2015 (12) TMI 748 - AT - Service Tax

Waiver of pre deposit - Banking and other Financial Services - appellant availed Cenvat credit on insurance policies of its employee - Held that - Appellant is clearly engaged in providing Banking and other financial services and service it is engaged in lending money to borrowers. However assisting borrowers to obtain life and health risk coverage even though appellant may have an incentive for doing this, by way of covering the risk it incurs in lending to small borrowers and whose life and health are a matter of economic concern for the appellant, this activity does not fall within any of the integers of the Banking and other Financial Services, referred in Section 65(12) read with Section 65(105)(zm) of the Act - Prima facie the appellant s activity of maintaining records of the insurance policies of borrowers, managing the data in this regard and facilitating an interface between borrowers and insurance companies, does not fall within the definition of Banking and other Financial Services - Stay granted.

Summary

Issues:
1. Confirmation of total service tax demand on various components.
2. Disallowance of Cenvat credit on insurance policies.
3. Tax liability on amounts collected for administrative charges, death relief fee, and reimbursement of expenses.
4. Interpretation of 'Banking and Financial Services' under Section 65(12) of the Act.
5. Prima facie case in favor of the appellant for waiver of pre-deposit and stay of further proceedings.

Analysis:

1. The impugned adjudication order confirmed a total service tax demand of Rs. 11,80,28,886, including amounts collected by the appellant for administrative charges, death relief fee, and reimbursement of expenses. Additionally, the demand included service tax on Cenvat credit of service tax on Health Insurance Policies and an alleged arithmetical error. The tax liability on the arithmetical error was Rs. 1,82,545.

2. The appellant had availed Cenvat credit on insurance policies of its employees, which was disallowed, resulting in a demand of Rs. 1,11,01,315. However, citing a decision of the Karnataka High Court, the Tribunal found this demand prima facie unsustainable.

3. The service tax demand on amounts collected by the appellant for administrative charges, death relief fee, and reimbursement of expenses from borrowers totaled Rs. 10,67,45,026. These amounts were collected in relation to insurance policies taken out for borrowers' health or life risk. The Revenue treated these receipts as taxable under Banking and other Financial Services. The appellant argued that these amounts were not exigible to service tax under any taxable service. The demand was confirmed based on the Revenue's assertion.

4. The definition of 'Banking and Financial Services' under Section 65(12) includes asset management, fund management, and pension fund management. While the appellant provided financial services by lending money to borrowers, assisting borrowers in obtaining life and health risk coverage did not fall within the definition of Banking and Financial Services as per the Act.

5. The Tribunal found a strong prima facie case in favor of the appellant regarding the interpretation of services provided and granted a waiver of pre-deposit and a stay of further recovery proceedings. The application was disposed of accordingly.