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Judgment
THE only question involved in this case is, ''''Whether the Reliance Life Insurance Co. Ltd., can charge, ''service '' tax upon the policy, pertaining to the year, December, 2005 ? ''''. Dandu Krishna Murthy Raju, the Complainant, in this case, purchased whole life policy under Nitysri Plan Policy, on 08.12.2005, with profits. He paid premium in the sum of Rs.37,675/ - p.a. Before June, 2009, the Insurance Co.,/OP paid the service tax and, thereafter, they forcibly collected the service tax @ 10.5%, on this policy, from the complainant. The allegation of the petitioner/complainant is that as per the insurance contract, the Insurance Company could not have deducted the said amount. He further alleged that it is an unfair trade practice , the insurance company is liable to return such service tax collected from him and they should not collect the service tax on the future premium. He also prayed that he should be granted a sum of Rs.10,000/ - towards compensation and Rs.5,000/ - towards costs of the complaint.
THE District Forum heard both the parties and dismissed the complaint. The State Commission also dismissed the First Appeal, filed by the complainant. We have heard the petitioner in person and the counsel for the respondent. Counsel for the respondent vehemently argued that they are entitled to charge the service tax. He has also invited our attention towards few notifications. Notification No.8/2008 -Service Tax, dated 01.08.2002, reads as under : - ''''In exercise of the powers conferred by section 149 of the Finance Act, 2002 (20 of 2002), the Central Government hereby appoints the 16th day August, 2002, as the date on which the Finance Act, 1994 (32 of 1994), shall be amended as provided in the said section 149 and the service tax shall be levied under sub -section (6) of section 6 of the Finance Act, 1994 (32 of 1994) ''''. G.D.Lohani Under Secretary to the Government of India F.No.B11/1/2002 -TRU ''''.
NOTIFICATION No.9/2002 -Service Tax, dated 01.08.2002, reads as under : - ''''In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided, by an insurer carrying on life insurance business, to a policy holder in relation to life insurance business from the whole of the service tax leviable thereon under Section 66 of the said Act. 2. This notification shall come into force on the 16th day of August, 2002. G.D.Lohani Under Secretary to the Government of India F.No.B11/1/2002 -TRU ''''.
HE also referred to life insurance services clause 21(1), which reads, as under : - ''''21.1 In Budget 2004, it has been decided to levy service tax on that portion of the service which pertains to risk element. The levy would not be applicable to such premium of the existing policies, which were paid before the new levy comes into force. 21.2. It has been provided that in the case of composite policies (risk plus saving) life insurer can at his option pay 1% of the total premium towards discharge of service tax liability. This shall not be applicable in case an insurance policy is towards risk only or where the premium gives details of risk premium and other premium separately (refer notification No.11/04 -ST, dated 10.09.2004). However, those insurance companies who want to pay tax on risk premium as certified by the Appointed Actuary on a company basis can do so. The insurance companies may be allowed to pay monthly service tax provisionally, based on estimates. The monthly estimated (i.e. provisional) duty payment for the entire company would be based on a provisional certificate issued by the Appointed Actuary, subject to final certification at the end of the year. At the end of the financial year, when the sum at risk is calculated and certified by the Actuary, the liabilities would be finalized and the companies would pay the balance tax or adjust the excess tax paid ''''.
He further invited our attention to Notification No.35/2011 - Service Tax, dated 25.04.2011, the relevant extract, runs as follows: - ''''(7A) An insurer carrying on life insurance business shall have the option to pay tax. (i) on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service ''''.
HE has also cited an authority of the Supreme Court of India, reported in All -India Federation of Tax Practitioners and Ors., Vs. Union of India and Ors., where it was held : - ''''It is this economic concept based on the legal principle of equivalence which now stands incorporated in the Constitution vide the Constitution (88th Amendment) Act, 2003. Further, it is important to note, that ''''service tax '''' is a value added tax, which, in turn is a general tax which applies to all commercial activities involving production of goods and provision of services. Moreover, VAT is a consumption tax as it is borne by the client ''''.
A conjoint reading of the above said Notifications clearly goes to show that in Budget 2004, it was decided to levy ''service tax '' on that portion of the service, which pertains to ''risk element '', as per Clause 21(1), noted above. This Notification clearly goes to show that even though there is no element of earning additional benefit, than, a life risk, it may not be a composite policy, i.e., risk plus saving. Clause 21(1) takes care of the ''service tax '' on that portion of the ''service '' which pertains to risk element only and Clause 21(2) pertains to risk plus saving element. It must be borne in mind that Dandu Krishna Murthy Raju, the complainant, obtained the policy in December, 2005. It cannot be said to be an existing policy. Consequently, we find no force in this revision petition, the same is, therefore, dismissed.