The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand imposed on group life insurance schemes on the ground of benefit of closure defined under section 73(3) of the Finance Act,1994.
Shriram Life Insurance Co. Ltd, the appellant assessee was a life insurance company and was registered with the Service Tax Department and was depositing the admitted taxes and filing the periodical returns regularly and also in compliance to the Board Circular in respect of ‘group insurance schemes’, obtained the prescribed certificate from the appointed Actuary and accordingly paid the service tax on the composite policy (risk plus savings, etc.).
The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand for service tax and the imposition of penalty under section 78 of the Finance Act.
Aqeel Sheerji, the counsel for the assessee contended that since they had paid the differential service tax along with interest before the issuance of SCN, no penalty should be imposed on them, giving the benefit of closure under section 73(3) of the Finance Act, as they were under the bonafide belief that the Act contemplated that service tax was payable only on the risk portion of the premium.
Rangadham, the counsel for the department relied on the decisions made by the lower authorities and contended that the demand raised by the revenue was as per the law and liable to be sustained.
The Bench observed that the assessee was registered, and had regularly deposited the admitted taxes and filed periodical returns. It is further evident that the whole case is due to an interpretational issue (change of opinion) on the part of the Revenue and the benefit of closure under section 73(3)of the Finance Act had been wrongly denied to the appellant assessee, and no show-cause notice was required to be issued.
The two-member bench comprising Anil Choudary (Judicial) and A.K Jyothishi (Technical) quashed the demand for service tax while allowing the appeal filed by the assessee.
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