2023 (7) TMI 826 - AT - Service Tax

Rejection of refund claim - amount paid under protest - tax has been included in the gross amount collected as insurance premium or not - HELD THAT - It is unable to comprehend the finding of the original authority that the claim for refund was premature. It was preferred after payment of the claimed amount and it was certainly later than the final audit objection came to approved by the appropriate internal authority. Not unnaturally, the reviewing authority has not placed much store on that line. The thrust of the grounds is that the respondent has not evinced any factual material to contend that the amount collected did include the taxes; on the contrary, it was pointed out that, prior to the decision of the Tribunal in 2015 upholding the leviability of tax on activity undertaken by the respondent from 2011 onwards, the assessee had not been functioning under the premise that tax was not leviable and, hence, the claim that such is included in the premium is not tenable. The history of the dispute itself offers reliable guide to the view to be taken. The respondent had been providing the impugned service since 1st January 1962 by mandate of Parliament after failure of banks left small depositors stranded and though service tax was introduced as far back as 1994 on insurance service , the nature of its activity left it undisturbed from tax oversight until the issue determined by the Tribunal in re Deposit Insurance and Credit Guarantee Insurance Corporation fastened the tax liability on them in 2015 and, in accordance with circular of Central Board of Excise Customs (CBEC) - in the absence of exemption, tax liability does lie and, in such circumstances, the tax would have to be borne from the premium itself. Furthermore, as set out in the grounds of appeal, they could not have collected any amount higher than the premium specified by the Reserve Bank of India (RBI) as their customers the banks also bound under the supervision of the Reserve Bank of India would not pay up any amount over and above the premium. Consequently, the consideration, and gross value, includes the tax amount and liability was to be computed only on the cum tax value. The computation of premium is a complicated exercise involving several aspects and factors as well estimation of probability; it is, therefore, not possible to conclusively conclude that inclusion of tax liability would have altered the premium payable for the service. A normal commercial transaction cannot be equated with insurance service and the extent to which the premium represents consideration for insurance cover. No evidence has been placed on record by the appellant to demonstrate otherwise. There are no merit in the appeal which is dismissed.

Summary

Issues involved:
Claim for refund of tax paid 'under protest' following audit objection on value of taxable services rendered between October 2011 and March 2013.

Summary:

Issue 1: Refund of tax paid 'under protest'

The appeal arose from the rejection of a claim for refund of tax amounting to Rs. 158,11,16,024, paid 'under protest' following an audit objection on the value of taxable services rendered between October 2011 and March 2013. The respondent, a wholly owned subsidiary of the Reserve Bank of India, was established to protect bank constituents by providing insurance services. The audit revealed that the tax liability had been improperly discharged by considering the premium as inclusive of tax, leading to a differential tax liability. The respondent remitted the differential tax along with interest, seeking refund later. The original authority held the claim as premature, but the Tribunal found it valid as it was filed after payment and after the audit objection was approved. The appeal was dismissed as the respondent failed to provide evidence that the premium collected included taxes.

Issue 2: Computation of assessable value and tax liability

The audit objection raised concerns about the assessable value adopted by the respondent and the discharge of differential tax liability. The original authority set aside the claim as premature, citing a Tribunal decision on tax liability post-2011. The impugned order found the objection premature and incorrect, emphasizing that the audit objection did not constitute a show cause notice. The appeal argued that the tax was properly collected on the gross value and any refund would be a loss to the State. The Tribunal found no merit in the appeal, emphasizing the lack of evidence that the premium included taxes, and dismissed the appeal.

Separate Judgment by Judge AJAY SHARMA, MEMBER (JUDICIAL)

The judgment by Judge Ajay Sharma, Member (Judicial), focused on the history of the dispute and the respondent's awareness of tax liability. It highlighted that the respondent had sought exemption in 2008 but pursued the matter after rejection, indicating their knowledge of tax liability. The judgment emphasized that the premium amount, set by the RBI, included the tax component, and liability was to be computed on the 'cum tax' value. The judgment dismissed the appeal, stating that the inclusion of tax liability in the premium was known to the respondent, and no evidence was presented to suggest otherwise.