Pranav B Prem

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member), has set aside a service tax demand of ₹29.90 crore raised against United India Insurance Co. Ltd., holding that a retrospective exemption granted under Section 135 of the Finance Act, 2025 rendered the levy unsustainable. The appeal arose from Order-in-Original No. 96/2018 dated 08.10.2018 passed by the Principal Commissioner of GST, Chennai, confirming service tax demand along with interest and penalty under Section 78 of the Finance Act, 1994.

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The appellant, a public sector general insurer registered with the Service Tax Department for providing general insurance services including reinsurance, was engaged in offering reinsurance services to the Agricultural Insurance Company of India Ltd. (AICIL) under the Weather Based Crop Insurance Scheme (WBCIS) and the Modified National Agricultural Insurance Scheme (MNAIS).

On the basis of investigation, the Department alleged that the appellant had not discharged appropriate service tax on reinsurance services by wrongly claiming exemption under Sl. No. 26 of Notification No. 25/2012-ST dated 20.06.2012. According to the Department, the exemption applied only to general insurance services provided directly to farmers under WBCIS or MNAIS and not to reinsurance services rendered by one insurer to another. The show cause notice dated 08.01.2018 proposed a demand of ₹46.80 crore under Section 73(1) of the Finance Act, 1994, invoking the extended period and proposing interest and penalty.

Upon adjudication, the authority dropped a portion of the demand amounting to ₹16.89 crore but confirmed the balance demand of ₹29.90 crore along with interest and penalty under Section 78, leading to the present appeal.

Before the Tribunal, the appellant contended that the entire proceedings stood vitiated by operation of law in view of the retrospective exemption introduced by Section 135 of the Finance Act, 2025. The Tribunal noted that Section 135 specifically provides that “no service tax shall be levied or collected in respect of taxable services provided or agreed to be provided by insurance companies by way of reinsurance under the Weather Based Crop Insurance Scheme and the Modified National Agricultural Insurance Scheme during the period commencing from the 1st day of April, 2011 and ending with the 30th day of June, 2017 (both days inclusive).”

The Bench observed that Parliament, by enacting Section 135, granted a clear retrospective exemption covering the period from 01.04.2011 to 30.06.2017. Since the disputed period in the present case was from 2014–15 to 2016–17, it squarely fell within the exempted period. The Tribunal held that by virtue of this statutory provision, which received Presidential assent on 29.03.2025, the levy of service tax on reinsurance services provided by the appellant to AICIL under WBCIS and MNAIS became untenable in law.

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In view of the retrospective exemption, the Tribunal concluded that the demand confirmed in the impugned order could not survive. It held that the levy itself had been nullified by operation of the subsequent legislation and therefore the Order-in-Original dated 08.10.2018 was liable to be set aside. Accordingly, the Tribunal allowed the appeal and granted consequential relief as per law.

Cause Title:  M/s. United India Insurance Co. Ltd. v. Commissioner of GST & Central Excise, Chennai North

Case No.: Service Tax Appeal No. 42768 of 2018

Coram: P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member)