2019 (11) TMI 65 - AT - Service Tax

Valuation - non-inclusion of policy administration charge collected from recipients of life insurance service in the assessable value - Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 - HELD THAT - It is seen from the records that the appellant, having been served with one show cause notice on 23rd August 2007, proposing to recover tax liability on the consideration as provider of banking and other financial services , taxable under section 65(105)(zm) of Finance Act, 1994, for the period from 1st April 2004 to 31st March 2007, was given relief, which dropped proceedings. Extended period of limitation - HELD THAT - Palpably, the period for which recovery has been confirmed would be within the sanction of law only if extended period was so invoked. In the light of the transactions of the appellant having been subject to scrutiny and proceedings initiated on the earlier occasion, the notice was precluded from seeking recovery beyond the normal period prescribed in section 73 of Finance Act, 1994 - As the period covered in the present show cause notice is 2007-08 and the notice was issued in 2013, the demand fails to overcome the bar of limitation. The appeal is allowed without dilating on the submissions pertaining to scope of the taxing entry.

Summary

Issues Involved:
Dispute regarding non-inclusion of 'policy administration charge' in assessable value for tax liability under Finance Act, 1994. Applicability of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006. Justification for demand of tax, interest, and penalty. Invocation of extended period for recovery of service tax. Misclassification of charges leading to suppression and liability for payment. Bar of limitation under section 73 of Finance Act, 1994.

Analysis:

1. The appeal was filed against an order confirming a demand of tax, interest, and penalty under the Finance Act, 1994, related to the non-inclusion of 'policy administration charge' in the assessable value. The dispute revolved around the interpretation of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006.

2. The appellant argued that the taxable service was exempted until a certain date and subsequent changes in taxability were introduced through legislative amendments. Reference was made to previous decisions clarifying the effective date of tax liability on 'policy administration charge.' The legislative intent and exemptions were discussed in detail.

3. The Tribunal found it unnecessary to determine the extent of taxability due to past proceedings where the appellant was relieved of tax liability on a different service. The current demand for the period 2007-08, based on an extended period, was challenged by invoking the bar of limitation under section 73 of the Finance Act, 1994.

4. The Tribunal highlighted the misclassification of charges by the appellant, leading to suppression and liability for payment. The invocation of the extended period for recovery of service tax was deemed incorrect, considering the previous dropped proceedings and the bar of limitation.

5. It was emphasized that the observations made by the adjudicating authority regarding deficiency in earlier proceedings were improper and beyond their competence. Such errors could not justify the invocation of the extended period for recovery of service tax.

6. Ultimately, the Tribunal set aside the impugned order and allowed the appeal, citing the failure to overcome the bar of limitation under section 73 of the Finance Act, 1994. The decision was pronounced in open court on 31.10.2019.