Official sources said that firms including Birla Sun Life Insurance, ICICI Prudential, HDFC Life Insurance, MetLife Insurance and Reliance Life Insurance Company among others have been issued summons by Directorate General of Central Excise Intelligence (DGCEI), an intelligence arm under the finance ministry.
An email query seeking response from HDFC Life Insurance, MetLife Insurance, Birla Sun Life and ICICI Prudential was not answered.
However, a Reliance Life Insurance Company spokesperson confirmed receiving a letter from the department.
We have received a letter from the DGCEI seeking some information. We understand that this is part of a process wherein the department has sought similar information from several other insurance companies.
RLIC is in full compliance with applicable laws and regulations and will be providing the required information as desired, the spokesperson said.
Preliminary probe so far has found alleged irregularities, including evasion of service tax by misrepresenting the information on accounts book and fudging records related to commission paid to field associates, agents and brokers who were selling the insurance policies, the sources said.
The notices were sent under Section 14 of the Central Excise Act 1944 to the companies, they said.
The Act empowers a central excise officer to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry being undertaken by the officer.
One of the companies was paying more commission to their brokers and field associates but avoiding payment of service tax on the amount. There were discrepancies in records of payment given to such brokers maintained by it," a source said.
The DGCEI started its discreet probe early this year and expanded it after more documentary evidences proved that the amount of evasion may be running into several hundred crores.
As per the initial investigations, the amount of evasion is at least R300 crore. The department is investigating the matter," a DGCEI official said.
All general policies including insurance against risk of loss to assets like motor vehicle etc is 12.36 per cent on the annual premium paid. Whereas, the rate of service tax varies on the part of premium taken towards risk coverage for life insurance, according to a service tax expert.
Officials said that in some of the cases companies were deducting service tax from agents who were selling their products but did not show it on their accounts book.
Whereas, there have been instances where the companies were giving incorrect data of the total policies sold or renewed by them to evade tax, the source said.
The total annual premium income of the insurance industry comprising life, non-life and health, is around R3.5 lakh crore, as per the Insurance Regulatory and Development Authority data.