Brief of the case:
- The Hon’ble Karnataka HC in the case of CCE Vs. PNB Metlife India Insurance Co. Ltd held that reinsurance service is an input service for rendering insurance service because the reinsurance is an integral part of insurance service rendered by the insurance co. and cannot be termed as an activity post completion of insurance services.
- Hence, the Cenvat credit of service tax paid on procuring reinsurance services can be claimed.
Facts of the case:
- The assessee insurance company (insurer) procured reinsurance services from foreign insurance companies and claimed Cenvat credit of service tax paid under Reverse charge mechanism.
- The adjudicating authority (Commissioner of Central Excise) disallowed the Cenvat credit by contending that the reinsurance services are not eligible input services.
- Accordingly , he confirmed the demand of credit taken to the tune of Rs. 12,04,06,544/- with penalty and interest.
- The appeal of the assessee was allowed by tribunal who held that the reinsurance services were availed to complete the process of providing insurance services and thus, there is a direct nexus with the output service of providing insurance coverage to its customers.
Contention of Revenue:
- The business of insurance continues till the validity of the insurance policy and the process of re-insurance is an integral part of issue of the insurance policy particularly when the statute requires certain percentage of insurance business to be mandatorily re-insured from another company.
- Thus, the tribunal’s order required no interference.
Contention of Assessee:
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