Hoodwinking Car Buyers with Inflated Insurance Expenses to Enriches Dealers and Agents by Bogus Claims to Defruad Exchequer : CESTAT Bench Delivers Different Opinions [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) bench delivered different opinions regarding the issue of car buyers with inflated insurance expenses to enrich dealers and agents by bogus claims to defraud the exchequer. 

Royal Sundaram General Insurance Company Ltd, the appellant assessee was engaged in providing General insurance like Motor, Health, Personal Accident and Fire, and Burglary insurance services and Miscellaneous policies and centralized registration, and are registered for payment of service tax under reverse charge mechanism on commissions paid to insurance agents, etc. 

The assessee appealed against the order passed by the adjudicating authority for confirming the demand of wrongly availed CENVAT credit and for the imposition of the penalty along with the interest. 

Raghavan Ramabadran, the counsel for the assessee contended that when the duty-paid nature of the goods and the actual receipt of the goods in the recipient’s factory was not disputed, the credit cannot be denied on the mere ground that the description of the goods on the invoice was incorrect and no investigation was initiated at the hands of the transporter or supplier, and therefore credit cannot be denied at the recipients end. 

R. Subramanian, the counsel for the department contended that the assessee not authorized to outsource such insurance services and as per Section 40 of the Insurance Act, 1938, only licensed Brokers are permitted to do insurance business and entitled to receive a commission to receive the commission, the dealers had raised the invoices describing the services as ‘data processing and policy servicing activities’. 

 Sulekha Beevi (Judicial member) held that the demand for CENVAT credit was not justified and liable to be deleted. 

Ajith Kumar (Technical member) opinioned that if the impugned order is found incorrect and the appeal succeeds, it would be a rare but exemplary exertion of the right of a taxpayer to pay taxes in the teeth of opposition by the department. 

There was a difference of opinion in the same issue and the Judicial member of the bench quashed the demand of CENVAT credit and penalty imposed on the assessee and the Technical member upheld the demand and penalty imposed on the assessee. 

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates