In the case of M/s. Max Life Insurance Company India Ltd., the Delhi Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that Service tax was leviable under “Investment or Management Service under ULIP” on Policy Administration Charges, Front End Load and Switching Charges.
The appellant is an insurance service provider and the other service provided by the appellant i.e. life risk coverage service was taxable under Section 65(105)(zx), which provides, “taxable services” means – any service provided or to be provided to a policyholder or any person by an insurerincluding re-insurer carrying on life insurance business, about risk cover in life insurance.
It was alleged that during the thematic audit of the records of the appellant conducted in the year 2013 by the Director General of Audit (Central Receipt), A.G.C.R., the appellant collected charges from the policy holders like administration charges, front-end loadcharges and switching charges totalling Rs.5,20,43,50,816/- during the period July 2010 to April 2011 but have not paid service tax on the same amounting to Rs.53,60,48,134/- under Investment Management Service of ULIP.
It was further alleged that the appellant has not disclosed the material facts of receipt of these charges and non-payment of service thereon in their Service Tax Returns submitted to the Department, whichappears to be deliberate suppression with intent to evade payment of tax.
The show cause notice was adjudicatedon contestvide order-in-original dated 13.01.2016 by the Commissioner, who vide impugned order confirmed the proposed demand of Rs.53,60,48,134/-. Further confirmed interest under Section 75 of Rs.1,19,011/-. Further, imposed the penalty of an equal amount under Section 78. Rs.10,000/- under Section 77 for failure to assess the value of the taxable service correctly.
Counsel for the appellant, Shri Sanjeev Sachdeva urges that refers to clarificatory TRU Circular No. DOF/334/1/2010 dated 26.02.2010 where it has been clarified that policy administration charges, switching charges, partial withdrawal Charges, miscellaneous charges, etc. were taxable under Life Insurance Service as definedunder Section 65(105)(zx) of the Act, and not under Section 65(105)(zzzzf). Opposing the appeal, Special Counsel, Shri S.K. Mathur has filed written submissionsand relies on the allegations in the show cause notice.
Mr Anil Choudhary, member (judicial) Mr P V Subba Rao, member (technical) observed that the clarification by the Board vides TRU Circular No. DOF/334/1/2010 dated 26.02.2010, that such policy administration charges are chargeable to tax under Section 65(105)(zx). The revenue cannot be permitted to be taken a u-turnin the light ofthe Board’s Circular and are binding on the officers of the Revenue Department. The appeal is allowed and set aside the impugned order.
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