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TMI Blog2017 (10) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... ods contending that the substantial benefit of reversing the credit should not be denied to them - it is their submission that they have been given option to reverse the proportionate credit and they cannot be forced to reverse 6% of the value of exempted goods in terms of Rule 6 (3) of CCR, 2004 - Held that: - the assessee cannot be forced to pay 6% of the value of exempted goods in case where they have availed the credit of input services used in exempted output services. The Rule 6(3A) of CCR, 2004 only contemplates procedure for application of Rule 6(3) and does not mandates that on failure to intimate in writing for availing option the manufacturer or the service provider shall lose their choice to avail option under Rule 6(3)(ii) for reversing proportionate credit. The procedure given therein and the conditions in said Rule 6(3A) is intended to make Rule 6(3) workable. It nowhere mandates to take away options exercisable available to the assessee. Rule 6(3)(i) cannot be made automatically applicable on failure to intimate in writing about option to be availed by the assessee. The assessee has the option either to reverse the proportionate credit pertaining to such exempted se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sarangi, Addl. Commissioner (A.R) for Respondent ORDER Per : Ramesh Nair This appeal has been filed by the Appellant M/s Reliance Life Insurance Co. Ltd. against Order-in-Original No.13/ST-II/RS/2013 dt. 25.02.2013 passed by the Commissioner of Service Tax, Mumbai II wherein a demand of ₹ 3,94,32,229/- stands confirmed against the Appellant alongwith penalty under Section 78 of the Finance Act, 1994 readwith Rule 15 (3) of Cenvat Credit Rules, 2004. 2. The Appellant are engaged in providing Life Insurance Service. They were providing taxable service (risk premium), Non taxable Service (investment management services provided under ULIP for the period 2010 11) and exempted service (Traditional Golden Year Plan) and availed cenvat credit. The Appellant after audit were issued show cause notice dt. 03.08.2012 alleging that they are providing taxable service (risk premium), Non taxable service (investment management service provided under ULIP for the period 2010 11) and fully exempted service (Traditional Golden Year Plan) and therefore are required to pay the amount/ reverse cenvat credit as prescribed under rule 6 (3) of Cenvat Credit Rules, 2004 on the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 6 (3) (ii) to pay an amount equivalent to the cenvat credit attributable to input services used for providing exempted services subject to fulfillment of conditions and procedures specified in sub-rule (3A) of Rule 6 of CCR. Hence the adjudicating authority confirmed the demand of 6% of the value of exempted service. The adjudicating authority also held that the case involves suppression of facts and there is no need to prove that the same was willfull and therefore the demand made by invoking extended period. 3. The Ld. Counsel Shri V. Sridharan Ld. Sr. Counsel Shri Jay Chandra C.A. Shri Vinay Jain, C.A., appearing for the Appellant filed written submission. He during the hearing submitted that the taxable service during the period May 2010 to April 2011 only includes the services in relation to risk cover in life insurance. The service tax was required to be paid on the amount of risk portion. The Traditional Golden Plan does not contain any risk and hence no amount was collected towards risk cover and thus no service is rendered in relation to risk cover and service tax was not paid during the period May 2010 to April 2011. The product is covered under Life insurance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposition has been upheld by the Honble SC in case of Larsen Toubro Ltd. - 2015 (39) STR 913 (SC) and Hon ble Delhi High Court in case of Suresh Kumar Bansal - 2016 (43) STR 3 (Del). The Explanation 3 to Rule 6 (1) of CCR was inserted in Budget 2016 to provide that for the purpose of Rule 6 (1) of the CCR exempted services shall include an activity which is not a service as defined in section 65B (44) of the Finance Act, 1994. Therefore such machinery provision was inserted w.e.f 2016 only under which explanation 3 has been added to Rule 6 (1) of the CCR to provide that for the purpose of rule 6 (1) exempted service shall include an activity which is not service as defined in Section 65 B (44) of Finance Act, 1994. Therefore the machinery provision was not available before 2016 for computation of value of exempted service during the disputed period. He also submits that in any event value of exempt service under rule 6 (3) (1) cannot include value of investment portion of premium. That in the demand confirmed by the department the entire amount of premium which includes the saving portion and investment portion has been considered in exempted value for