2011 (8) TMI 558 - HC - Service Tax

Appellant Life Insurance Company (Service Provider) - Respondent Service Receiver - Whether amount of premium paid includes Service Tax or Not - Held That - It depends upon the terms of the contract in pursuance to which Ext.P1 policy was issued. The premium paid during 2006, 2007 and 2008 is accepted by appellant and service tax during those three years was paid out of the collected amount. When Ext.P1 policy was issued the service tax was in force and the premium was determined by the appellant on its own taking into account of the nature of the business, viability and profit, if not huge profit. The fact that the appellant didn t claim service tax till the 4th instalment persuades us to arrive at a conclusion in favour of the 2nd respondent. Suppression of the prevailing taxes and levies would amount to material misleading concerning the price. Such misleading in turn would come within the above definition of unfair trade practice which we cannot allow, but to deprecate and condemn such greedy devices of the multinational companies in attempt to make pigmy profit exploiting the public including illiterate rural mass. Therefore, we rule that a service provider who doesn t disclose the prevailing statutory duties and levies at the time of transaction is not entitled to claim such taxes and levies from the consumer at a later stage during the course of continuing service. - Appeal Dismissed.

Summary

Issues:
1. Delay in filing the appeal.
2. Dispute over the payment of service tax in a Life Insurance Policy.
3. Interpretation of the terms of the insurance contract regarding service tax.
4. Allegations of unfair trade practices by the insurance company.
5. Consumer protection implications under the Consumer Protection Act, 1986.

Issue 1: Delay in filing the appeal
The judgment addresses a delay of 57 days in filing the appeal, which was condoned after hearing both sides.

Issue 2: Dispute over the payment of service tax in a Life Insurance Policy
The appellant, a Public Limited Company engaged in Life Insurance, demanded the 2nd respondent to pay service tax in addition to the premium. The 1st respondent, Insurance Ombudsman, held that the premium amount demanded and accepted by the appellant was inclusive of service tax. The appellant challenged this decision through a Writ Petition, which was dismissed by the Single Judge.

Issue 3: Interpretation of the terms of the insurance contract regarding service tax
The Court analyzed the terms of the insurance contract and found that the premium accepted by the appellant for issuing the policy was inclusive of service tax. The conduct of the appellant, not claiming service tax until the 4th installment, supported the respondent's claim. The Court concluded that the premium amount was inclusive of service tax based on the pleadings and conduct of the parties.

Issue 4: Allegations of unfair trade practices by the insurance company
The Court considered the absence of disclosure regarding the exclusion of statutory taxes and levies in the policy document and premium receipts. It found that the failure to disclose the exclusion of taxes and levies amounted to an unfair trade practice under the Consumer Protection Act, 1986. The Court criticized the lack of transparency in pricing by multinational companies and ruled against the appellant's claim for additional service tax.

Issue 5: Consumer protection implications under the Consumer Protection Act, 1986
The judgment emphasized consumer protection principles, stating that a service provider must disclose statutory duties and levies at the time of the transaction. Failure to disclose such information would be considered misleading and an unfair trade practice. The Court upheld the Single Judge's decision, ruling in favor of the 2nd respondent and dismissing the appeal.

In conclusion, the Court dismissed the appeal, ruling that the 2nd respondent was entitled to have any excess amount levied adjusted towards future premiums.