Custom, Excise & Service Tax Tribunal
Medicare Service (India) Pvt.Ltd, vs Commissioner Of Service Tax Kol on 30 July, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Service Tax Appeal No.87 of 2011
(Arising out of Order-in-Original No.23/Commr/ST/Kol/2010-11 dated 06.12.2010
passed by Commissioner of Service Tax, Kolkata.)
M/s. Medicare Service (India) Private Limited
(6B, Bishop Lefroy Road, Kolkata-700020.)
...Appellant
VERSUS
Commissioner of Service Tax, Kolkata
.....Respondent
(GST Bhawan, 180, Shantipally, Rajdanga Main Road, Kolkata-700107.)
APPEARANCE
S/Shri J.P. Khaitan, Sr.Advocate, Subhendu Halder & Agnibesh Sengupta,
Advocates for the Appellant (s)
Shri S.S.Chattopadhyay, Authorized Representative for the Revenue
CORAM: HON'BLE SHRI R. MURALIDHAR, MEMBER(JUDICIAL)
HON'BLE SHRI RAJEEV TANDON, MEMBER(TECHNICAL)
FINAL ORDER NO. 76459/2024
DATE OF HEARING : 25.06.2024
DATE OF DECISION : 30.07.2024
Per : R. MURALIDHAR :
The Appellant carved out a new wing within their company w.e.f.
26.06.1999 called as "Medicare Service Club". This club was to take
over the services pertaining to the existing members of "Medicare
Membership Scheme", wherein the members have insurable interest.
The Appellant also approached National Insurance Company for
providing such services to the members. The Insurance Company
issued Group Insurance Policy to the appellant for the insurance of its
Members. On 28.07.2009 show cause notice was issued to the
Appellant alleging that they were providing service under the category
2
Service Tax Appeal No.87 of 2011
of "Insurance Auxiliary Service". The show cause notice alleged that the
Appellants were providing this service, but they were not discharging
the Service Tax liability. On this count the demand was quantified at
Rs.62,06,774/- for the period 2004-2005 to 2007-08. The show cause
notice also alleged that the appellants have taken Cenvat Credit
irregularly on the basis of documents which are not prescribed
document under Rule 9(1) of Cenvat Credit Rules, 2004. On this count,
the demand was quantified at Rs.4,10,25,659/- After due process, the
Adjudicating authority confirmed the demand. Being aggrieved, the
Appellant is before the Tribunal.
2. Shri J.P.Khaitan, Ld.Sr.Counsel appearing on behalf of the
Appellant submits that the Revenue is in gross error in terming the
service as "Insurance Auxiliary Service". He takes us through the
definition of "Insurance Auxiliary Service" as given under Section 65 of
the Finance Act, 1994.
"SECTION 65. Definitions - In this Chapter, unless the context
otherwise requires, -
.....................
(54) "insurance agent" has the meaning assigned to it in clause (10) of section 2 of the Insurance Act, 1938 (4 of 1938);
(55) "insurance auxiliary service" means any service provided by an actuary, an intermediary or insurance intermediary or an insurance agent in relation to general insurance business or life insurance business and includes risk assessment, claim settlemet, survey and loss assessment;"
3. In order to clarify the entity, he takes us through to definition of „Club or Association‟ as given under section 65(25a) of the Finance Act, 1994, which reads as under:-
"SECTION 65. Definitions - In this Chapter, unless the context otherwise requires, -
....................3
Service Tax Appeal No.87 of 2011 (25a) "club or association" means any person or body of persons providing services, facilities or advantages, for a subscription or any other amount, to its members, but does not include -
(i) any body established or constituted by or under any law for the time being in force; or
(ii) any person or body of persons engaged in the activities of trade unions, promotion or agriculture, horticulture or animal husbandry; or
(iii) any person or body of persons engaged in any activity having objectives which are in the nature of public service and are of a charitable, religious or political nature; or
(iv) any person or body of persons associated with press or media;
4. The insurance intermediary is defined in IRDA Act, 1999. He takes us through to the definition given under section 2(f) which reads as under:-
2. Definitions - (1) In this Act, unless the context otherwise requires, -
2(f) "intermediary" or "insurance intermediate" includes insurance brokers, reinsurance brokers, insurance consultants, corporate agents, third party administrator, surveyors and loss assessors and such other entities, as may be notified by the Authority from time to time.]
