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TMI Blog2019 (2) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) only w.e.f. 01.07.2012, however, even for the period prior thereto the transaction in question is a actionable claim and not a service. It has to be also noted that for the period prior to 01.07.2012, for an activity to be tax it had to qualify as a taxable service in one of the specified services - Since we are of the view, the transaction in question is not a service at all but the transaction in a actionable claim hence could not have been by any stretch of imagination covered under any of the specified taxable heads of service even for the period prior to 01.07.2012 - the demand of service tax on the surrender charges for the period in question is unsustainable. Demand of Interest on amount short paid - Held that:- The appellant assessee, having not debited the CENVAT register for the period June, 2012, needs to pay the interest on the said amount till the liability of ₹ 91,92,096/- has been paid i.e. to say for the period from July, 2012 to April, 2013 till the date on which debit entry was made in CENVAT register, interest liability on the ₹ 91,92,096/-, needs to be worked out as per the provisions of Section 75 of the Finance Act, 1994 and paid by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT credit on the inputs and input services. During the period in question i.e. 2011-2012 to 2014-2015, appellant was providing two types of life insurance policies i.e. the traditional plan though pure risk insurance policies, participating and non-participating policies (endowment policies) and unit linked insurance plans (ULIP for short). In respect of Traditional Plan/Policy, the appellant assessee will pay out the sum assured only on the death of the policyholder within the policy term. In the event that the policyholder outlives the policy term, the insurer will not pay anything while in the case of endowment policy the insurer will pay out the sum assured under the policy along with all benefits that have accrued till date upon the death of the policy holder within the policy term or expiry of the policy term. While in the case of Unit Linked Insurance Plans (ULIP), allows the policy holders to direct part of their premium into investment in different types of funds wherein, a part of the investment goes towards providing life cover, while the residual portion of the ULIP is invested in a fund which in turn invests in stocks/bonds/ various investment instruments. It is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Associates Vs. Government of NCT, Delhi [2006 (5) SCC 603] as also LIC of India Vs. Insure Policy Plus Services Pvt. Ltd., [2016 (2) SCC 507]. ii) Definition of Service under Section 65B(44) specifically excludes from it is purview in transaction in money or actionable claim, consequently, exercise of the right by policy holder to receive insurance money (surrender value) is transaction in an actionable claim and not a service to be taxed under Finance Act. iii) Without prejudice to the submissions, the Tribunal in the case of Reliance Life Insurance Company Ltd., [2018 TIOL-1308-CESTATMumbai] held that the surrender/discontinuance charges represent penalty or liquidated damages are cannot be considered as a consideration for any services. iv) Reliance placed by the Adjudicating Authority on Notification dated 01.07.2010 in terms of which IRDA had issued the Insurance Regulatory and Development Authority (Treatment of Discontinued Linked Insurance Policies) Regulations, 2010 to contended that surrender/discontinuance charges consideration for life insurance service that had been rendered in as much as the regulation specifically stated that the said charges were to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice nor the impugned order has suit out any head of taxable service under which the tax in respect of said amount was being demanded. It is settled law that without specifying the head of taxable service under which the demand is being raised, tax cannot be recovered. D) regarding reversal of tax as required under Rule 6 as sought in the Revenue s appeal. It is his submission that the appellant was not recovered any taxable or exempted services and has availed credit attributable to the inputs and input services were correctly availed and provisions of Rule 6 cannot be invoked in the case in hand. It is also his further submission that for the demand under Rule 6, it is partially beyond 5 years which is the maximum period prescribed as raising a demand and even otherwise the primary input service credit availed by the appellant assessee was in respect of insurance auxiliary service to which the restrict of for which tax liability does not apply as has been held by the Hon ble Mumbai Tribunal in the case of Tata Aig Life Insurance Co. Ltd., [2015 (37) STR 570]. 7. He relies upon the decisions of the Supreme Court in the case of Union of India Vs. Sri Sarada Mills Ltd., [( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid as surrender value, is accounted as surrender charges in the books of account. 