2014 (9) TMI 819 - AT - Service Tax

Export of Insurance Auxiliary Services - receipt of re-insurance brokerage commission - brokerage received from overseas re-insurers - Held that - the decision in the case of National Engg. Ind. Ltd. 2009 (3) TMI 93 - CESTAT NEW DELHI cannot be applied to the present case. In that case, services were provided to foreign company for whom orders were received from Railways. The Foreign supplier received the amount from Indian Railways for the goods supplied, the discount / remuneration for the Indian company was paid by Railways in Indian rupee instead of paying consideration in foreign exchange to the foreign supplier and thereafter, the foreign supplier sending the discount/brokerage in foreign currency to the broker/agent. In that case, service was provided to the service receiver abroad and consideration was in fact indirectly received in foreign currency. In the present case, the appellant provided service to Indian Insurer who has paid the remuneration to the appellant in Indian currency. Prima facie, the facts are not comparable and therefore, the decision is not applicable. In the appellant s own case as well as in the case of Suprasesh G.I.S. & Brokers P. Ltd. (2008 (11) TMI 82 - CESTAT, CHENNAI), this Tribunal in similar circumstances has taken a view that the appellant does not have a prima facie case - stay granted partly - matter remitted back to Commissioner (Appeals) subject of deposit of 50% as pre-deposit.

Summary

Issues:
1. Taxability of reinsurance brokerage commission received from overseas reinsurers under service tax.
2. Appellant's contention regarding pre-deposit for hearing the appeal on merits.
3. Comparison of conflicting decisions on whether service tax is liable to be paid by the broker in India for reinsurance brokerage.

Analysis:
1. The case involved the taxability of reinsurance brokerage commission received from overseas reinsurers under service tax. The appellants contended that the service fell under the category of export, but further scrutiny revealed that the service was essentially performed in India without physical receipt of payment in convertible foreign exchange, making it not quantifiable as export. The appellants received a significant amount as reinsurance brokerage commission, leading to the initiation of proceedings resulting in the confirmation of a demand for service tax with interest and penalty imposed.

2. The appellant's counsel argued that the Commissioner (Appeals) should have heard the appeal on merits without insisting on any pre-deposit, citing a relevant case law. However, the Revenue pointed out a previous Stay Order directing the appellant to deposit a portion of the service tax demanded for the appeal's hearing. The Revenue relied on a case where the Tribunal held that service tax is liable to be paid by the broker in India and cannot be considered as an export of service, a decision upheld by the High Court.

3. The issue of conflicting decisions arose regarding the liability of service tax on reinsurance brokerage. The appellant's counsel argued for a stay based on conflicting decisions, citing a case law supporting the grant of a stay in such situations. However, the Tribunal differentiated the present case from the cited case law, emphasizing that the appellant provided services to an Indian insurer, receiving remuneration in Indian currency, unlike the foreign currency transactions in the other case. The Tribunal directed the appellant to make a pre-deposit to proceed with the appeal on merits, remanding the matter to the Commissioner (Appeals) for further consideration without expressing any opinion on the case's merits.