Facts of the Case

The petitioner, M/s The Oriental Insurance Company Limited, filed a writ petition challenging the Show Cause Notice dated 27.09.2023, the Order-in-Original dated 29.12.2023 passed by the Additional Commissioner, CGST Delhi North, and the Order-in-Appeal dated 11.07.2024 passed by the Commissioner (Appeals-I), CGST Delhi. The dispute related to levy of GST on reinsurance services availed by the petitioner for the period from 01.07.2017 to 24.01.2018.

The Revenue’s case was that reinsurance services availed by the petitioner were liable to GST during the relevant period, as the exemption under Notification No. 12/2017-Central Tax (Rate) did not explicitly cover reinsurance of certain insurance schemes until 25.01.2018. The petitioner contended that reinsurance services relating to exempt insurance schemes were not intended to be taxed and that subsequent amendments and clarifications were curative in nature.

During pendency of the proceedings, the GST Council in its 53rd Meeting held on 22.06.2024 recommended regularisation of GST liability on reinsurance services of specified insurance schemes for the period 01.07.2017 to 24.01.2018 on an “as is where is” basis. Pursuant thereto, Circular No. 228/22/2024-GST dated 15.07.2024 was issued.

Issues Involved

Whether GST was leviable on reinsurance services availed in respect of specified insurance schemes for the period from 01.07.2017 to 24.01.2018, whether adjudication orders passed prior to issuance of Circular No. 228/22/2024-GST could survive after such clarification, and whether the petitioner was entitled to benefit of the circular despite the orders having been passed earlier.

Petitioner’s Arguments

The petitioner argued that reinsurance services relating to insurance schemes exempt under Notification No. 12/2017-Central Tax (Rate) were not intended to be taxed even prior to 25.01.2018 and that subsequent amendments and the circular merely clarified the original intent. Reliance was placed on the decision of the Delhi High Court in AXA France Vie-India vs Union of India & Ors., wherein similar demands were set aside in view of the GST Council’s decision and the clarificatory circular. It was contended that denial of benefit of the circular merely because the adjudication orders were passed earlier would be arbitrary and unsustainable.

Respondent’s Arguments

The Revenue submitted that the Order-in-Original and Order-in-Appeal were passed prior to issuance of Circular No. 228/22/2024-GST and therefore the benefit of the circular could not automatically be extended to the petitioner. It was contended that the tax demand was valid as per the legal position prevailing at the time of passing of the orders.

Court Order / Findings

The Delhi High Court examined the recommendations of the GST Council in its 53rd Meeting and the clarificatory Circular No. 228/22/2024-GST dated 15.07.2024. The Court observed that the GST Council had consciously decided to regularise the GST liability on reinsurance services for the period from 01.07.2017 to 24.01.2018 on an “as is where is” basis. The Court relied upon the judgment in AXA France Vie-India vs Union of India & Ors., holding that adjudication orders passed prior to issuance of the circular could not survive in light of the subsequent clarification reflecting the true legislative and executive intent.

The Court held that merely because the Order-in-Original dated 29.12.2023 and the Order-in-Appeal dated 11.07.2024 were passed before issuance of the circular, the benefit thereof could not be denied to the petitioner. The circular was held to be squarely applicable to the petitioner’s case.

Important Clarification

The High Court clarified that clarificatory circulars issued pursuant to recommendations of the GST Council must be applied to pending and decided matters relating to the covered period, as they reflect the correct position of law. Orders inconsistent with such clarifications cannot be sustained merely on the ground of having been passed earlier.

Final Outcome

The writ petition was allowed. The Show Cause Notice dated 27.09.2023, the Order-in-Original dated 29.12.2023, and the Order-in-Appeal dated 11.07.2024 were set aside. The benefit of Circular No. 228/22/2024-GST dated 15.07.2024 was extended to the petitioner for the period from 01.07.2017 to 24.01.2018. All pending applications, if any, were disposed of accordingly.

Source Link- https://delhihighcourt.nic.in/app/showFileJudgment/PMS26092025CW101712025_191924.pdf

 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.