Custom, Excise & Service Tax Tribunal
Suprasesh General Insurance Services ... vs Service Tax - Chennai on 23 July, 2018
1
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No. ST/00108/2011
(Arising out of Order-in-Original No. 19/2010 dated 03.11.2010
passed by the Commissioner of Central Excise, Chennai III
Commissionerate, Chennai)
M/s. Suprasesh General Insurance : Appellant
Services & Brokers Pvt. Ltd.
Vs.
The Commissioner of Service Tax, : Respondent
Chennai Appearance:-
Shri. S. Sunder Raman, Managing Director for the Appellant Shri. K. Veerabhadra Reddy, JC (AR) for the Respondent CORAM:
Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) Hon'ble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing/Decision:23.07.2018 Final Order No. 42164 / 2018 Per Bench, Brief facts are that appellants are engaged in providing Insurance Auxiliary Service through insurance agents as insurance intermediary in General Insurance Business. They are registered under the category of Insurance Auxiliary Services. They also act as insurance intermediary to various insurance company located both in India and also abroad. It was noticed that in respect of services 2 rendered as insurance intermediary to companies situated abroad while remitting the premium to them, appellants were retaining their commission. The appellants were not paying service tax on the commission retained by them on the ground that retaining the commission for the service rendered to foreign insurance companies has to be treated as amount received in convertible foreign exchange and, therefore, are export of services. The Department entertained the view that the commission retained by them being in Indian currency, cannot be treated as commission received in convertible foreign exchange and therefore, is subject to levy of service tax. Show Cause Notice was issued proposing to demand the service tax along with interest and for imposing penalties. After due process of law, the Commissioner confirmed the demand of Rs. 1,07,73,577/- along with interest and imposed penalty under Section 76 of the Finance Act. Aggrieved, the appellants are now before the Tribunal.
2.1 Today, when the matter came up for hearing, Managing Director of Appellant-company, Shri. S. Sunder Raman appeared and argued the matter. He submitted that the role of a re-insurance broker is to support the contract of re-insurance between a re- insured and a re-insurer. The re-insurer may either be located in India or abroad. The appellant receives the re-insurance premium from the ceding companies in India, retains certain portion of the 3 same as commission and remits the rest to the re-insurers in rupees if the re-insurer is an Indian re-insurer, and in foreign currency if the re-insurer is located overseas. The appellant has been discharging service tax on the commission retained by the appellant in respect of re-insurance contract where re-insurers are located in India. However, in respect of re-insurance contracts where the re- insurers are located abroad, the appellant had been claiming exemption from payment of service tax under Export of Service Rules, 2005.
2.2 He placed reliance on the decision of the Hon'ble Supreme Court in the case of M/s. J. B. Boda and Co. (Pvt.) Ltd., reported in 223 I.T.R. 271 and also the CBDT Circular No. 731 dt. 20.12.1995 wherein it is held that brokerage can be paid either by allowing the brokers to deduct their brokerage out of the gross premia collected from Indian insurance companies and remit the net premia overseas, or they could simply remit the gross premia and get back their brokerage in the form of remittance through banking channels. The Reserve Bank of India has expressed the view that since the principle underlying in both the transactions is the same, there is no difference between the two modalities of brokerage payment and that RBI had also observed that former method is, in fact, administratively more convenient.
42.3 It is also argued by them that the Hon'ble jurisdictional High Court in their own case has held the issue in their favour vide judgment dated 28.07.2015 in C.M.A. Nos. 1058 & 1459/2009.
3. The Ld. AR Shri. K. Veerabhadra Reddy supported the findings in the impugned order.
4. Heard both sides.
5. The issue is whether the appellants are liable to pay service tax on the commission retained by them in Indian currency. In the appellant's own case, the very same issue was considered and the jurisdictional High Court has held the same in favour of the assessee. Following the same, we are of the considered opinion that the demand cannot sustain and requires to be set aside. The impugned order is set aside.
6. The appeal is allowed with consequential reliefs, if any.
(Operative part of the order was pronounced in open Court) (Madhu Mohan Damodhar) (Sulekha Beevi C.S.) Member (Technical) Member (Judicial) Sdd