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Max New York Life Insurance Co. Ltd. v/s The Insurance Ombudsman & Others

    W.A.No.449 of 2011

    Decided On, 26 August 2011

    At, High Court of Kerala


    For the Petitioner: E.K. Nandakumar, A.K. Jayasankar Nambiar, K. John Mathai, P. Benny Thomas, P. Gopinath, Advocates. For the Respondents: J. Jayachandran, K.L. Narasimhan, Advocates.

Judgment Text

P.S. Gopinathan, J.

1. This appeal was preferred by the petitioner in W.P.(C).No.1024/2010 assailing the judgment dated 14.12.2010, whereby the learned Single Judge dismissed the writ petition preferred under Article 226 of the Constitution of India. There is delay of 57 days in filing the appeal. Having heard either side, the delay is condoned.

2. The appellant is a Public Limited Company engaged in Life Insurance and other activities. Responding to the offer by the appellant the 2nd respondent took a Life Insurance Policy on 30.6.2006 with 20 year Level Term Plan. Ext.P1 is the copy of the policy document. Mode of payment of premium is annual. Premium payable is Rs.4,810/-. First instalment was collected on 22.6.2006. Thereafter, in 2007 and 2008 premiums were remitted and accepted by the appellant at the above rate. Immediately before the payment of the 4th instalment of premium, the appellant issued Ext.P2 notice dated 24.5.2009 requiring the 2nd respondent to remit Rs.5305.43 of which Rs.495.43 is claimed towards service tax. By Ext.P3, the 2nd respondent objected the demand of service tax in addition to the premium. The appellant sent Ext.P4 reply stating that in addition to the premium the 2nd respondent is bound to pay 10.3% of the premium as service tax and thus the total amount would come to Rs.5305.43/-. Being not satisfied with the explanation given by the appellant, the 2nd respondent moved the 1st respondent, Insurance Ombudsman, with a complaint, copy of which is marked as Ext.P5. The appellant filed his written version, copy of which is marked as Ext.P6.

3. The 1st respondent, having heard either side and perusing the materials placed, accepted the case of the 2nd respondent. Consequently, by Ext.P7 award the 1st respondent held that the premium of Rs.4810/- per annum is inclusive of service tax payable by the 2nd respondent and directed the appellant to adjust the excess amount, if any, collected pending the proceedings before the 1st respondent.

4. Aggrieved by Ext.P7 award, the appellant preferred with Writ Petition. The learned Single Judge declined to interfere with Ext.P7 award. Consequently, the Writ Petition was dismissed. Now this appeal.

5. We have heard Adv. Sri. A.K. Jayasankar, learned senior counsel appearing for the appellant and the 2nd respondent, who appeared in person and argued the matter.

6. The vehement argument that was advanced by the learned senior counsel basing upon the decision reported in All India Federation of Tax Prayers v. Union of India, 2007 (7) STR 625 is that the appellant is a service provider and that the 2nd respondent is the service recipient and that it is the liability of the service recipient to pay the service tax and it is the duty of the service provider to collect and remit the tax. On the other hand, the 2nd respondent didn’t dispute the liability to pay the service tax. According to him, the agent of the appellant at the time of canvassing policy stated that the premium of Rs.4810/- is inclusive of service tax and other levies and it is accepting that offer the 2nd respondent took the policy. During 2007 and 2008, the same amount was accepted by the appellant and the demand made in 2009 for service tax additionally is contrary to the contract and unsustainable.

7. We have carefully gone through the pleadings of the parties before the 1st respondent as well as before this Court. In the nature of the defence we find that no question of law is involved. The liability to pay the service tax is also not in dispute. The question is whether the premium of Rs.4810/- is inclusive of tax or not. It depends upon the terms of the contract in pursuance to which Ext.P1 policy was issued. 1st respondent on a finding of facts on the basis of pleadings concluded in Ext.P7 award that the premium amount demanded and accepted by the appellant in 2006, 2007 and 2008 is inclusive of service tax. Evident by the conduct of the appellant, service tax during those three years was paid out of the collected amount. It is not in dispute that at the time when Ext.P1 policy was issued the service tax was in force. It is also not disputed that the premium fixed in between the appellant and the 2nd respondent is not based upon any basis or on any other criteria. The premium was determined by the appellant on its own taking into account of the nature of the business, viability and profit, if not huge profit. In the event the premium offered didn’t include the service tax, the appellant should have, in the normal course, disclosed the same. The fact that the appellant didn’t claim service tax till the 4th instalment persuades us to arrive at a conclusion in favour of the 2nd respondent. Therefore, the conduct of the appellant is also in support of the finding in Ext.P7 that in the given set of facts the premium accepted by the appellant for issuing policy is inclusive of service tax. Before us there is no material to arrive at a contrary finding. Going by the pleadings on record, we find that the appellant has not cared to deny the allegation of the 2nd respondent that the agent of the appellant offered the premium amount including the service tax and other levies. If the contention advanced by the 2nd respondent is not true, the appellant would have filed an affidavit of the agent, but not cared. Result is that pleading of the 2nd respondent that the model premium stated in the schedule is inclusive of tax remains uncontroverted. Such being the pleadings on record, we find that the learned Single Judge was absolutely right in holding that the conclusion of the 1st respondent in Ext.P7 award is not at all vitiated. Neither is there any jurisdictional error. On the other hand, finding is in tune with the pleadings.

8. If we take the argument of the learned senior counsel that the premium offered and accepted was excluding the service tax and the appellant had paid service tax for three years out of pocket, we find an element of unfair trade practice, in canvassing the 2nd respondent, as defined under Section 2(r)(1)(ix) of the Consumer Protection Act, 1986 which reads as follows:

“(r) “unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:-

(1) the practice of making any statement, whether orally or in writing or by visible representation which, -

(i) to (viii) omitted

(ix) materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly specified to be the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made.”

We are constrained to find so, because the policy document and premium receipts issued for the first three annual premiums do not contain a statement that premium demanded and accepted doesn’t include statutory taxes and levies. Since the tax now demanded was then in force, if the premium demanded and payable was excluding the taxes and levies it should have been fairly disclosed to the 2nd respondent, namely by stating taxes extra. It was not only done at the time of issuing policy, but also for the next two years no such disclosure was made. Multinational companies offering services to public including rural mass have a duty to disclose the real price at which the service is provided along with prevailing statutory taxes and levies. Suppression of the prevailin

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g taxes and levies would amount to material misleading concerning the price. Such misleading in turn would come within the above definition of unfair trade practice which we cannot allow, but to deprecate and condemn such greedy devices of the multinational companies in attempt to make pigmy profit exploiting the public including illiterate rural mass. Therefore, we rule that a service provider who doesn’t disclose the prevailing statutory duties and levies at the time of transaction is not entitled to claim such taxes and levies from the consumer at a later state during the course of continuing service. The learned Single Judge was right in dismissing the petition. The appeal is devoid of any merit. 9. In the result, the appeal is dismissed. The 2nd respondent is entitled to get the excess amount, if any, levied pending dispute, adjusted towards the future premiums.