Service Tax Exemption allowable on Commission Received in Relation to General Insurance Under Government’s Various Schemes: CESTAT [Read Order]

The Ahmedabad bench Customs, Excise and Service Tax Appellate Tribunal (CESTAT) have held that service tax exemption is allowable on the commission received about general insurance under the government’s various schemes.

Shri Rajkot District Co-Operative Bank Ltd, the appellant had received commission on the collection of premium of Crop Insurance Service from M/s. Agriculture Insurance Company of India Limited, Ahmedabad.  The case of the department is that appellant is liable to pay service tax on the commission received from M/s. Agriculture Insurance Company of India Limited under the category of Business Auxiliary Service.  Accordingly, the demand of service tax was confirmed and the same was upheld by the Commissioner (Appeals).

 Ms Amrin Alwani,  Chartered Accountant appeared on behalf of the appellant and submitted that the service of the appellant is exempted under Notification No. 3/2000-ST dated 06.07.2000.   She submits that the lower authorities have confirmed the demand for service tax on the ground that the appellant has provided Business Auxiliary Service which is not Insurance Service accordingly it is taxable

The appellant has received the commission from clients on the insurance premium and other activities which are about the aforesaid insurance scheme. Therefore, it was exempted under the notification, hence not taxable.  She further submitted that in the appellant’s case, the Additional Commissioner dropped the proceedings of show cause notice in an identical issue. On the other hand, Shri Prakash Kumar Singh, Superintendent (AR) reiterated the findings of the impugned order.

From the plain reading of the notification, it was clear that exemption is not provided to a specific service of insurance but all the services if it is provided about general insurance business provided under National Agricultural Insurance Scheme or the pilot scheme on Seed Crop Insurance or the Farm Income Insurance scheme. 

The two-member bench comprising of Mr Ramesh Nair, Judicial Member and Mr C L Mahar, Technical Member observed that the appellant has admittedly provided service for the collection of premiums about the general insurance business provided under the aforesaid government scheme.  Therefore, the appellant is eligible for the exemption notification.

The CESTAT held that “the appellant is entitled to the exemption notification 3/2000-ST and not liable to pay any service tax on the commission received about general insurance under government’s various schemes.  Accordingly, the impugned order is set aside and the appeal is allowed.”

To Read the full text of the Order CLICK HERE

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