2026-VIL-1640-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax – Inclusion of Insurance Premium in Taxable Value of Banking and Financial Service – Appellant, a microfinance company, facilitated group insurance coverage for borrowers, collecting insurance premium from customers and remitting the entire amount to the insurance company without any markup or retention, while separately collecting administrative charges for facilitation services - Department sought to include the entire amount collected as Insurance Income in the taxable value of appellant's Banking and Financial Service – Whether insurance premium represents consideration for service rendered by appellant or constitutes pass-through receipts excludible from taxable value – HELD – Section 67(1)(i) requires nexus between consideration received and service actually rendered. An amount that merely passes through the service provider's hands without adding to the provider's own remuneration falls outside the definition of taxable value. The principle affirmed by the Supreme Court in Union of India v. Intercontinental Consultants is that reimbursable or pass-through expenditure bearing no nexus with the service rendered cannot be brought within the measure of taxable value under Section 67 - The insurance premium collected and remitted in full by the appellant without any markup constitutes pass-through receipts not representing consideration for service rendered by the appellant. The administrative charges collected for facilitation of insurance represent the only consideration flowing to the appellant for its service and appropriately remain subject to service tax - The demand of service tax on the insurance premium component is set aside. Penalty imposed is not sustainable as no elements of fraud or wilful suppression are established. The demand concerning administrative charges remains undisturbed – The appeal is partly allowed
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GST & Customs updates: Sep'26
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