The IRDA regulations do not allow any person other than insurance agents and insurance brokers approved by IRDA, to sell vehicle insurance policies. Further the maximum brokerage/commission payable for selling insurance policies is also capped at 10% of the premium. To circumvent these regulations, the Insurance Companies ask the car dealers to raise invoices to show that the car dealers have provided the Insurance Companies services such as advertisement, renting of computers/ printers, training, arranging customer awareness program etc.
As these services were never provided by the car dealers, their invoices are not permissible documents under the CENVAT Credit Rules, 2004 and the Service Tax Rules, 1994 for availing Cenvat credit by the Insurance Companies. These facts have been confirmed by the employees of the Insurance Companies and the car dealers in their voluntary statements.
The estimated incorrect Cenvat Credit involved in this case is Rs. 1200-2500 crore.
New Delhi, dated the 10th August, 2015- PRESS RELEASE