2018 (11) TMI 304 - AT - Service Tax

Janta Personal Accident Insurance Plan - benefit of N/N. 3/94-ST dated 30.06.94 - insurance policy provided by the appellant to the Govt. of U.P. for providing insurance cover to 2,50,00,000 farmers for an assured sum of ₹ 1 lakh each on premium of ₹ 10.50 per person - Whether standard insurance policy i.e. Janta Personal Accident Policy covered under Notification No.3/94-5 dated 30.06.1994 or not? Held that - Just because the agreement of the appellant with the Govt. of U.P. mentions two grounds for rejection of claim policy not covering self-exposure to needless peril except in an attempt to save human life and the cases where claims not submitted within 90 days from the date of accident, the policy in question would cease to be the Janta Personal Accident Policy - the Board vide its letter dated 18.01.2011 has specifically clarified that since description of JPAP Policy is not given in the notification, customized group JPAP Insurance schemes by various insurance companies as per specifications of the State Govt. concerned, to extend risk cover to target populations and to fulfil the prescribed rural or social sector obligation, are covered by the Notification No.3/94-ST. There is no requirement in the notification that the Janta Personal Accident Policy referred to in the notification must be submitted to the IRDF for its approval. Demand no sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of exemption Notification No.3/94-ST dated 30.06.94 for insurance schemes. Determination of eligibility for service tax exemption for a Personal Accident Insurance policy provided to registered farmers. Adjudication of service tax demand, interest, and penalty under Sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:
The appellant, a Company engaged in General and Life Insurance, entered into an agreement with the Government of U.P. to provide Personal Accidental Insurance Cover to 2,50,00,000 registered farmers. The insurance cover was for an insured sum of ?1,00,000 per person against a premium of ?10.50 per person. The issue arose when the department contended that the policy did not meet the criteria of the Janta Personal Accident Policy covered under Notification No.3/94-ST, leading to a show cause notice for recovery of service tax, interest, and penalties.

The Commissioner, in the Order-In-Original, confirmed the service tax demand but decided not to impose penalties. Both parties appealed this decision. The appellant argued that the insurance cover provided falls under the Janta Personal Accident Policy exempted from service tax as per the notification. They emphasized that the policy was tailored to protect the insured farmers, meeting the rural or social sector obligation. The Revenue opposed the appeal, stressing that the policy must adhere to a prescribed format and have IRDA approval to qualify as a Janta Personal Accident Policy.

Upon review, the Tribunal found that the policy issued by the appellant to the Government of U.P. for the farmers did qualify as a Janta Personal Accident Policy exempted under Notification No.3/94-ST. The Tribunal noted that the notification did not specify a standard format and clarified that customized group policies fulfilling rural or social sector obligations are covered. The Tribunal held that the Commissioner's decision was incorrect, and the demand for service tax was not sustainable.

Consequently, the Tribunal set aside the service tax demand, allowing the appellant's appeal, while dismissing the Revenue's appeal. The judgment highlighted the importance of adherence to the exemption notification's criteria and the interpretation of policies tailored to meet specific obligations without requiring IRDA approval for exemption eligibility.