2007 (6) TMI 534 - AT - Service Tax

Summary

Issues involved:
The issues involved in the judgment are the demand of service tax under Section 73(1) of the Finance Act, 1994, imposition of penalties under Sections 76 and 78 of the Act, waiver of pre-deposit, and stay of recovery.

Demand of Service Tax and Penalties:
The ld. Commissioner confirmed a demand of service tax amounting to over Rs. 1.4 crores against the appellants under Section 73(1) of the Finance Act, 1994, along with interest on tax under Section 75 of the Act. Penalties were also imposed on them under Sections 76 and 78 of the Act. The appellants applied for waiver of pre-deposit and stay of recovery concerning these amounts.

Nature of Service and Tax Liability:
The demand pertained to reinsurance brokerage received in Indian currency by the appellants from overseas companies, referred to as "reinsurers." The appellants acted as reinsurance brokers between General Insurance Companies in India and overseas reinsurers. The service rendered by the appellants fell within the ambit of "insurance Auxiliary Service" defined under Section 65(55) of the Finance Act, 1994. The Commissioner classified the appellants as "reinsurance brokers" within the meaning of Regulation 2(m) of the IRDA (Insurance Brokers) Regulations, 2002. The ld. Commissioner demanded service tax from the appellants for the period July 2001 to April 2006. The appellants contended that they were not liable to pay service tax on the reinsurance brokerage received by them u/s Notification No. 6/1999-ST and Export of Service Rules, 2005. The ld. Commissioner rejected this argument, leading to the dispute.

Export of Service and Tax Exemption:
The appellants argued that their service was not exigible to service tax before 1-5-2006. The question arose whether the service, designated as "Insurance Auxiliary Service," was exported by them. After considering relevant Circulars and Notifications, the Tribunal found in favor of the appellants. It was clarified that there shall be no service tax on export of services, irrespective of the manner in which consideration for the service is received by the service provider. The service recipients being abroad residents with no office in India supported the view that the service was exported. Consequently, there was a waiver of pre-deposit and stay of recovery in respect of the tax and penalties.

Direction for Appeal Disposal:
The ld. SDR urged for early disposal of the appeal due to the high stake involved in the case, which was not opposed by ld. Counsel. The appeal was directed to be posted for a specific date.