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2024 Supreme(Online)(Mad) 54157
IN THE HIGH COURT OF JUDICATURE AT MADRAS
JUSTICE, J
ROYAL SUNDARAM GENERATION INSURANCE COMPANY – Appellant
Versus
COMMISSIONER OF CENTRAL EXCISE – Respondent
Writ Petition | ST/40810/2017 | ST/40198/2020
For the Appellants/Petitioners: Mr. Arvind P. Datar
For the Respondents: Mr. Rajnish Pathiyil
CENVAT credit cannot be denied based on invoices from dealers who have paid service tax, as long as no dispute exists regarding the legitimacy of the tax payment.
Headnote:(A) Finance Act, 1994 - Section 77(1)(e) - Insurance Act, 1938 - Section 40(1) - CENVAT credit eligibility - The petitioners challenged the CESTAT's interim order regarding CENVAT credit on service tax paid by dealers for services not rendered, leading to split opinions among Tribunal members. (Paras 1-4)
(B) Judicial Discipline - The High Court emphasized that decisions of coordinate benches must be followed, and deviations require referral to a larger bench. (Paras 15-17)
Facts of the case:
The petitioner, a general insurance company, faced denial of CENVAT credit based on allegations that dealers were not authorized to solicit insurance business, leading to a dispute over the legitimacy of invoices and services rendered.
Findings of Court:
The prejudicial portion of the CESTAT's order was quashed, affirming the petitioner's right to CENVAT credit based on accepted service tax payments.
Issues: The main issues included the validity of the denial of CENVAT credit and whether the Tribunal's split opinion warranted referral to a third member.
Ratio Decidendi: The court ruled that the CESTAT's decision to deny credit was unjustified as it contradicted established judicial principles requiring adherence to prior coordinate bench decisions.
Result: Writ petitions allowed.
| Table of Content |
|---|
| 1. background of insurance service agreements. (Para 2) |
| 2. arguments regarding cenvat credit eligibility. (Para 3 , 4) |
| 3. split verdict in cestat. (Para 5 , 6) |
| 4. petitioner's challenge to tribunal's findings. (Para 7 , 8) |
| 5. department's stance on appeal maintainability. (Para 9 , 10) |
| 6. cenvat credit cases referenced. (Para 11 , 12 , 13) |
| 7. judicial discipline and precedents. (Para 14 , 15 , 16) |
| 8. final decision quashing prejudicial order. (Para 17) |
THE ACTING CHIEF JUSTICE
Both the writ petitions are filed by M/s. Royal Sundaram General Insurance Company Limited, Chennai questioning the validity and/or correctness of the order dated 25.07.2023 passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai, (in short, “the CESTAT”) in Interim Order Nos.40007 – 40008/2023 in Appeal Nos. ST/40810/2017 and ST/40198/2020, to the extent it is prejudicial to them. For ease of reference, the operative portion of the order impugned herein, is reproduced below:
DIFFERENCE OF OPINION
In view of the difference of opinion between the Members, the following questions are framed for resolving the difference:-
Whether the appeals is to be allowed by setting aside the impugned orders as held by Member (Judicial)?
(OR)
Whether the appeals is to be dismissed by upholding the impugned orders as held by Member (Technical)?
BRIEF FACTS:
2.(i) The petitioner is engaged in the business of providing general insurance services relating to Motor Insurance, Health Insurance, Property Insurance, Engineering Insurance, liability insurance and other miscellaneous insurance and it was registered with the Service Tax Department under Registration No.AABCR7106GST001. The petitioner is carrying on such business from 2001 and they also registered themselves with Insurance Regulatory Development Authority of India (IRDAI) to conduct business of general insurance.
(ii) According to the petitioner, during the course of their business, they have entered into facilitating agreements with various automobile manufacturers and dealers, who, at the time of sale of automobiles, through their established dealer network, assist the buyers of such automobiles to obtain motor insurance. In that context, the dealers of the automobiles are considered as the first point of contact with the buyers of motor vehicles and also motor insurance. The petitioner offered to their customers, insurance services through their automobile manufacturers/dealers as per the agreements entered into with them. Apart from facilitation agreements, the petitioner also entered into Service Provider Agreements with the dealers and availed the services of the dealers. In certain instances, tripartite agreements have been entered into with automobile manufacturers and infrastructure service providers. For taxation purpose, the dealers declared those infrastructure support service as taxable service and remitted service tax. For several years, the payment of tax by the dealers has been accepted by the first respondent and no proceedings have been initiated under Section 77 (1) (e) of the Finance Act , 1994 in respect of any discrepancy.
(iii) While so, on the basis of an alleged investigation conducted by the officers of the Chennai Zonal Unit, an issue was raised in relation to the eligibility of the petitioner to avail Central Value Added Tax (CENVAT) credit on service tax charged by the dealers on the infrastructure services provided in respect of motor insurance policies. As per the investigation conducted by the Chennai Zonal Unit, the dealers of motor vehicles not being Agents/Brokers/Intermediaries of Insurance Companies, are neither permitted to do insurance business nor to receive commission. However, the dealers have been soliciting business of insurance on behalf of the petitioner, while selling the vehicles to their customers. For this purpose, the petitioner pays commission to the dealers for soliciting insurance business on their behalf, which is prohibited under the Insurance A
