2018 (3) TMI 195 - AT - Service Tax

Insurance Auxiliary Service - appellant had received incentives from insurance companies - SCN has alleged that these activities of the appellant will bring them within the fold of actuary and hence they are required to pay service tax under the Insurance Auxiliary Service - Held that - insurer registered to carry on insurance business cannot carry on such business without an appointed actuary. Such actuary has to be, inter alia, a Fellow Member of the Actuarial Society of India, an employee of the life insurer (in case of Life Insurance business or General Insurance business), a person who possesses a Certificate of Practice issued by the Actuarial Society of India - Surely, the appellant does not possess any of these qualifications nor they have been appointed or registered as actuary. This being so, the main plank of the SCN cannot survive - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of service tax liability on incentives received from insurance companies under Insurance Auxiliary Service.

Analysis:
The case involved the appellants, holders of service tax registration as an Authorized Service Station, who received incentives from insurance companies. The Department contended that service tax was applicable on these incentives under Insurance Auxiliary Service. The original authority confirmed the demand for service tax and imposed penalties. On appeal, the Commissioner upheld the decision but directed modifications in tax liability calculation. The main issue was whether the appellants fell under the category of actuary and were liable for service tax under Insurance Auxiliary Service.

During the hearing, the appellant's advocate argued that the appellants did not meet the actuary definition under the Insurance Act, 1938, and were not soliciting insurance for specific companies. The advocate highlighted that the appellants were not actuaries and the incentives were not commissions for soliciting insurance. The adjudicating authority had classified the appellants as intermediaries, which was not considered by the Commissioner.

On the other hand, the respondent supported the impugned order, emphasizing that the appellants' activities were predominantly related to policy issuance and claims, falling under Insurance Auxiliary Service. The bench considered the arguments from both sides and examined the appellants' practices. It was found that the appellants informed customers about insurance options, but the choice was solely with the customers, not influenced by the appellants. The bench analyzed the statutory requirements for becoming an actuary and concluded that the appellants did not meet these qualifications, rendering the service tax liability claim invalid.

The bench held that the lower authorities' classification of the appellants as insurance intermediaries was beyond the scope of the show cause notice. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief as per law. The judgment clarified that the appellants were not liable for service tax under Insurance Auxiliary Service due to their lack of qualifications as actuaries and the nature of their operations as explained during the proceedings.