2018 (9) TMI 176 - AT - Service Tax

Banking and Financial services - appellant was working as an agent of SBI Life and receiving commission of such sells - N/N. 30/2012-ST dated 20.06.2012 read with Section 68(2) of the Finance Act, 1994 and Rule 2(1)(d)(i)(A) of Service Tax Rules, 1994 - Held that - The appellant was not required to pay service tax on Insurance Agent service in terms of N/N. 30/2012-ST dated 26.02.2012. However, the service recipient i.e. SBI Life is liable to pay service tax on reverse charge mechanism. CENVAT Credit - input service - Insurance Agent service provided by the appellant in the capacity of service provider - Held that - The service tax was paid on the output service therefore, the credit in respect of output service cannot be taken as per CENVAT Credit Rules. Therefore, the appellant are not entitled for Cenvat credit since they were not liable to pay service tax. Extended period of limitation - Held that - Since the appellant have paid the service tax on 100% value and availed 50% credit, even though they were not liable to pay, no malafide intention on the part of the appellant. In such a case, demand for the longer period and penalties are not sustainable. Appeal allowed in part.

Issues: Liability of service tax on insurance agent services, entitlement to Cenvat credit, refund of service tax paid inadvertently, applicability of penalties

Liability of service tax on insurance agent services:
The case revolved around the liability of the appellant, a banking and financial services entity, to pay service tax on the commission received from selling insurance products as an agent of SBI Life Insurance. The appellant mistakenly paid service tax on the commission and availed Cenvat credit. The department contended that the service provided by the appellant as an insurance agent was an output service, making them ineligible for Cenvat credit. However, it was established that the appellant was not required to pay service tax on insurance agent services as per relevant notifications. The responsibility to pay service tax lay with the service recipient, SBI Life Insurance, under the reverse charge mechanism.

Entitlement to Cenvat credit:
The appellant argued that they should not be liable to pay service tax since they had already paid tax on 100% of the commission and availed only 50% Cenvat credit. The tribunal acknowledged the appellant's inadvertent payment of service tax and subsequent credit availed. It was clarified that as the service tax was paid on the output service, the appellant could not claim Cenvat credit. Despite this, the tribunal allowed the appellant to pursue a refund for the excess tax paid inadvertently.

Refund of service tax paid inadvertently:
The tribunal recognized the appellant's genuine error in paying service tax on the commission and granted them the opportunity to seek a refund for the excess tax paid. It was emphasized that there was no malicious intent on the part of the appellant, as they had paid tax on 100% of the commission received.

Applicability of penalties:
The tribunal found that since the appellant had paid service tax on the entire commission amount and availed partial credit, penalties and demands for an extended period were deemed unsustainable. The penalties imposed by the Adjudicating Authority and upheld by the Commissioner (Appeal) were set aside. The tribunal ruled in favor of the appellant, allowing the appeal partly on the grounds of penalties and extended period demands being set aside.

In conclusion, the tribunal ruled in favor of the appellant, setting aside penalties and demands for an extended period while allowing them to pursue a refund for the excess service tax paid inadvertently. The judgment clarified the liability of service tax on insurance agent services and the entitlement to Cenvat credit in such scenarios.

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