The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has exonerated a proprietorship from a significant service tax demand, clarifying that the liability rests with the insurer under the reverse charge mechanism for insurance-related commissions.
The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has set aside a service tax demand on commission income earned by a proprietorship concern from insurance-related work, holding that the tax burden lay with the insurer under the reverse charge route. According to the report on SagiInfotech, the dispute involved M/s Anindita Dutta, which had been issued a show-cause notice after receipts of ₹78.13 lakh appearing in its income tax records and Form 26AS were treated as taxable income for the period from FY 2015-16 to June 2017.
The department had demanded ₹11.56 lakh in tax, together with interest and penalties, and invoked the extended limitation period. The adjudicating authority confirmed the demand after the assessee did not reply to the notice or attend the hearing, and the Commissioner (Appeals) later upheld that view in an order dated June 11, 2024, the report said. The appellant then took the matter to the tribunal.
Before CESTAT, the assessee argued that the money was commission from ICICI Lombard for procuring insurance policies and that the liability, if any, rested with the insurer under reverse charge. The tribunal accepted that position. In doing so, it echoed a 2026 Kolkata ruling reported by Taxtmi in which the bench said tax-return data alone was not enough to sustain a service tax demand and that insurance-agent commission falls within the reverse charge framework, with the insurer liable to pay.
Member (Technical) K. Anpazhakan observed that the wording of the law makes it clear that when an insurance company pays commission to its agent, the company, not the agent, must discharge the service tax. The finding brings the case into line with other recent Kolkata bench decisions that have scrutinised demands based on indirect evidence and have rejected tax claims where the department did not first establish the exact character of the services involved. According to SagiInfotech, the tribunal therefore concluded that Anindita Dutta should not have been saddled with the tax demand.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
