This writ petition is filed by the petitioner challenging the order passed by the Insurance Ombudsman, viz. the first respondent herein. The award passed by the Ombudsman has been produced as Ext.P7. The petitioner is an insurance company incorporated under the Companies Act, 1956 and is duly licensed to carry life insurance business under a valid registration certificate issued by the Insurance Regulatory Development Authority.

2. The second respondent herein is a policy holder. The policy in question is a life insurance policy. It is a twenty year level term plan and Ext.P1 is the copy of the policy document. The date of the policy is 30.6.2006 and the mode of payment of the premium amount is annual. The schedule shows that the model premium payable is Rs.4,810/-.

3. The dispute between the parties arose in the following circumstances: In terms of the policy the premium was being collected from 22.6.2006 which instalment was the first one. This amount was collected in subsequent years. By a notice dated 24.5.2009, Ext.P2, the petitioner required the second respondent to pay service tax of Rs.495.43 along with the premium amount and the net amount is shown as Rs.5,305.43. This was objected to by the second respondent by sending Ext.P3 letter after remitting the amount. The petitioner sent a further reply explaining the various aspects as per Ext.P4 stating that the premium due for base policy is Rs.5,305.45 (Rs.4810.00 + 1.03% of service tax) and the total amount due is Rs.5,305.45. Thereafter, the second respondent approached the Ombudsman by filing a complaint, a copy of which is produced as Ext.P5. The written version of the petitioner is produced as Ext.P6 and after hearing the parties, the award has been passed.

4. The view taken by the Ombudsman as evident from the award Ext.P7 is that the model premium payable is Rs.4810/-. Service tax was enforced by the Finance Act, 1994, in 2004. Therefore, even in 2004 the policy was exigible to service tax and was being paid by the insurer. It would show that the gross amount will include the service tax payable also. When the total amount is agreed as Rs.4810/-, it can only be presumed that the premium was fixed as inclusive of tax and all the expenses and hence the liability to pay tax was with the service provider.

5. Heard learned counsel for the petitioner Shri Jayasankar Nambiar, Shri S.B. Premachandra Prabhu, learned Amicus Curiae and the second respondent who appeared in person. Even though the additional third respondent, viz. the Insurance Regulatory and Development Authority was served notice, no counter affidavit has been filed.

6. Learned counsel for the petitioner submitted that Finance Act, especially Section 66 and other relevant provisions will show that it is a destination based consumption tax. Reliance is placed on the decision of the Apex Court in All India Federation of Tax Payers v. Union of India {2007 (7) STR 625) laying down the said legal position. Therefore, the same has to be passed on to the consumer. In the absence of an express provision prohibiting the passing on of the tax to the consumer, the tax can be passed on to the consumer. The same is an implied term of the contract between the parties. It is pointed out that there cannot be any estoppal against the law and the tax is sought to be collected in terms of the provisions of the Finance Act alone. In the year 2006 the Company decided not to pass on the tax liability and from 2009 onwards they took a policy decision in the matter. The tax component is sought to be collected in addition to the premium amount. My attention was invited to the proceedings of the Insurance Ombudsman, Bhubaneswar in a similar matter wherein the view taken is that the service tax liability is that of the consumer.

7. These arguments were opposed by Shri S.B. Premachandra Prabhu, by relying upon the whole concept of Life Insurance, the conditions generally adopted and the principles applicable in this regard.