2024 (8) TMI 16 - AT - Service Tax

Classification of service - Insurance Auxiliary Service or not - irregular availment of CENVAT Credit, on the basis of documents which are not prescribed document under Rule 9(1) of Cenvat Credit Rules, 2004 - time limitation. Classification of service - HELD THAT - From the SCN it is observed that the Department has not brought in any evidence or allegation to the effect that the Appellant has obtained any licence from the IRDA authorities to act as intermediary or agent for the Insurance companies. It is also noticed that the company is purchasing Insurance policy by paying certain amount and selling the same to the individual members at a particular rate. For such an activity, the Appellant may be keeping some margin for themselves for providing some other allied services to the members - There is nothing to indicate from the show cause notice that the Appellant has received any commission from the insurance company as an intermediary or as an agent. In case of insurance auxiliary service , the person acting as an intermediary or an agent receives commission from the insurance company since they act as an intermediary between the insurance company and the clients of the insurance company. In this case for the insurance company, the Appellant himself is the client. The individual members of the club are not the clients of the insurance company. The sale value minus purchase value of the policy would be the profit for the club - the Appellant has not provided any service under the category of insurance auxiliary service and set aside the confirmed demand of Rs.62,06,774/-. I rregular availment of CENVAT Credit, on the basis of documents which are not prescribed document under Rule 9(1) of Cenvat Credit Rules, 2004 - HELD THAT - The Appellant is paying the Service Tax on the membership fee collected from the members. The insurance companies which are providing the insurance service, are charging the Service Tax. There is a direct nexus between the input services i.e. insurance service provided by the insurance companies and the output service provided by the Appellant in the form of club or association service. Hence, this meets the requirement of input service in terms of Section 2(l) of the Cenvat Credit Rules, 2004 - there are no reason to doubt the authenticity of the transactions and the Service Tax payment made by the insurance companies. The appellant has enclosed all the copies of the invoices issued by the insurance companies. Therefore, it is held that the Appellant has correctly taken the Cenvat Credit and set aside the confirmed demand of Rs.4,10,25,659/-. Time Limitation - HELD THAT - Being a public limited company, they are also filing their Income Tax Returns and maintaining proper records in the form of Profit and Loss account, Balance Sheet etc. The Department has failed to bring any evidence to the effect that the Appellants have suppressed any facts in order to evade payment of Service Tax. Therefore, the invocation of extended period in this case is legally not sustainable. The Appeal stands allowed both on merits as well as on limitation.

Summary

Issues Involved:
1. Classification of service as "Insurance Auxiliary Service."
2. Eligibility for Cenvat Credit.
3. Invocation of extended period for demand due to alleged suppression of facts.

Issue-wise Detailed Analysis:

1. Classification of Service as "Insurance Auxiliary Service":
The primary issue was whether the services provided by the Appellant under the "Medicare Service Club" could be classified as "Insurance Auxiliary Service." The Appellant argued that they did not qualify as an "insurance intermediary" or "insurance agent" as defined under Section 65 of the Finance Act, 1994, and the IRDA Act, 1999, because they did not possess the necessary licenses from the IRDA. The Tribunal agreed, noting that the Appellant had neither applied for nor obtained such licenses and that there was no evidence or allegation in the show cause notice indicating that the Appellant acted as an intermediary. The Tribunal concluded that the Appellant was merely purchasing group insurance policies and providing them to its members, and there was no commission received from the insurance company. Thus, the demand of Rs. 62,06,774/- was set aside as the service did not fall under "insurance auxiliary service."

2. Eligibility for Cenvat Credit:
The second issue was whether the Appellant was eligible to take Cenvat Credit on the service tax paid on insurance services provided by insurance companies. The Tribunal found that the Appellant was paying service tax on the membership fees collected from its members and that the insurance companies were charging service tax on the insurance premiums. There was a direct nexus between the input services (insurance services) and the output services (club or association services) provided by the Appellant. The Tribunal held that the Appellant met the requirements of input service under Section 2(l) of the Cenvat Credit Rules, 2004. The Appellant had provided documentary evidence, including invoices from reputed insurance companies, proving the authenticity of the transactions. Therefore, the demand of Rs. 4,10,25,659/- was set aside, and the Appellant was deemed to have correctly taken the Cenvat Credit.

3. Invocation of Extended Period for Demand:
The third issue concerned the invocation of the extended period for demand due to alleged suppression of facts. The Appellant argued that they had been registered with the Service Tax Department, paying service tax on membership fees, and filing ST-3 returns. They also maintained proper records and filed Income Tax Returns. The Tribunal found no evidence of suppression of facts by the Appellant. The Department's audit had quantified the data from the Appellant's books of account, and there was no allegation of improper maintenance of records. Thus, the invocation of the extended period was deemed legally unsustainable, and the demand for the extended period was set aside on account of time bar.

Conclusion:
The appeal was allowed both on merits and on the issue of limitation, with consequential relief as per law. The Tribunal set aside the confirmed demands of Rs. 62,06,774/- for "insurance auxiliary service" and Rs. 4,10,25,659/- for Cenvat Credit. The invocation of the extended period was also dismissed due to the lack of evidence of suppression of facts.