computing demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. The issue involved is purely interpretational and legal in nature and therefore suppression of facts and invocation of extended period of limitation cannot be made in such case. He relies upon following judgments : (i) Continental foundation Jt. Venture Vs CCE - 2007 (216) ELT 177 (SC) (ii) Larsen Toubro Ltd. vs. CCE - 2007 (211) ELT 513 (SC) (iii) CCE Vs. Telco Ltd. - 2006 (204) ELT 83 (T) as upheld in 2009 (234) ELT 156 (Bom) (iv) CCEC ST. Vs. N.R. Agarwal Industries - 2014 (300) ELT 213 (Guj.) (v) Marsha Pharma Pvt. Ltd. Vs. CCE - 2009 (248) ELT 687 (T) (vi) CCE C Vs. Alicon Pharma P. Ltd. - 2015 (322) ELT 47 (Guj.) He also submits that in identical case of SBI Life Insurance Co. Ltd. the Commissioner (Adj.) Central Excise, Mumbai vide Order-in-original No. 03/COMMR/(AK)/08 dt. 18.01.2008 held that in order to levy service tax u/s 66, the service should be 'taxable service'. Accordingly in case of pension products, the same are not taxable at all and cannot be construed as 'exempted service'. He also relied upon the letter dt. 29.08.2011 by the department to Joint Secretary (TRU), CBEC, North Block request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is exempted service but in case of taxable service as defined in the act only for the purpose of payment of S.Tax. In the present case the whole of the service is exempt and there is no dispute that the investment portion is exempt. The Appellant did not approach the department for clarification hence the extended period has been rightly invoked. 5. We have carefully considered the rivals submissions and perused the records. We find that the controversy in the case has evolved as the Appellant were availing credit on input services. The revenue's case is that the Appellant was not entitled for the credit of services which has been exclusively used in providing the Life Insurance services under the Traditional Golden Plan which is not taxable simultaneously they have availed credit of common input service used in taxable policies as well as policies which had no risk portion and hence not liable to tax. However we are of the view that in terms of explanation to Rule 2 (e) of CCR, 2004 the services on which no service tax is payable is to be considered as exempted service and the credit of input or input services is not available to the 'service provider'. The Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SIONER OF CENTRAL EXCISE, NEW DELHI Vs MAX NEW YORK LIFE INSURANCE COMPANY LTD reported in 2017-TIOL-2385-CESTAT-DEL the Tribunal held that assessee is entitled for reversal of credit. The Tribunal held as under : 6. The proceedings against the respondent is to recover an amount equivalent to 6% of the value of the exempted service. The Original Authority held that the respondent is liable to follow one of the two options in terms of Rule 6(3) of CCR, 2004. The respondent followed second option and reversed the proportionate credit attributable to the exempted service, along with interest for delayed reversal of such credit. We find that the only objection of the Revenue is to the effect that the respondent failed to exercise the option for reversal at the time of availing credit. We note that the annuity products are considered as exempted service as held by the impugned order. It is also held that the appellant has to follow the consequences of such finding. We note that upon the direction of the impugned order, the respondent did exercise the second option and reversed the credit along with interest. In such factual background, we find that there is no reason to insist th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts has been brought to the fore which can show that behind such alleged non declaration or availment of Cenvat Credit there was an intention to evade. The facts of such credit availment were recorded in books of accounts and the same was also presented before audit. There is no findings during investigation that the Appellant was intentionally availing cenvat credit with malafide intention. Based upon interpretation of the provisions of the Finance Act, 1994 and CC Rules, 2004 they bonafidely believed that they are entitled for the credit. Their registration was only for the purpose of payment of service tax under reverse charge mechanism and not as an actual service provider and therefore they obtained service tax registration. We also find from the letter 29.08.2011 addressed by the department to the Joint Secretary (TRU), CBEC, North Block that the life insurance companies availed credit on bonafide belief and that there was no reason to invoke extended period for demands. In such these facts, we are of the view that the availment of cenvat credit cannot be held to be with the malafide intention as none of the ingredients of malafide intention or any contumacious conduct on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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