Max Life Insurance Company India Ltd Vs Commissioner of Central Excise (CESTAT Delhi)
CESTAT Delhi held that Policy Administration Charges is leviable to service tax with effect from 01.05.2011 via amendment to definition under section 65(105)(zx) of the Finance Act, wherein, the words ‘by an insurer including re-insurer carrying on life insurance business’ are substituted.
Facts-
The issue in this appeal is whether service tax was leviable under “Investment or Management Service under ULIP” under Section 65(105)(zzzzf) of the Finance Act for the period 1.7.2010 to 30.04.2011 on Policy Administration Charges, Front End Load and Switching Charges collected by the appellant – Insurer, from the Policy holders and the other issue is whether show cause notice is hit by limitation.
Conclusion-
Tribunal in the case of Sahara India Life Insurance Co. Ltd. has held that Policy Administration Charges is leviable to service tax with effect from 01.05.2011 when the definition in Section 65(105)(zx) was amended and for the words, “in relation to the risk cover in the Life Insurance business”, the words “ by an insurer including re-insurer carrying on life insurance business” were substituted.
Held that in view of the clarification by the Board vide 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).
FULL TEXT OF THE CESTAT DELHI ORDER
The issue in this appeal is whether service tax was leviable under “Investment or Management Service under ULIP” under Section 65(105)(zzzzf) of the Finance Act for the period 1.7.2010 to 30.04.2011 on Policy Administration Charges, Front End Load and Switching Charges collected by the appellant – Insurer, from the Policy holders and the other issue is whether show cause notice is hit by limitation.
2. The brief facts are that the taxable service called “Management of Investment under ULIP” was brought under Service Tax Net, read as follows:-
“(zzzzf) to a policy holder, by an insurer carrying on life insurance business, in relation to management of investment, under unit linked insurance business known as Unit Linked Insurance Plan (ULIP) Scheme.”
Explanation – for the purposes of this sub-clause –
(i) Management of segregated fund of unit linked insurance business by the insurer shall be deemed to be the service provided by the insurer to the policy holder in relation to management of investment under unit linked insurance business; and
(ii) the gross amount charged by the insurer from the Policy Holder for the said services provided or to be provided shall be equivalent to the difference between –
(a) premium paid by the Policy Holder for ULIP, and
(b) the sum of premium paid for or attributable to risk cover-whether for life, health or other specified purposes and the amount segregated for actual investment.
The aforementioned Explanation (II) has been substituted w.e.f. 1.7.2010 vide notification no.24/2010-ST dated 22.06.2010, as follows:-
“(ii) the gross amount charged by the insurer from the policy holder for the said service, provided or to be provided shall be equal to the maximum amount fixed by IRDA, as fund management charges for ULIP or the actual amount charged for the said purpose by the insurer from the policy holder, whichever is higher.”
3. The appellant is a insurance service provider and is registered with the Department and has been paying taxes regularly as well as filing the returns. 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 policy holder or any person by an insurer including re-insurer carrying on life insurance business, in relation to risk cover in life insurance.
4. This definition was amended by way of substitution w.e.f. 1.5.2011, vide Finance Act, 2011, the amended sub-section reads as follows:-
“(zx) to a policy holder or any person by an insurer including re-insurer carrying on life insurance business”
5. A show cause notice dated 19.12.2014 was issued to the appellant – an LTU, inter alia, alleging that during 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., it appeared that the appellant have collected charges from the policy holders like administration charges, front end load charges and switching charges totaling 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. The details of the charges are as follows:-
