2014 (1) TMI 662 - AT - Service Tax

CENVAT Credit - Service tax paid on premium of insurance policy - Whether the appellant would be eligible for Cenvat credit of the service tax paid on the premium of the above insurance policy - Held that - appellant who have obtained the accident insurance policy for the workers and paid the premium for the same and this is required to be done in terms of the provisions of the Workmen s Compensation Act, 1923. Since getting the workers, even if the contract workers, insured is the requirement of the law, insurance service has to be treated as an activity service in or in relation to the manufacture of the finished products and would be covered by definition of input service - Stay granted.

Summary

Issues:
1. Eligibility for Cenvat credit of service tax paid on the premium of the group accident insurance policy for contract workers.

Analysis:
The case involved a dispute regarding the eligibility of the appellant, a manufacturer of cement, for Cenvat credit of the service tax paid on the premium of a group accident insurance policy for contract workers supplied by labor contractors. The jurisdictional Assistant Commissioner had denied the Cenvat credit, imposing a demand and penalty. On appeal, the Commissioner (Appeals) upheld the decision, leading to the filing of the current appeal.

The appellant argued that they were required by statutory provisions to obtain the insurance policy for all workers, including contract workers, and had paid the premium along with the service tax. They contended that since obtaining insurance for workers was a legal requirement, it constituted a service availed in relation to manufacturing, making them eligible for Cenvat credit. The appellant also highlighted a previous decision where Cenvat credit for a similar service had been allowed and the Revenue's appeal against it had been dismissed, supporting their claim for eligibility.

The Departmental Representative defended the impugned order, supporting the findings of the Commissioner (Appeals). However, upon considering the submissions from both sides and reviewing the records, the judge found that the appellant had indeed obtained the accident insurance policy for the workers, including contract workers, as required by the Workmen's Compensation Act, 1923. The judge determined that insuring workers, even if they were contract workers, was a legal obligation and thus constituted an activity service related to manufacturing, falling under the definition of an input service. The judge cited a previous Tribunal decision in the appellant's favor to support this interpretation. Consequently, the impugned order denying the Cenvat credit was set aside, and the appeal was allowed in favor of the appellant.