2021-TIOL-307-CESTAT-DEL

Oriental Insurance Company Ltd Vs Commissioner

ST - The assessee-company is a registered insurer under the Insurance Act, 1938 & is engaged in providing general insurance service - The present issue pertains to the Terrorism Insurance policy released by the assessee - Under the Insurance Pool, a member company can issue insurance policies to insure properties against terrorism risk. After retaining a specified percentage, the whole of the premium collected from the terrorism insurance policies is required to be ceded to the pool. Thereafter, in proportion to the capacity of each member, the GIC (the pool administrator), decides the inward premium to be ceded by one member company to the other member companies - Hence, to the extent of individual inward premium, one member company acts as a reinsurer to the other member companies - The share of each member is determined on the basis of its proportion to the total premium received in the Insurance Pool - Apart from the inward premium in respect of reinsurance provided by each member to other members, the GIC also takes excess of loss cover so as to protect the members from any excess of loss arising from risks - This is also apportioned amongst the members in the same manner as inward premium - Over and above the inward premium and excess of loss premium, the GIC also obtains excess of loss insurance cover from foreign insurance companies - Thus, each member company provides reinsurance service to other member companies, for which it receives inward premium and excess of loss cover premium (domestic) - The foreign reinsurers provide re-insurance services to member companies, for which they are paid excess of loss cover premium (foreign) - The above premiums are adjusted on the basis of settlement of accounts resulting in booking adjustment premiums in a year in respect of adjustments pertaining to the last financial year - This premium is, thus, nothing but a part and parcel of the reinsurance services provided/ received - During assessment for the relevant period, the Commr. passed order raising duty demand u/s 73 of the Finance Act, 1994 on grounds that the assessee had failed to disclose receipt of various premium such as inward premium, OIL premium & Adjustment premium - The Commissioner also raised demand for interest u/s 75 of the Finance Act, 1994 and imposed penalty u/s 78 of the Act.

Held - Extended limitation

+ It is, therefore, clear that even when an assessee has suppressed facts, the extended period of limitation can be evoked only when "suppression" is shown to be willful and with an intent to evade payment of service tax. (Para 36)

+ The Commissioner has not recorded any finding that even if the appellant had suppressed the fact of having received the amount, it was willful and with an intent evade payment of service tax. In fact, the Commissioner observed that there was no mala fide intention on the part of the appellant to suppress this fact. (Para 37)

+ This apart, it has been pointed out by counsel for the assessee that the issue relating to the point of time for payment of service tax on the services in question was prevailing in the industry and was being discussed with GIC - It has also been pointed out that the service tax to be paid by the appellant on reinsurance services provided to member companies was available as CENVAT credit to the appellant - Likewise, the service tax paid by the appellant on reinsurance services received from foreign companies was also available as CENVAT credit - Such being the position, the appellant is correct in contending that there was no suppression of facts with any intention to evade payment of service tax. Hence in these facts & circumstances, extended period of limitation could not have been invoked. (Para 38)

Held - Delay in Payment of Service Tax

+ Thus, section 64VB (5) of the Insurance Act read with rule 59 of the Insurance Rules, clearly excludes re-insurance from the general rule that no risk should be assumed until the premium is paid. The consideration in re-insurance policies can be like in any other contract (past, present or future). (Para 53)

+ The issue, therefore, that arises for consideration is when service is rendered and service tax is due but the assessee is not able to pay it until the accounts are squared up and thereby delays paying the service tax, than whether in such a situation the appellant is liable to pay interest on the delayed payment, considering that the delay is not on account of the fault of the assessee. (Para 54)

+ A similar issue comes up often in Central Excise matters when the transaction value of the goods is unknown, either partly or fully when the goods are cleared. This happens with Government contracts which fix the price based on a formula, several elements of which (say cost of raw material or minimum wages of the labour) are not known at the time of clearance. Later, when they get the details, they pay the differential excise duty. The question whether interest needs to be paid even in such cases for the period when the excise duty is due and when it is actually paid was answered in the affirmative by a Constitution Bench of the Supreme Court in Steel Authority of India Ltd. vs Commissioner of Central Excise Raipur Civil Appeal No. 2150 of 2012 decided on May 08, 2019 . (Para 54)

