred by BIL has to be held to be wrong and the Commissioner (Appeals) could not have given a different interpretation to the nature of claim made by the BIL from the assessees by interpreting the terminology used in the invoice. The correct test, which o....
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....entative for the Department before us; none of these decisions are applicable to the issue or facts under consideration in this appeal. 10. From the foregoing, after appreciation of the facts and following the decision of the Hon'ble High Court in M/s. Modular Auto Ltd. (supra), we hold that the impugned order cannot sustain and requires to be set aside, which we hereby do." 4.4 This judgment was followed again by the Tribunal in the case of Cholamandalam MS General Insurance Co. Ltd. [2021 (9) TMI 442 -CESTAT Chennai, the relevant para of which is reproduced below:- "5. It is brought to our notice that the issue in this appeal has been analyzed and decided in the appellant's own case for the previous period vide decision reported in 2021 (3) TMI 24- CESTAT Chennai. The Tribunal had followed the decision of the Hon'ble jurisdictional High Court in Modular Auto Ltd. Vs. CCE, Chennai-2018 (8) TMI 1691 Madras High Court. The relevant paragraph of the decision of the Tribunal reads as under:- "6.1 The allegation of the Department is that no services have been provided by the dealers to the appellant as per the invoices and therefore, the appellant ....