2013 (7) TMI 495 - AT - Central Excise

Cenvat credit of service tax paid on the group insurance, life insurance and mediclaim of employees of the company Held that - As per the decision in the case of CCE & ST, LTU, Bangalore vs. Micro Labs Ltd. 2011 (6) TMI 115 - KARNATAKA HIGH COURT , Cenvat credit is available for such input services Decided in favor of Assessee. Adjudicating Authority observed that though the decision in the case of CCE & ST, LTU, Bangalore vs. Micro Labs Ltd. 2011 (6) TMI 115 - KARNATAKA HIGH COURT cover the disputed issue involved in the instant case, but the same has not been accepted by the Revenue, the same does not have any binding defect. Adjudicating Authority further agreed that the said decision of the Hon ble Karnataka High Court has not been challenged by the Revenue as the amount involved was much less Held that - The refusal of the original Adjudicating Authority to follow High Court s order on the ground that the same has not been accepted by the Revenue cannot be appreciated. Once a High Court declares a law, whether the Revenue accepts the same or not, the same is binding on the Revenue authorities unless the same is challenged by them and is set aside by the higher appellate forum. Following the law declared by High Court is not depending upon the pleasure of the Revenue officer and is required to be followed by them, in its totality Decided in favor of Assessee.

Summary

Issues:
Denial of Cenvat credit on service tax paid for insurance of employees, Applicability of High Court decisions on the issue, Observations of Adjudicating Authority and Commissioner (Appeals), Binding effect of High Court decisions on Revenue authorities.

Analysis:
The judgment addresses the issue of denial of Cenvat credit on service tax paid for insurance of employees. The Adjudicating Authority alleged that the insurance of employees cannot be considered input services, despite the appellant relying on the Hon'ble Karnataka High Court decision in a similar case. The Adjudicating Authority expanded the scope of allegations by including insurance for family members of employees, leading to the confirmation of demand and imposition of penalty, upheld by the Commissioner (Appeals).

The Tribunal reviewed the show cause notice and a letter from the appellant, clarifying that the credit of service tax was availed only for insurance premium for group insurance, mediclaim, and life insurance of company employees, not their families. The Tribunal emphasized that the Adjudicating Authority's observations were against the facts presented by the appellant.

Regarding the legal issue, the Tribunal referred to the settled law by the Hon'ble Karnataka High Court in similar cases. The Tribunal criticized the Adjudicating Authority for not following the High Court's decision, despite it being binding on Revenue authorities unless challenged and set aside by a higher appellate forum. The Tribunal emphasized that Revenue officers are required to follow High Court decisions in their entirety, regardless of the Revenue's acceptance.

Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellant. The judgment highlights the importance of following established legal precedents and the binding nature of High Court decisions on Revenue authorities, emphasizing the need for adherence to legal principles rather than individual discretion.