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TMI Blog2023 (4) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... considers this to be interest on delayed payment of premium by the policy holder, and hence, not exigible to service tax in view of the provisions of rule 6(2)(iv) of the Service Tax (Determination of Value) Rules, 2006 the 2006 Rules. The department, however, believes that the appellant camouflaged the amount received towards processing/administrative charges as reinstatement interest collected on delayed payment of premium. 3. The Commissioner, by the order dated 28.02.2017, confirmed the demand of service tax for the following reasons: (i) Re-instatement interest is charged by the appellant for reviving lapsed policies and in any case no interest can be charged by the appellant since the policies are terminated; (ii) Interest must necessarily be charged at a uniform rate, and be recovered periodically. As the amount recovered by the appellant for revival of the lapsed policies was neither charged at a uniform rate nor recovered periodically, it is not "interest"; and (iii) Re-instatement interest charged is in the nature of "administrative charged/ processing fee". 4. In order to appreciate the controversy involved in this appeal it would be useful to first examine some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be available to the policy holder of a lapsed policy. D. Revival of a policy. The Insurance Regulatory and Development Authority (Treatment of discontinued linked insurance) defines "revival of a policy" to mean: "restoration of the policy by the insurer, which was discontinued due to the non-payment of premium, with all benefits, with or without rider benefits if any, mentioned in the policy document, upon the receipt of all the premiums due and other charges if any, as per the terms and conditions of the policy, upon being satisfied as to the continued insurability of the policyholder on the basis of the information, documents and reports furnished by the policyholder. 6. Therefore, regardless of whether a policy has acquired a surrender value or not, the policy contract allows the policy holder to revive a lapsed policy within a specified period from non-payment of the last premium. Normally this is a period of 2-3 years. Such revival is possible if the policy holder pays all the overdue premiums along with charges as per terms and conditions specified in the policy itself. 7. In the instant case, the policy specifies inter-alia levy of interest along with payment of over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in Schedule, if any, provided all due Premiums have been paid for at least 3 (Three) consecutive Policy Years. 6. SURRENDER 6.1 Once Policy has acquired a Guaranteed Surrender Value, the Policyholder may request in writing to surrender the Policy at any time. On receipt of the request for surrender, the Policy shall terminate and surrender value prevailing on the date of surrender shall be paid. No benefit under this Policy shall be payable thereafter. 6.2 The Company may, at Es discretion, pay a special surrender value which shall be higher than the Guaranteed Surrender Value. The surrender value payable will be subject to the condition that the Policy is in full force and that there are no statutory or other restrictions to the contrary. 7. GRACE PERIOD The Company shall allow a grace period of 30 (Thirty) days from the due date for payment of Premium. However, In policies where the Premium payment mode is monthly, the Company shall allow 15 (Fifteen) days from the due date for payment of Premium ("Grace Period"). During the Grace Period the Company, will accept Premium without interest and the insurance coverage will continue. However, the Company will be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have been levied. 11. Shri Ravi Kapoor, learned authorised representative appearing for the department, however, supported the impugned order and submitted that: (i) The amount received by the appellant towards processing/administrative charges has been camouflaged as re-instatement interest collected on delayed payment of premium and, therefore, service tax is leviable on this amount; (ii) Since the rate of interest on late payment is not uniform, the amount charged has to be treated as being towards processing/administrative charges as the same is levied for reviving or activating a lapsed policy. This amount would not partake the nature of interest; and (iii) Interest can be charged only if the policy is surviving and so the amount with the interest cannot be charged on a policy that has lapsed. 12. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 13. From the facts stated above, it is more than apparent that it is only in a case where the policy has lapsed that it can be revived and a policy which stands terminated cannot be revived. The rights and obligati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government hereby, for the purpose of the said section, fixes the following rates of simple interest per annum for delayed payment of service tax, as given in table below : - SI. No. Period of delay Rate of simple interest (1) (2) (3) 1. Up to six months 18 per cent. 2. More than six months and up to one year 18 per cent. for the first six months of delay and 24 per cent. For the delay beyond six months. 3. More than one year 18 per cent. for the first six months of delay; 24 per cent. for the period beyond six months up to one year and 30 per cent. for any delay beyond one year. 17. Learned authorised representative appearing for the department has placed reliance upon the decision of the Tribunal in ICICI Prudential Life Insurance Co. Ltd. vs. Commissioner of Central Excise, Thane II Service Tax Appeal No. 85705 of 2014 decided on 16.09.2022. This decision would not help the department as that was based on its own facts. The issue of liability of service tax on policy re-instatement charges was in issue. It was not the contention of the appellant therein that the amount was collected towards interest and, therefore, not exigible to service tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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