5. He submits that in order to act as „intermediary‟ or „insurance intermediary‟ including for acting as insurance brokers, agents, etc., the person has to be notified by the IRDA for such purpose. He further submits that as per Section 42(d) of IRDA Act, 1999, „intermediary‟ or „insurance intermediary‟ are required to obtain proper licence for their operations. In the case of the Appellant, they have neither applied for nor obtained any licence to operate as „intermediary‟ or „insurance intermediary‟. Therefore, when the provisions of Section 65(54) and (55) of the Finance Act, 1994 are harmoniously read with Section 2(f) and 42D of the IRDA Act, 1999, it would get clarified that only when a person obtains a proper licence and is notified under the IRDA Act, the 4 Service Tax Appeal No.87 of 2011 person can provide „insurance auxiliary service‟. In the present case the Appellant has not obtained any such licence. Even in the show cause notice there is no allegation that the Appellant has obtained the licence and therefore acting as an „insurance intermediary‟ providing the service of „insurance auxiliary service‟. Ld.Sr.Counsel submits that in the present case, the Appellant was issued a letter dated 30.06.1999 by National Insurance Company wherein it has been clearly stated that "Medicare Services Club" is a "registered services club" and that "Medicare Services Group" has "Insurable interest in its members for their welfare and benefit through medical insurance". This letter also states that "the payment of the members will be paid by Medicare Services Club and claims naturally will be paid through them also"
(Page 20 of Volume-1 of Appeal compilation).
6. This is a case where group insurance is obtained by the Appellant for all its club Members. The Ld.Sr.Counsel also takes us through to the letter submitted by them to the Superintendent Audit Service Tax on 04.08.2008 clarifying the types of facilities being given by the club to their members and the kind of insurance policies being taken by the club for the welfare of the club members. This letter also specifies the additional benefits, ambulance facility, health check ups, ticket booking, electricity bill payment etc. being done on behalf of the members for the insurance policies taken by the members through the club. He also takes us through Bills raised by the Appellant wherein they are collecting the membership fees and also collecting Service Tax. Such Service Tax is being remitted to the Service Tax Department. In view of the foregoing factual situation as well as documentary evidence, the Ld.Sr.Counsel submits that the Adjudicating authority is in error in holding that the Appellant is providing „insurance auxiliary service‟ and confirmed the demand of Rs.62,00,774/-.
7. Coming to the Cenvat Credit taken by them, the Ld.Sr.Counsel submits that w.e.f. June 16, 2005 the „club or association service‟ was brought under the ambit of Service Tax after insertion of Section 65(105) (zzzz) and Section 65(25(a) in the Finance Act, 1994. Before 5 Service Tax Appeal No.87 of 2011 this date, no Cenvat Credit was taken by the Appellant though the Insurance companies were charging Service Tax on the Appellant. He submits that after this date, since the Appellant was providing output service to the members under the category of „club or association service‟ they were eligible to take the Cenvat Credit for the input services which were „in‟ or „in relation to‟ the output services provided by them. He submits that it has been clarified in the above paragraphs that the Appellants are providing various services to the members and the club is also paying the Service Tax on the Membership fee collected from the members. Further, there is no denial that the insurance policies are taken in respect of all the members by the club. On such insurance policies the insurance companies are charging Service Tax. Since, the input services i.e. the insurance service provided by the insurance companies are directly relatable to the output service being provided to the club members, the Appellant is eligible to take Cenvat Credit in terms of Rule 2(l) of the Cenvat Credit Rules, 2004. He further submits that the insurance companies have been issuing proper invoices indicating the amount of the value of the policy and the Service Tax thereon. He takes us through some invoices at Page No.76, 77, 78, 80 etc. to show that the insurance companies have issued the invoices showing the premium amount and the Service Tax collected by them. He submits that Cenvat Credit has been taken on such invoices. Therefore, he submits that there is no justification in denying the Cenvat credit of Rs.4,10,25,659/-. Accordingly, he prays that the impugned order may be set aside and the Appeal may be allowed on merits.
8. He further submits that the show cause notice issued on 28.07.2009 for the alleged non-payment of Service Tax during the period 2004-05 to 2007-08 and the alleged irregular Cenvat Credit taken during the period April 2005 to March 2008 is hit by time bar provisions. He submits that the Appellant has taken the registration w.e.f. 16.05.2005 and they have been paying the Service Tax on the membership fee collected from the members. All the Cenvat Credit 6 Service Tax Appeal No.87 of 2011 taken by them in respect of input services have also been shown in the ST-3 Returns. The complete details of membership fee collected, insurance premium paid to the insurance companies, Service Tax paid to the insurance companies, Service Tax received from the members etc. are all properly recorded in the Profit and Loss accounts and are also accounted for in their Income Tax Returns. In fact, the data towards the Cenvat Credit taken and membership fee collected etc. are all quantified by the Audit Department only from the books of account maintained by the Appellant. There is no allegation in the Show Cause Notice that the Appellants have not been maintaining proper books of account in terms of Income Tax Act, Companies Act or in terms of Central Excise Act, 1944/Finance Act, 1994. Therefore, in such a situation, the Appellant cannot be fastened with the allegation of suppression without any substantial corroborative evidence by the Revenue in order to confirm the demand for the period 2004-05 to 2007-08. Therefore, he prays that the Appeal may be allowed on account of limitation also.
