2013 (4) TMI 588 - AT - Central Excise

Waiver of duty , interest and penalty - Denying credit of service tax paid in respect of medical insurance covers for the families of the workmen is not in or in relation to the manufacture of the goods.- Held that - The contention of the Revenue is that for stay purpose, service tax paid in respect of mediclaim policy in respect of families of the workmen cannot qualify as an activity in or in relation to the manufacture of final product. It is also submitted that mediclaim insurance service is a welfare activity and cannot be treated as input service for the manufacture of goods. We find prima facie merit in the contention of Revenue - We find that this is not a fit case for total waiver of duty. Therefore, applicant is directed to deposit 50% of the demand within 6 weeks - On deposit of above mentioned amount, pre-deposit of remaining dues are waived - Recovery of the amount is stayed during pendency of the appeal.

Summary

Issues:
Waiver of duty, interest, and penalties based on service tax paid in relation to medical insurance policy for workmen's families.

Analysis:
The applicant sought a waiver of duty amounting to Rs. 63,65,681/- along with interest and penalties due to the denial of credit for service tax paid on medical insurance for workmen's families. The demand was upheld on the grounds that the service tax paid did not pertain to the manufacture of goods.

The applicant contended on both merit and time-bar. They argued that as per the definition of "input service," service tax paid for business activities qualifies as input service credit. Regarding time-bar, they claimed that regular monthly returns were filed, indicating the availing of credit, making the demand unsustainable.

The Revenue, however, pointed out that the service tax was indeed paid on policies for employees and their families. They argued that the service tax on mediclaim policies for workmen's families does not qualify as an activity related to manufacturing the final product. The Revenue also emphasized that mediclaim insurance is a welfare activity and cannot be considered an 'input service' for manufacturing goods.

The Commissioner (Appeals) in the impugned order specifically noted that the service tax credit availed was for policies of employees/staff and their families. Considering these facts, the Tribunal found merit in the Revenue's argument that service tax on mediclaim policies for workmen's families cannot be deemed an input service. Consequently, the Tribunal directed the applicant to deposit 50% of the demand within six weeks, with the remaining dues being waived upon this deposit. The recovery of the amount was stayed during the pendency of the appeal.

In conclusion, the Tribunal ruled that the service tax on mediclaim insurance for workmen's families did not qualify as an input service related to manufacturing goods, leading to the decision for partial waiver of duty and the stay of recovery pending the appeal process. Compliance was to be reported by a specified date.