2013 (11) TMI 1403 - AT - Service Tax

Demand of service tax - General Insurance Business service - Waiver of pre deposit of duty, interest and penalty - CBEC has earlier clarified that the activity is not taxable, later on, after reconsideration, clarified that the activity is taxable - Assessee contends that letter was prospective in nature therefore demand for the earlier period is not sustainable - Held that - applicants were corresponding with the Board of Customs & Central Excise. Earlier the applicants were asking for exemption from service tax which was declined vide letter dated 05.01.2009. The matter was again taken up with the Board and the Board vide letter dated 24.02.2009 conveyed to the applicants that the applicants are not performing taxable service of General Insurance Business and not liable under the taxable service of General Insurance Business service. The Board has reviewed its earlier decision which was conveyed to the applicants vide letter dated 20.09.2011 whereby it has been decided that the applicants are providing taxable service. Show Cause Notices were issued in view of the letter dated 20.09.2011. In view of the earlier letter dated 24.02.2009, whereby it was conveyed that the applicants are not liable for service tax under the category of General Insurance Business, prima facie, the applicants have a strong case for waiver of pre-deposit of dues - Stay granted.

Summary

Issues:
Demand confirmation for General Insurance Business service under Finance Act, 1994; Application for waiver of pre-deposit of duty; Contention of not providing General Insurance Business services; Exemption request from service tax denied by the Board; Review of Board's decision on taxable service; Liability for service tax under General Insurance Business services; Request for waiver of pre-deposit of dues.

Analysis:
The judgment deals with the confirmation of demand for General Insurance Business service under the Finance Act, 1994. The applicants sought a waiver of pre-deposit of duty for two show-cause notices amounting to significant sums. The main contention of the applicants was that they are a subsidiary of RBI and do not provide General Insurance Business services but operate for profit under The Deposit Insurance and Credit Guarantee Corporation Act, 1961. They argued that the charges collected are not taxable under the General Insurance Business service.

The applicants claimed that they had approached the CBEC for exemption from service tax, which was initially denied. However, the Board later reviewed its decision and determined that the applicants are liable for service tax under General Insurance Business service. The applicants contended that the demand was made based on a letter dated 20.09.2011, and they started paying tax from October 2011, suggesting that the demand for the earlier period was not sustainable.

The Revenue, on the other hand, supported the lower adjudicating authority's findings, asserting that the applicants indeed provided General Insurance Business services and were liable for service tax. They argued that the Board's decision was based on incomplete information provided by the applicants initially and that the subsequent review led to the determination of tax liability. Revenue emphasized that the applicants were informed of the denial of exemption in 2009 and could not claim ignorance of their tax liability.

The Tribunal held the applicants liable for service tax under General Insurance Business services but considered the earlier communication from the Board, stating that the applicants were not liable for service tax under this category. Consequently, the Tribunal found a strong case for waiver of pre-deposit of dues and stayed the recovery during the pendency of the appeal. The Registry was directed to list the appeal for further proceedings on a specified date.