2025-VIL-941-CESTAT-CHE-ST

SERVICE TAX CESTAT Cases

Service Tax - Insurance Auxiliary Services, Overriding Commission, Availment of CENVAT Credit - In the course of their business, the assessee would procure various services from insurance agents and pay them commission under the Reverse Charge Mechanism (RCM) for 'Insurance Auxiliary Services' (IAS). Apart from the IAS, the insurance agents charged the assessee separately for providing operating space, computers, database, and reimbursement of marketing expenses, which the assessee termed as 'Overriding Commission' (ORC). The assessee has availed CENVAT credit on the payments made to the insurance agents, which was sought to be denied and recovered by the department along with interest and penalty - Whether the payments made by the assessee to the insurance agents for services such as providing operating space, computers, database, and reimbursement of marketing expenses, termed as 'Overriding Commission' (ORC), are liable to service tax under the category of 'Insurance Auxiliary Services' (IAS) under the Reverse Charge Mechanism - HELD - The services provided by the insurance agents, as per the referral agreement, are in relation to the general insurance business of the assessee and should be classified as 'Insurance Auxiliary Services' under RCM and not as 'Business Auxiliary Services'. The payments made by the assessee to the agents were in the nature of commission or other remuneration for soliciting or procuring insurance business, and not for the provision of other services such as operating space, computers, or marketing expenses - the assessee's act of availing CENVAT credit on the basis of self-generated invoices, instead of invoices issued by the service providers, was in violation of the CENVAT Credit Rules, 2004, and the credit was rightly denied by the Department – The demand for service tax under RCM on the 'Overriding Commission' paid by the assessee to the insurance agents and the denial of CENVAT credit on the basis of self-generated invoices are upheld – The appeal is disposed of - Whether the assessee's act of availing CENVAT credit on the basis of self-generated invoices was in violation of the CENVAT Credit Rules, 2004 - HELD - The assessee's act of availing CENVAT credit on the basis of self-generated invoices, instead of invoices issued by the service providers, was in violation of the CENVAT Credit Rules, 2004. The statutory provisions require the recipient of the service to satisfy the proper officer regarding the admissibility of the credit, as per the proviso to Rule 9(2) of the CENVAT Credit Rules, 2004. The principles laid down by the Supreme Court in the case of The State of Karnataka Vs M/s Ecom Gill Coffee Trading Private Limited, is that the burden of proving the correctness of the CENVAT credit claimed lies on the output service provider, and mere production of invoices and payment by cheque is not sufficient to discharge this burden - Denial of CENVAT credit on the basis of self-generated invoices by the assessee is upheld

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