9. The Ld.AR for the Department reiterates the detailed findings given by the Adjudicating authority and justifies the confirmed demand. He submits that the non-payment of Service Tax and availment of irregular Cenvat Credit came to light only because of the detailed investigation taken up by the audit team. Therefore, he justifies the invocation of extended period in this case. He submits that the Appeal is required to be dismissed.
10. Heard both sides, perused the appeal papers, submissions made and documentary evidence placed before us.
11. Admittedly, the Appellant is running a club which consists of various members. These members are given Membership once they pay the Membership fee. The Appellant has approached various insurance companies and has been granted the facility of taking a single group policy in respect of all their members. The premium is being paid to the insurance company by the Appellant. For making this payment, naturally the Appellant is collecting membership fee from their 7 Service Tax Appeal No.87 of 2011 members and using the same towards payment of premium to the insurance company. There is no denial that on the membership fee collected from the members, Service Tax is being discharged. A careful and harmonious reading of the provisions of Section 65 (54) & (55) of the Finance Act, 1994 with the provisions of IRDA Act, 1999, Section 2(f) and Section 42D, would clarify that in order to act as an intermediary or as an agent of the insurance company, a proper licence is required to be obtained by such person. From the show cause notice we observe that the Department has not brought in any evidence or allegation to the effect that the Appellant has obtained any licence from the IRDA authorities to act as intermediary or agent for the Insurance companies. It is also noticed that the company is purchasing Insurance policy by paying certain amount and selling the same to the individual members at a particular rate. For such an activity, the Appellant may be keeping some margin for themselves for providing some other allied services to the members. From the letter dated 30.06.1999 issued by National Insurance Company it gets clarified that the Appellant is issued the Insurance policy and the settlement of any claim for their members would be the responsibility of the Appellant only. In case of a claim, the members file their claim with the club, who in turn takes up the matter with the insurance company and gets the claim settled for the members. In this case it is a straight case of the appellant acting independently by purchasing the policy and selling the policy. There is nothing to indicate from the show cause notice that the Appellant has received any commission from the insurance company as an intermediary or as an agent. In case of „insurance auxiliary service‟, the person acting as an intermediary or an agent receives commission from the insurance company since they act as an intermediary between the insurance company and the clients of the insurance company. In this case for the insurance company, the Appellant himself is the client. The individual members of the club are not the clients of the insurance company. The sale value minus purchase value of the policy would be the profit for the club. Therefore, we hold that the Appellant has not 8 Service Tax Appeal No.87 of 2011 provided any service under the category of „insurance auxiliary service‟ and set aside the confirmed demand of Rs.62,06,774/-.
12. Coming to the Cenvat Credit taken by the Appellant, from the documentary evidence placed before us, it is seen that the Appellant is paying the Service Tax on the membership fee collected from the members. The insurance companies which are providing the insurance service, are charging the Service Tax. There is a direct nexus between the input services i.e. insurance service provided by the insurance companies and the output service provided by the Appellant in the form of club or association service. Hence, this meets the requirement of input service in terms of Section 2(l) of the Cenvat Credit Rules, 2004. Since all the credits are being taken based on the payments made to reputed insurance companies like National Insurance Company and United Insurance Company which are all Government companies, we do not find any reason to doubt the authenticity of the transactions and the Service Tax payment made by the insurance companies. The appellant has enclosed all the copies of the invoices issued by the insurance companies (page 22 to 110 of the Appeal Paperbook). Therefore, we hold that the Appellant has correctly taken the Cenvat Credit and set aside the confirmed demand of Rs.4,10,25,659/-.
13. Coming to the issue of time bar raised by the Appellant, from the records it is seen that the Appellant has been registered with the Service Tax Department and for the membership fee collected from the members, Service Tax is being discharged. They are also being charged the Service Tax for the insurance premium by the various insurance companies. They also have been filing their ST-3 Returns for the Service Tax payment and Cenvat Credit taken. Being a public limited company, they are also filing their Income Tax Returns and maintaining proper records in the form of Profit and Loss account, Balance Sheet etc.. The Department has failed to bring any evidence to the effect that the Appellants have suppressed any facts in order to evade payment of Service Tax. Therefore, we hold that invocation of extended period in this case is legally not sustainable. Accordingly, we set aside the 9 Service Tax Appeal No.87 of 2011 impugned order in respect of the confirmed demand for the extended period on account of time bar.
14. Thus, the Appeal stands allowed both on merits as well as on limitation with consequential relief, if any, as per law.
(Order pronounced in the open court on 30.07.2024.) Sd/ (R. MURALIDHAR) MEMBER (JUDICIAL) Sd/ (RAJEEV TANDON) MEMBER (TECHNICAL) sm