2023 (7) TMI 107 - AT - Service Tax

Non-payment of service tax - amount paid to foreign insurance companies for reinsurance as well as on the amount received by them from other insurance companies in the domestic sector - period May 06 to March-08 - Rule 2(i)(d)(iv) of the service tax rules, 1994 - HELD THAT - The reinsurance premium was liable to service tax only w.e.f.01.05.2005 when the definition was amended to include re-insurer also as insurer. Thus, there were some confusion regarding payability of service tax on the re-insurance premium paid to foreign insurance companies. The issue became clear only after the issue of Taxation of Services (Provided from outside India and received in India ) Rules, 2006. After this, the Appellant has agreed their liability and paid service tax on the re-insurance premium paid by them to foreign companies. Thus, it is observed that there was no intention to evade payment of service tax on the part of the Appellant. In such cases, no penalty imposable under Section 78 of the Finance Act, 1994. Reliance placed in the case of M/S. C.C.I. LOGISTICS LIMITED VERSUS COMMISSIONER OF CGST CX, KOLKATA NORTH COMMISSIONERATE (ERSTWHILE SERVICE TAX-I KOLKATA COMMISSIONERATE) 2021 (6) TMI 546 - CESTAT KOLKATA where it was held that Since the tax amount alongwith interest has already been deposited by the assessee, I do not find any reason to uphold the penalty amount in absence of evidence of fraud or suppression with an intent to evade payment of tax. Hence, the penalty imposed is set aside. There was no mala fide intention on the part of the Appellant to evade payment of service tax. Accordingly, the penalty imposed under section 78 of the Finance Act, 1994, is liable to be set aside - there is no ingredient available in this case to impose penalty under section 76 of the Finance Act , 1994. Accordingly, the Department appeal is liable to be rejected - The department appeal is rejected.

Summary

Issues:
The issues involved in the present case are related to the leviability of service tax on reinsurance premiums paid abroad and received domestically during the period May'06 to March'08.

Details of Judgment:

Issue 1: Leviability of Service Tax on Reinsurance Premiums
The Appellant, engaged in General Insurance Business, was issued a show cause notice for non-payment of service tax on reinsurance premiums paid abroad and received domestically during May'06 to March'08. The adjudicating authority confirmed the service tax demand along with interest and penalty under Section 78 of the Finance Act, 1994. The Appellant contended that since they paid the entire service tax amount before the notice and were under provisional assessment, no penalty should be imposed. The Tribunal observed that reinsurance premiums paid abroad and received domestically are liable to service tax. The Appellant had already paid the service tax amount, and thus, the confirmation of the demand was upheld.

Issue 2: Imposition of Penalty
The impugned order imposed a penalty under Section 78 of the Finance Act, 1994. The Appellant argued that there was no intention to evade service tax and cited decisions supporting their view that penalty is not imposable when there was a genuine belief of no tax liability. The Tribunal agreed that the Appellant acted in good faith as confusion existed regarding the payability of service tax on reinsurance premiums paid abroad. The Appellant agreed to their liability and paid the tax promptly after clarity was achieved. Therefore, the Tribunal held that no penalty was imposable under Section 78 of the Finance Act, 1994.

Conclusion:
Based on the above analysis, the Tribunal set aside the impugned order, allowed the appeal filed by the Appellant, and rejected the Department's appeal. The penalty imposed under Section 78 of the Finance Act, 1994, was held to be not applicable, and the Department's appeal for penalty under Section 76 was rejected. The judgment was pronounced on 28 June 2023.