Per Ashok Jindal The appellant is in appeal against the impugned order denying CENVAT credit taken by them.
2. Brief facts of the case are that the appellant is engaged in the business of providing General Insurance Service through out India. The head office of the appellants is located at Pune and is centrally registered with the service tax department for discharge of service tax liability on general insurance services. The appellant had appointed independent insurance auxiliary agents to promote their business. These insurance agents are providing services to the appellant and the said service is taxable under the category of insurance auxiliary services under Section 65(105)((zl) of the Finance Act, 1994. In terms of Rule 2 (1)(d)(iii) of the Service Tax Rules, 1994, the liability to pay the service tax on insurance auxiliary services has been shifted to service receiver i.e. on insurance company. Accordingly, the appellants discharge the service tax liability as a receiver of service from the insurance auxiliary agents. After paying the service tax on the said service, the appellants take CENVAT Credit of the service tax paid by them. The appellants also rendered general insurance services for the clients and assets located in the Jammu and Kashmir through its own branches located in Jammu & Kashmir. The appellants were not liable to pay service tax on the general insurance services so provided in the Jammu & Kashmir, as the provisions of the Finance Act, 1994 do not extend to Jammu and Kashmir. Therefore, the appellants were not liable to pay service tax on general insurance provided in the State of Jammu and Kashmir and therefore, the appellants are not paying service tax on the services provided by them in the State of Jammu and Kashmir. The appellants also appointed insurance agents in Jammu & Kashmir. The said agents were procuring the policies for the clients/assets located in Jammu and Kashmir. Though the services provided by the agents in Jammu and Kashmir were also not taxable, the appellants have wrongly discharged the service tax as a recipient of service and taken CENVAT Credit of the same as input service. During the course of audit, the department took objection that the appellants have wrongly availed the CENVAT Credit on service tax paid on insurance auxiliary services rendered in Jammu & Kashmir on the ground that the services are exclusively used in the State of Jammu & Kashmir on which no service tax has been discharged by the appellants. Therefore, these services have been exclusively used in providing non-taxable insurance service in State of Jammu & Kashmir. Accordingly, two show-cause notices were issued and the CENVAT Credit availed by the appellants for the service tax paid by them was denied. Aggrieved by the said order, the appellants are before us.
3. Heard both sides.
4. The learned Counsel for the appellant submits that in this case the branches located in the State of Jammu & Kashmir have received the services of insurance auxiliary agents for the policies of clients/assets located in Jammu & Kashmir only. Therefore, they are not liable to pay service tax on the said services. The service tax which was paid by them was refundable accordingly, they have taken the credit of the same. Therefore, taking credit on the service tax which was not required to be paid pay amounts to payment of CENVAT Credit wrongly availed. To support his contention the learned Counsel relied on the decision of the Honble Apex Court in the case of CIT v. Mahalakshmi Textile Mills Ltd. 1967 (66) ITR 710 (SC). He also relied on the decision in the case of Nitco Tiles Ltd. vs. CCE Mumbai 2007 (220 ELT 827 (Tri. Mum). He further submitted that the extended period of limitation is not applicable to the facts of this case, hence the impugned order should be set aside and the appeal allowed with consequential relief.
5. On the other hand, the learned A.R. appearing on behalf of the Revenue submits that in this case the insurance auxiliary service agents are located in the State of Jammu & Kashmir and provided services of procuring the policies for the clients/assets located in Jammu and Kashmir but the services received by the appellants are to be seen. Therefore, as the services have been provided in the state of Jammu and Kashmir the said services are exempt from the service tax. In that context, the service tax if at all paid by the appellant is not available as CENVAT Credit to the appellant. Therefore, the learned Commissioner has rightly denied the CENVAT Credit to the appellant. In these circumstances, the impugned order is required to be upheld.
6. Considered the submissions made by both the sides.
7. In this case the facts which are not in dispute are that the insurance auxiliary agents have provided insurance auxiliary service for the clients/assets located in the State of Jammu and Kashmir to the branches of the appellants located in Jammu and Kashmir which means the place of providing the service is Jammu and Kashmir and the service provider was located in the State of Jammu and Kashmir and the service recipient is also located in Jammu and Kashmir. To confirm the demand for a service, the place of provision of services has to be seen. The place of provision could be either one of the following:- (a) It could be place of the provider of service; (b) It could be place of recipient of service; (c) It could be place of performance of service i.e. Where the risk of insurance i.e. assets are located. 7.1 It is apparent that the place of provider and place of performance are in J & K. But the learned A.R. disputed the fact that the service recipient is the appellant and they are located in Pune. Therefore, the core issue is that whether the service was received by the appellant at Pune or not? 7.2 In CBEC Circular No.BI/6/05-TRU dated 27.7.2005 which gives the explanation regarding the fixed establishment, business establishment etc. would be as under:- This Circular claries that in cases where either the service provider or services recipient had multiple establishment, then the establishment who is directly concerned with the provision/receipt of the service will be the deciding factor. Explanation in Section 65(105) of the Finance Act, 1994 provides as under:- Explanation For the removal of doubts, it is hereby declared that where any service provided or to be provided by a person, who has established a business or has a fixed establishment from which the service is provided or to be provided, or has his permanent address or usual place of residence in a country other than India and such service is received or to be received by a person who has his place of business, fixed establishment, permanent address or as the case may be, usual place of residence, in India, such service shall be deemed to be taxable service for the purpose of this clause. 7.3 From the above said provisions, it is clear that the service provider, the branches are recipient of the services and are directly concerned with the receipt of the service. With effect from 18.4.2006, the provisions of Section 66A of the Finance Act has been introduced which is reproduced here-in under:- 66A. (1) Where any service specified in clause (105) of section 65 is (a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply: Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1. A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2.Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted. 7.4 The said provisions are not directly related to the facts of this case but concept of establishment most directly concerned with the receipt of the service will be equally applicable to the facts of this case and therefore the J & K branches are recipient of the service. 7.5 From the above discussion, it is very much clear that the insurance auxiliary services provided by the agents in the State of Jammu & Kashmir are not taxable. Therefore, the appellants are not liable to pay service tax for the said services of the insurance agents. In these terms, whatever credit is taken by the appellant is nothing but the refund of tax erroneously paid by them. Similar issue came before the Honble Supreme Court in the case of CIT v. Mahalakshmi Textile Mills Ltd. 1967 (66) ITR 710 (SC) wherein the Honble Supreme Court held that - 5. By the first question the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the departmental authorities is canvassed. Under sub-s. (4) of s.33 of the Indian IT Act, 1922, the Tribunal is competent to pass such orders on the appeal as it thinks fit. There is nothing in the IT Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal : If for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief. 7.6 We further find that in the case of Nitco Tiles Ltd. v. CCE Mumbai 2007 (220) ELT 827 (Tri. Mum), this Tribunal observed as under:- Further, the bar of unjust enrichment will also not apply in the present case. The appellants have taken credit of the tax paid by them; therefore the same cannot be said to be passed on to the customers. In these circumstances we hold that the CENVAT Credit taken by the appellant is nothing but refund of the service tax paid by them on the services on which they were not required to pay service tax.
8. With these observations, we hold that the appellant is entitled to take the CENVAT Credit in the facts and circumstances of the case. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief, if any. (Order Pronounced in open Court on..) (P.S.Pruthi) Member (Technical) (Ashok Jindal) Member (Judicial) nsk
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