February 20, 2026 : In a significant ruling, the Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a service tax demand of ₹29.90 crore raised against United India Insurance Co. Ltd., holding that a retrospective exemption introduced by Parliament 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, which had confirmed service tax demand along with interest and penalty under Section 78 of the Finance Act, 1994. The adjudicating authority had confirmed ₹29.90 crore out of the proposed ₹46.80 crore demand.
Background of the Dispute
United India Insurance, a public sector general insurer registered under the Service Tax regime, was providing reinsurance services to the Agricultural Insurance Company of India Ltd. (AICIL) under:
- Weather Based Crop Insurance Scheme (WBCIS)
- Modified National Agricultural Insurance Scheme (MNAIS)
The Department alleged that the company wrongly claimed 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 and not to reinsurance services rendered by one insurer to another.
A 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 along with interest and penalty. While ₹16.89 crore was dropped during adjudication, the remaining ₹29.90 crore was confirmed.
Retrospective Exemption Under Finance Act, 2025
During the pendency of the appeal, Parliament enacted Section 135 of the Finance Act, 2025, granting retrospective exemption to reinsurance services provided by insurance companies under WBCIS and MNAIS for the period from 01.04.2011 to 30.06.2017.
The Tribunal noted that the disputed period in the present case was 2014–15 to 2016–17, which squarely fell within the exempted window. The statutory provision received Presidential assent on 29.03.2025.
Quoting Section 135, the Bench recorded 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 WBCIS and MNAIS during the specified period.
The Tribunal held that once the levy itself stood nullified by retrospective legislation, the confirmed demand could not survive.
Tribunal’s Findings
The Bench comprising:
- P. Dinesha (Judicial Member)
- Vasa Seshagiri Rao (Technical Member)
observed that the demand had become legally untenable by operation of law. It ruled that the Order-in-Original dated 08.10.2018 was liable to be set aside. Accordingly, the appeal was allowed with consequential relief as per law.
Case Details
Case 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
Final Order No.: 40274/2026
Date of Decision: 19.02.2026
