The issuance of the insurance policy by the insurer, the taking of reinsurance by it, is a continuous process, authorized service tax benefit: Rajasthan HC


The High Court of Rajasthan ruled that the issuance of an insurance policy by the insurer, the taking of reinsurance by the insurer, is a continuous process and the benefits of service tax are permissible.

The appeal is filed by the Inland Revenue against the judgment of the Customs, Excise and Service Tax Appeal Tribunal, New Delhi dated 04.03.2020. The questions of law suggested by the revenues would show that the department objects to the respondent-assessed, Shriram General Insurance Company Limited, claiming the benefit of service tax paid on reinsurance as an entry service eligible. We can note that the problem concerns the period before 1.4.2012.

The respondent, which is an insurance company, deposited its service tax on the amount of the insurance premium. In the process, the appraisee had used the input service credit amount based on invoices issued by other insurance companies with which the appraisee had a pooling agreement.

The commissioner was of the opinion that the person being assessed had no right to claim such a credit. The Commissioner referred to the definition of the term input service contained in Rule 2(l) of the CENVAT Credit Rules, 2004, as it was in force at the relevant time and came to the conclusion that the person being assessed was not entitled to claim such an input credit. a service.

The assessee appealed the case. The court allowed the appeal proceeding mainly on the basis of the judgment of the Karnataka High Court Divisional Bench in the case of Central Excise Commissioner, Bangalore Vs. PNB Metlife India Insurance Co.Ltd. reported in (2015) 51 GST 504 (Karnataka). The Tribunal noted that PNB Metlife’s decision had been accepted by the tax authorities. In the said case, the Court was concerned about the admissibility of the service tax paid on the reinsurance premium as an entry service. The Division Bench referred to the provisions contained in Rule 2(l) of the CENVAT Credit Rules 2004 and observed that such reinsurance was required under Section 101A of the Insurance Act 1938.

The Divisional Bench headed by Chief Justice Akil Kureshi and Justice Sameer Jain noted that the term reinsurance has been defined under Section 2(16B) of the Insurance Act 1938 to mean the insurance of part of an insurer’s risk by another insurer. who accepts the risk for a mutually acceptable premium. Section 101A of the Act requires any insurer to reinsure a percentage of the sum insured on each policy which may be specified by the authority with the prior approval of the central government.

“Under these circumstances, we see no possibility of deviating from the ratio in the case of PNB Metlife (supra). Incidentally, we can note that the court also considered that the situation as a whole had no revenue impact. Either way, no question of law arises,” the court noted.

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