2013 (12) TMI 147 - AT - Service Tax

Cenvat credit on input services - Credit availed for service tax paid on the insurance premium for covering the risk of the employees employed in the factory on contract basis - Held that - they have statutory obligation to take insurance to care for persons working in the factory. Even if there is no statutory obligation, they have considered it to be in their business interest to do so. Services availed for such insurance can be prima facie considered to be an input service for manufacture - Stay granted.

Summary

Issues: Cenvat credit on insurance premium for contract workers.

Analysis:
The case involved the Appellants, who are manufacturers of excisable goods, taking Cenvat credit on input services, specifically the insurance premium for contract workers in their factory. The Revenue contended that the credit was not admissible as the contract workers were not on the Appellants' rolls. This led to proceedings resulting in the demand confirmation along with penalties.

The Appellants argued citing Section 2(1) of the Factories Act, stating that contract workers in a factory are considered as workers of the factory, and factories have a responsibility to insure such workers, which they had done. They asserted that there was no justification to deny the credit.

On the other hand, the learned DR representing the Revenue argued that the responsibility of insuring contract labor did not lie with the Appellants, and the insurance was taken as a welfare measure, not a statutory obligation.

After considering the arguments from both sides, the judge, Shri Mathew John, opined that there was a statutory obligation on factories to take insurance for persons working in the factory, including contract workers. Even if not mandated by law, the Appellants had taken the insurance as a business interest. The judge found that the services availed for such insurance could be considered as an input service for manufacturing. Consequently, the judge granted a waiver of dues for admission of the appeal, and the collection of the amount was stayed during the appeal's pendency.

In conclusion, the judgment favored the Appellants, recognizing the insurance premium for contract workers as an input service eligible for Cenvat credit, based on both statutory obligations and business interests, leading to the waiver of dues and a stay on collection during the appeal process.