2006 PLP (Trib (PTD)

This appeal is directed against the Order-in-Original No.64 of 2005, dated 4-6-2005 passed by Collector of Customs, Sales Tax and Central Excise (Adjudication), Karachi-III.

2. The brief facts which gave rise to the above appeal are that appellant has claimed to be the successor in interest of National Insurance Corporation which was formed under National Insurance Act, 1976, on 3-12-2002 it had received show-cause notice wherein it was alleged that the appellant had illegally recovered Central Excise Duty on the agent/commission on the Insurance Policies issued by the appellant for the period from 1990-1995 had retained the same whereas the same was not liable to Central Excise Duty. It was charged that the appellant had violated the law and was liable to pay Central Excise Duty total amounting to Rs.10,014,254 the additional duty and penalties.

3. The appellant had replied the show-cause notice wherein it was stated that the appellant was established under National Insurance Company Act, 1976 for the purpose of undertaking general insurance business relating to public property. They had never acted through any agent in conducting insurance business. No commission whatsoever was ever paid, therefore, there is no question of recovering Central Excise Duty from the agent/commission and retaining the same. It was explained by the appellant that it had always deducted premium discount granted to the different sector companies while calculating Central Excise Duty. It was further stated that Central Excise Duty recovered on the policies issued by the appellant was duly deposited with the national exchequer and that the show-cause notice itself barred by rule 10 of the Central Excise Rules. It was denied that any copy of any policy issued by the appellant was ever submitted nor did it suggest that the appellant was recovering Central Excise Duty on the commission. It was stated that excess calculation of amount of duty in terms of Rule 10(2) read with section 34 of the Central Excise Rules, 1944 along with leviable additional duty and the penalty equal to the amount of duty also imposed by the respondent be set aside.

4. The appeal is moved on the grounds that the appellant does not nor did have any agent nor paid any agency commission:, therefore, there is no question of recovering Central Excise Duty on such commission. There were no basis for the Collector to conclude his findings, therefore, it was prayed to hold that the show-cause notice was without any lawful basis and is barred by Rule 10 of the Central excise Rules and allow the appeal.

5. Heard Mr. Liaquat Advocate for the appellant and Mr. Arshad Mehmood Law Officer and perused the record.

6. The learned Advocate had argued that the appellant is a Government Institution and does not employ' any agents to procure business, therefore, no commission was ever paid to the agents hence Central Excise Duty is not leviable as ordered in the impugned order.

7. The allegation levelled in the show-cause notice that the Insurance Companies are legally collecting the same in the name of Central Excise Duty against the amount of commission and withholding the same. Messrs National Insurance Corporation providing insurance services and are classifiable under PTC Heading 9813.1010 and 9813.1090 respectively and are governed by section 4(3) read with Rule 96 ZZE of the Central Excise Act and Rules, 1944 and S.R.O.546(I)/96 amended by later on vide S.R.O.' 456(I)/96, dated 13th June, 1996 are chargeable to C.E. Duty 3% of the premium paid. When the insurance services came under the net of Central Excise Duty and Special Procedure for the Collection of Central Excise Duty on services provided by Insurance Companies was introduced vide Rule 96ZZE the agent's commission and discount was left deductible from Net Premium. The controversy of Rule 96ZZF and section 4(3) was washed out through Finance Act, 1993-94, through addition of a proviso in section 4(3) (a) - by virtue of which the agent's commission and discount were allowed deductible from the charges for the purpose of levy and collection of duty. This amendment remained in force up to July, 1995.

8. The charge levelled against the appellant is that during the course of examination of balance-sheet and the true copies of the policies pertaining for the period 1990-95 it was revealed that Central Excise Duty calculated and was subsequently collected on the basis of net premium without deducting the element of commission. The duty deposited after this deduction/commission amount from net premium had been collected without lawful authority and was held with the said company which. has resulted in unlawful monitory benefit. It was held that under the deliberate misconstruction of law and the amount of Central Excise Duty was not paid by the respondents while under the authority of section 4(3) read with section 3-D of the Act ibid, read with Rule 96ZZF of Central Excise Rule, 1944, it was incumbent upon them to pay the excess collected amount of Central Excise Duty totalling to Rs.10,014,

254. Therefore, the evaded amount of Central Excise Duty to the tune of Rs.10,014,254 is recoverable from the respondents in terms Of the authority of the section 4(3) read with section 3-D of the Act ibid read with Rule 96ZZF of the Central Excise Rule, 1944.

9. The Tribunal had asked Mr. Arshad Mehmood Law Officer to produce the evidence to show that the appellant had charged commission from the agents and had not paid Central Excise Duty and had caused monitory loss to the exchequer. The learned Law Officer had stated that in the balance-sheet of the company for the year, 1992 and 1995 show that the appellant had charged commission from the agents. He had produced balance-sheet for the year, 1992 and 1995 which shows that there is levy discount and agency commission to clients. The learned Law Officer had contended that National Insurance Corporation was charging commission to the agent under the said heading.

10. We do not agree with ,him because discount and agency commission to the clients, means, that the National Insurance Corporation had not hired any agent to whom agency commission was being given or charged. The Tribunal has also asked Law Officer if he could produce any policy which could have been issued by the appellant to any company through agent to which he answered that he cannot produce any. Since the appellant is a National Insurance Company a Government Institution and did not hire any agent to procure business, therefore, we are of the opinion that the directions levelled against the appellant in the show-cause notice is not warranted by law and is liable to be set aside. Appeal is allowed accordingly. M.B.A./29/Tax (Trib.)????????????????????????????????????????????????????????????? Appeal allowed.