Service rendered by ‘lead generator’ is not that of an ‘insurance agent

Commissioner of Service Tax Vs M/s Reliance Life Insurance Co. Ltd (CESTAT Mumbai)

CESTAT held that service rendered by ‘lead generator’ is not that of an ‘insurance agent’ and, consequently, the commission paid by respondent to such entities are not liable to be included in the assessable value of the respondent for discharge of tax liability under Finance Act, 1994.

FULL TEXT OF THE CESTAT JUDGMENT

The instant appeal has been filed by Revenue challenging order-in-original no. 01/ST-VI/RS/2014 dated 30.10.2014 passed by Commissioner, Service Tax, Mumbai-VI for dropping the proceedings initiated against the respondent, i.e. M/s. Reliance Nippon Life Insurance Co. Ltd. (RNLICL) in show cause notice dated 24.04.2014.

2. The remuneration paid to channel partners as brokerage, commission, etc., was admitted to being liable to tax under section 65(105)(zy) of Finance Act, 1994 and tax was being paid by respondent as ‘person liable to pay tax’ in terms of rule 2(1)(D)(iii) of Service Tax Rules, 1994. However, the commission paid to the ‘Lead generators’ was excluded from the assessable value determined by the respondent and the notice demanded recovery of Rs.28,17,70,415/-paid to these allegedly unlicensed ‘insurance agents’ for the period from October 2008 to March 2011 under section 73(1) of Finance Act, 1994, along with interest thereon, and proposed appropriate penalties. The impugned order held that the tax liability would arise only on services rendered by such persons as were ‘licensed’ in accordance with section 42 of Insurance Act, 1938 which the ‘Lead generators’ were not. Hence this appeal of Revenue.

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