Page 104 - GSTL_7th May 2020_Vol 36_Part 1

62 GST LAW TIMES [ Vol. 36

2020 (36) G.S.T.L. 62 (Tri. - Del.)
IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI
[COURT NO. II]
S/Shri Anil Choudhary, Member (J) and Bijay Kumar, Member (T)
MAX LIFE INSURANCE CO. INDIA LTD.
Versus
COMMR. OF C.E. & S.T., LTU, NEW DELHI

Final Order No. ST/A/51097/2019-CU(DB), dated 21-8-2019 in Appeal
No. ST/54356/2015-CU(DB)
Surrender charges for Insurance plan - Demand - Management of In-
vestment under Unit Linked Insurance Plan (ULIP) Service - Taxability of sur-
render charges deducted from fund value, as per policy provisions for pre-
mature withdrawal from scheme - HELD : Surrender charges permitted to be
levied by Insurance Regulatory and Development Authority (IRDA), by way
of penal charges towards recovery of initial expenses incurred by insurer in
marketing and distribution of policy - As IRDA fixed limits as to recovery, to
be made from time to time from initial cost, accordingly, IRDA permitted to
recover surrender charges in case of premature policy, so as to enable insurer
to recoup cost incurred - Substitution of clause (ii) in Explanation to Section
65(105)(zzzzf) of Finance Act, 1994 clarifying that Service Tax leviable only on
management fee or charges either fixed by IRDA or actually levied by insurer,
whichever is higher - Explanation meant for clarifying provision of main sec-
tion and accordingly having retrospective effect - Service Tax not leviable on
surrender charges - Section 65(105)(zzzzf) of Finance Act, 1994. [para 31]
Demand - Life Insurance service - Surrender charges, liability to Ser-
vice Tax for period 2011-12 - HELD : No substantial change in provisions of
Section 65(105)(zzzzf) read with Section 65(105)(zx) of Finance Act, 1994 for
impugned period - C.B.E. & C. Letter D.O.F. No. 334/1/2010-TRU, dated
26-2-2010, clarifying that charge pertaining to asset management alone to form
value for taxation in case of ULIP policy - No Service Tax can be leviable for
impugned period as surrender charges towards renting of service being penal-
ty - Impugned order set aside - Section 65(105)(zzzzf) read with Section
65(105)(zx) of Finance Act, 1994. [para 32]
Appeal allowed
CASES CITED
C.K.P. Mandal v. Commissioner — 2006 (4) S.T.R. 183 (Bom.) — Relied on ................................... [Para 20]
Housing & Development Corporation Ltd. v. Commissioner
— 2012 (26) S.T.R. 531 (Tribunal) — Referred ........................................................................... [Para 28]
Reliance Life Insurance Company Ltd. v. Commissioner
— 2018 (19) G.S.T.L. J66 (Tri. - Mumbai) — Referred ............................................................... [Para 15]
Small Industries Development Bank of India v. Commissioner
— 2015 (38) S.T.R. 666 (Tribunal) — Referred ........................................................................... [Para 30]
Sriram Life Insurance Company v. Commissioner
— 2019 (31) G.S.T.L. 442 (Tribunal) — Referred ........................................................................ [Para 15]
DEPARTMENTAL CLARIFICATIONS CITED
I.R.D.A. Circular No. 032/IRDA/Act-1/Dec-2005, dated 21-12-2005 ............................................ [Para 12]
GST LAW TIMES  7th May 2020  104