10. The issue which falls for consideration is whether the exercise of the right of the insurer to receive money is merely a transaction in actionable claim, so as to be out of the purview of service tax. The provisions of Finance Act, 1994 more specifically Section 65B(44) defines what would mean the service which we reproduce: service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1 . - For the removal of doubts, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in actionable claim. The term actionable claim is defined in Section 65B(2) (1) have the meaning assigned to it in Section 3 of the Transfer of Property Act, 1882 we reproduce the said relevant definition of the term actionable claim. Actionable Claim is a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in possession either actual or constructive, of the claimant, which the civil courts recognise as affording grounds of relief whether such debt or beneficial interest be existent, accruing or conditional or contingent . It can be seen that actionable claim as defined under Transfer of Property Act means a claim to any debt, secured by any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant. From the definition of actionable claim, the insurance policy or the surrender value thereof would become an actionable claim or otherwise was a matter of dispute in the Apex Court in the case of Union of India Vs. Sri Sarada Mills Ltd., (supra) wherein, it has been explained that right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sue. In a policy of life insurance the sum insured is certain, the premium, or the consideration for its payment is certain and the time when its payment is to become due is certain to come. Even the present value of the policy which is called the surrender value can be calculated. A policy of insurance is a present contract in the hands of the assured of which he has a present right to the benefit although the fruits are to be enjoyed in future. A life assurance policy as such would be property. Coitton, L.J. in (Tucan)2, (1888) 40 Ch. D5 remarked It was contended that the policies did not come within the term property but in my opinion, they may be considered as acquired by purchase during his life. They are contracts by which the policy holder has a right to recover certain sums of money from the insurance office in certain events, and the premium which he pays may be considered as an investment so as to obtain for him a benefit of the policy holder. Life policies are now construed not as contracts of indemnity but to pay a certain sum in a certain event depending on the duration of human life. The judgment of the Hon ble High Court of Bombay in the case of Insure Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discontinuance charges are consideration for services rendered and such charges are designed to recoup the expenses already incurred towards procurement administration of the policy and incidental thereto. The finding of the Adjudicating Authority are premised entirely are incorrect reading of the IRDA (treatment of discontinuance linked insurance policy) regulations, 2010 and overlooking the first principle and fundamental position that for an activity to be taxed as service under provisions of Finance Act, 1994, the activity has to first qualify as a service. In our view, a regulation framed by IRDA with the aim of protecting of the insured by providing for a yardstick for computation for the surrender and the consequent discontinuance charges cannot be read and applied out of services rendered a transaction in an actionable claim, as a service, liable to be taxed under the provisions of Finance Act, 1994. In any case, the said regulation will apply only to the policy issued after 01.07.2010 and does not apply to the policy prior thereto. 14. In view of the above findings, we hold that the demand of service tax on the surrender charges for the period in question is unsustaina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the period needs to be upheld as appellant assessee is not able to show from the records that they had indicated the amount as other income in the service tax returns. Accordingly, we find the arguments put forth by the Learned Counsel on this point do not merit any acceptance and we uphold the confirmation of demand of ₹ 8,17,779/- along with interest. We set aside the penalties imposed on them on this count also. 18. In so far as the appeal filed by the Revenue is concerned, show cause notice issued to the appellant assessee has alleged that the policy administration charges, premium allocation charges, surrender charges which are recovered as a part of management of ULIP services did not paid tax during the period 16.10.2006 to 15.05.2008 01.07.2010 till 31.03.2011 and consequently were to be treated as exempt services, thereby the notification of CENVAT credit Rules, we find that the Adjudicating Authority has concluded that services rendered by the appellant assessee are only taxable services in as much, no taxable service rendered by them is exempt from whole of tax leviable on them nor was had rendering non taxable services, he has also held that merely beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administration charges are only to be excluded and therefore exclusion of such value and such excluded value cannot be considered as attributable to exempted services. However, he fairly agrees that this issue had been considered by this Tribunal in the case of ING Vysya Life Insurance Co. Ltd., Vs. CCE, C ST, Bangalore [Misc. Order No. 2088-20882/2014 dt. 01/04/2014, and we had taken a prima facie view in favour of the Revenue. However in view of the fact that the issue as to whether the portion of such leviable amount can be considered as exempted service or not is a debatable issue and therefore the appellant could not be found fault with if they had not opted to pay proportionate credit attributable to such value. This Tribunal in the case of ING Vysya had allowed such option to be exercised now and accordingly took a view that appellant should reverse the proportionate credit attributable to such values. The learned counsel submits that according to their own calculation the amount of proportionate credit reversible would come to about ₹ 86 lakhs. 14. The observations hereinabove would show that prima facie, we have not found a case in favour of the appellant for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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