Held - Penalty

+ The Commissioner has imposed penalty under section 78 of the Finance Act for the reason that the appellant had deliberately suppressed or had not disclosed the material fact of non-payment of service tax on retrocession premium, excess of loss premium and foreign cession of the excess of loss premium related to terrorism reinsurance services with an intention to evade payment of service tax - While dealing with the issue as to whether the extended period of limitation under the first proviso to section 73 of the Finance Act could have been invoked in the facts and the circumstances of the case, it has been found as a fact that the suppression of facts was not willful nor was there any intent to evade payment of service tax - Thus, for all the reasons stated while dealing with the extended period of limitation, penalty under section 78 of the Finance Act could not have been imposed upon the appellant - The Commissioner was, therefore, not justified in imposing penalty under section 78 of the Finance Act as there was no deliberate suppression of facts with intention to evade payment of service tax. (Para 58)

+ In the result it is held that since the extended period of limitation could not have been invoked the demand of any interest up to March 2013 is not justified. However, the demand of interest for the period post March 2013 up to March 2014 is sustained. Penalty could also not have been imposed under section 78 of the Finance Act. (Para 59)

+ The appeal, therefore, succeeds in part. The impugned order dated September 7, 2016 passed by the Commissioner is set aside to the extent it has demanded interest for the period up to March 2013 and has imposed penalty under section 78 of the Finance Act. The demand of interest for period post March 2013 up to March 2014, however, is sustained. (Para 60)

- Assessee's appeal partly allowed: DELHI CESTAT

2021-TIOL-306-CESTAT-ALL

Parle Agro Pvt Ltd Vs CCGST

CX - The appellant is in appeal to modify the order dated 28.05.2019 passed by Commissioner (Appeals) to the extent that interest should be granted @ 12% instead of @ 6% - This order modifies the order dated 01.11.2018 passed by Assistant Commissioner to the extent that interest on the refund amount has been allowed from the date of deposit till the date of payment - The Assistant Commissioner, while deciding the refund claim filed by appellant pursuant to the order dated 31.01.2017 passed by Tribunal, sanctioned the refund claim with interest from the date the appellant became entitled to claim the refund (i.e. 01.12.2005) up to the date of order passed by Tribunal (i.e., 31.01.2017) - The contention of appellant is that a specific finding was recorded by Tribunal that it was a revenue deposit of amount and not central excise duty and as the Department had not filed any appeal to assail the finding recorded in order of the Tribunal, this finding attained finality and, therefore, cannot be assailed in this appeal filed by Department - It is also submitted that the Commissioner, pursuant to the order passed by Tribunal, had also sanctioned the refund - This submission of appellant deserves to be accepted - Once a finding was recorded by Tribunal in the order dated 31.01.2017 that the amount which had been deposited by appellant during investigation and that deposited pursuant to the interim order passed by Tribunal was a revenue deposit and not an excise duty deposit and there was no challenge to this finding of Tribunal, the appellant cannot now, after the Commissioner (Appeals) has allowed the appeal by order dated 28.05.2019, raise this issue by filling the appeal to assail the order dated 28.05.2019 - It also needs to be noted that the revenue had accepted the order dated 31.01.2017 passed by Tribunal, as is clear from the letter dated 09.10.2017 - This apart, the Assistant Commissioner, by the order dated 13.10.2018, had also ordered for refund of amount and this order was also not assailed by Department - Appeal filed by Department is, therefore, liable to be dismissed - The provisions of section 11B of Central Excise Act, 1944 would not be applicable - This is for the reason that the appellant was not claiming refund of duty - The applicant had claimed refund of the revenue deposit - Such a finding has also been clearly recorded by Tribunal in the order dated 31.01.2017, which order has attained finality - There is no provision in the Central Excise Act, which deals with refund of revenue deposit and so rate of interest has not been prescribed, when revenue deposit is required to be refunded - To be able to have some guidance regarding the rate of interest in case revenue deposit has to be refunded, the aid of the interest provisions under section 11AA, section 11BB which deals with interest on delayed refunds under section 11B(2) and section 11DD can be taken - In view of the fact that the rate of interest varies from 6% to 18% in Notifications issued under sections 11AA, 11BB, 11DD and 11AB of the Excise Act, the grant of interest @ 12% per annum seems to be appropriate - Thus, the order passed by Commissioner (Appeals) is modified to the extent that interest shall be granted to the appellant @ 12% instead of @6% from the date of deposit till the date of payment: CESTAT

- Assessee's appeal allowed/Revenue's appeal dismissed: ALLAHABAD CESTAT