KERALA STATE INSURANCE DEPARTMENT HOUSING BOARD BUILDING TRIVANDRUM Vs. UNION OF INDIA REPRESENTED BY SECRETARY MINISTRY OF FINANCE DEPARTMENT OF REVENUE GOVERNMENT OF INDIA NORTH BLOCK NEW DELHI

JUDGEMENT

(1.) Both these writ petitions have been filed by the Kerala State Insurance Department of the State. It involves a common issue, as to whether the petitioner, a Department of the Govt. of Kerala, established for providing 'Life Insurance' coverage to the State Government employees, as provided under Rule 22A of Part I KSR and also for providing General Insurance coverage for the assets of the Government/Governmental Institutions, is liable to pay 'service tax', treating such insurance as 'taxable service'. Contention is that the petitioner is not rendering any 'taxable service' having been excluded from the purview of any such activity governing 'life insurance' by virtue of the 'exclusion' under Section 44(f) of the Life Insurance Corporation Act, 1956 (LIC Act in short) and 'exemption' under Section 36(1)(a) of the General Insurance Business (Nationalisation) Act, 1972. The parties and proceedings are referred to, as arrayed in W.P. (C) No. 15892 of 2008, treating the same as the lead case. The case of the petitioner/State Insurance Department is that their constitution and existence is only in discharge of the duties cast upon them, by virtue of the statutory obligations, giving 'life insurance' protection to the employees of the State, in tune with the mandate of Rule 22A of Part I KSR and so also to insure the assets of the Government/Governmental Institutions, which constitutes public property. It is also stated that this is being pursued in continuation of the Scheme which was in existence for quite long, even prior to the enactment of the LIC Act, 1956 and the General Insurance Business (Nationalisation) Act, 1972. It is for this reason that, exemption/exclusion has been provided for the 'Life Insurance' coverage provided by the petitioner to the State Government employees, as specifically provided under Section 44(f) of the LIC Act and the public property coverage exempted under Section 36(1)(a) of the General Insurance Business (Nationalisation) Act. Absolutely no business is being done by the petitioner/Government Department, but for meeting the obligation as above and hence there is no 'taxable service', as contemplated under Section 65(12) of the Finance Act, 1994 to be mulcted with any liability. Still, the petitioner had submitted an application for registration and got registered, as provided under the Finance Act, 1994 and has been effecting 'service tax' in respect of the 'General Insurance' sector.

(2.) While so, the petitioner was served with a notice by the respondents, referring to some shortfall in the figures shown in the quarterly/yearly returns. According to the respondents, the petitioner was liable to pay 'service tax' in respect of the 'Life Insurance' segment as well. Inspite of explaining the position, an order was passed by the concerned assessing officer on 19-11-2001, fixing huge liability, which was subjected to challenge before the First Appellate authority, i.e., the second respondent.

(3.) After considering the appeal, the First Appellate authority passed Ext. P1 order on 30-7-2003, remanding the case for fresh assessment; deleting the 'penalty' imposed. The petitioner was directed to produce all the relevant documents before the concerned authority. On receipt of Ext. P1 order on 4-8-2003, the petitioner produced the documents and records before the 4th respondent/adjudicating authority, though no official receipt was given in this regard. Nothing transpired thereafter for quite long and the petitioner continued to file statutory returns and make remittance of 'service tax', to the extent it was considered as payable.