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2023 (6) TMI 555 - AT - Service TaxLevy of Service Tax - expenditure incurred by the appellants on foreign training of insurance agents - expenditure incurred by the appellants by way of reimbursement of certain expenses related to the training of insurance agents - demand on account of 4% debit adjustment from the insurance commission paid by the appellant to their Insurance/Corporate Agents. Expenses incurred towards overseas inland training - HELD THAT - The regulations mandate upon the insurer to provide training and the said cost incurred is reimbursed only to avoid any financial hardship to the insurance agents. Also as far as levy of service tax amounting to Rs. 47,70,218/- on the expenses incurred by M/s Max Life Insurance Company by way of reimbursement of certain expenses related to the training of insurance agents there being common grounds in the arguments, the same are also being dealt along with. In view of the aforesaid proposition, expenses incurred being towards discharge of a statutory mandate, it was pointed out by the learned advocate that there is no merit in the demand of service tax on this count and it needs to be set aside. The payment of expenses to the insurance agents for attending training is not in relation to the service of soliciting or procuring business provided by the insurance agents. The taxable event is rendition of the taxable service and in the present circumstances no taxable service is rendered by the insurance agents to the appellants for which the said expenses are reimbursed by the appellants - the training for insurance agents, is mandatory and imperative and is not only statutorily prescribed but is also a must for knowledge enhancement and to imparting the necessary skills beside the development and acquisition of work habits and product knowledge for the insurance agents. Section 42 of the Insurance Act mandates that individual insurance agents must possess the requisite qualification and/or practical training and are required to pass the examination as may be specified by the IRDA. A mandatory 50 hours of training to agents prior to issuance of the license is provided for. Without a doubt, training per se is not a part of appellants service it only seeks to make agents better at performance of their jobs it nonetheless is not a part of Soliciting providing insurance business. Thus, for the reasons the levy of demand does not survive. Demand for service tax on account of 4% debit adjustment from the insurance commission paid by the appellants to its insurance/ corporate agent - HELD THAT - In terms of Section 68(2) of Finance Act, 1994 read with Rule 2(1)(d)(i)(A) of the Service Tax Rules, the liability to pay service tax in respect of insurance auxiliary service is upon the appellants. However, the value at which such tax is leviable has to be considered in terms of Section 67(1)(i) of the Act. Thus, where the provisioning of service is for a consideration in monetary terms, the service tax is leviable on the gross amount charged. - any payment by whatever mode paid viz. cheque, credit card, direct debit to account or in any other form including issuance of credit or debit notes is a component of the value for purpose of determination of the tax liability. It has been contended that the agents do not owe any amount(s) to the appellant requiring a set off against commission paid to the said agents. Thus, the 4% debit adjustment from commission payable to the agents is no more than a discount as per agreed contractual terms. The service tax shall be payable and is to be paid on the actual commission paid to the said insurance agents. There are no merit in the order passed by the learned Commissioner, LTU (Audit) upholding the confirmation of the demand of the service tax collectively for an amount of Rs. 1,25,37,365/-. Such being the position and in view thereof as the issue in its entirety has been considered on merits, any other question ancillary raised by the appellants need not be considered and commented upon - appeal allowed.
Issues Involved:
1. Demand of Service Tax on Expenditure for Foreign Training of Insurance Agents. 2. Demand of Service Tax on Reimbursement of Expenses Related to Training of Insurance Agents. 3. Demand of Service Tax on 4% Debit Adjustment from Insurance Commission. Summary: A. Expenses Incurred Towards Overseas & Inland Training: 1. Foreign Training of Insurance Agents: - The appellants argued that the expenses incurred for the overseas training of their insurance agents, amounting to Rs. 77,67,147/-, were reimbursed and not liable to service tax under the reverse charge mechanism. This training was mandated by Regulation 5 of the IRDA Regulations and was not in connection with the solicitation and provisioning of any service. - The Tribunal noted that the training expenses were towards the discharge of a statutory mandate and not for any taxable service rendered by the insurance agents. Hence, the demand for service tax on this count was set aside. 2. Reimbursement of Training Expenses: - The appellants contended that the reimbursement of Rs. 47,70,218/- for training expenses was not related to the service of soliciting or procuring business by the insurance agents. They cited the decision in *Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India* and *Bajaj Allianz Life Insurance Co. Vs. Commissioner of Central Excise & Service Tax* to support their claim. - The Tribunal held that the training was mandatory, not part of the appellants' service, and aimed at enhancing the agents' skills. Thus, the demand for service tax on these expenses was also set aside. B. 4% Debit Adjustment from Insurance Commission: 3. Service Tax on Debit Adjustment: - The demand for service tax amounting to Rs. 5,22,45,987/- on the 4% debit adjustment from the insurance commission was contested. The appellants argued that the adjustment was akin to a discount and not subject to service tax. - The Tribunal referred to its earlier decision in the appellants' own case and noted that service tax is imposed on the gross value of consideration for service. The 4% debit adjustment was considered a discount as per agreed terms, and Rule 3 of the Valuation Rules was not applicable. - The Tribunal concluded that the appellants had discharged their service tax liability on the gross value of the consideration paid to their agents. Therefore, no service tax would be payable on the 4% debit adjustment. Conclusion: The Tribunal found no merit in the order passed by the learned Commissioner, LTU (Audit), and set aside the confirmation of the demand of service tax amounting to Rs. 1,25,37,365/-. The appeal was allowed with consequential relief, if any.
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