2014 (5) TMI 715 - AT - Central Excise

CENVAT Credit - Group Insurance Scheme - whether the appellant is eligible for the benefit of credit of service tax paid on Group Health Insurance Policy obtained by them in respect of their employees and their family members - Held that - Section 38 of the ESI Act requires all employees to be insured. This shows that it is not obligatory for an employer to insure that the employees family also are covered. When an employee is covered by ESI Act no doubt his family is also eligible. However it does not mean that there is a statutory obligation on an assessee to provide insurance coverage to the families of employees and Section 38 requires only employees to be covered. Therefore the submission relating to ESI Act cannot be accepted - if the credit is not admissible, the question of examination as to whether such expenditure forms cost of production does not arise. In this case after examining the definition and the relevant statutory provisions, what is seen is that the service tax paid on Group Health Insurance for the family of the employees can in no way be held to be relatable to the business of manufacture of an assessee - Matter remanded back for re quantification - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Eligibility for credit of service tax paid on Group Health Insurance Policy for employees and their family members.
2. Invocation of extended period for penalty assessment.

Analysis:

Issue 1: Eligibility for credit of service tax on Group Health Insurance Policy:
The main issue in this case was whether the appellant is entitled to the benefit of credit of service tax paid on a Group Health Insurance Policy covering both employees and their family members. The appellant argued that since the Employees State Insurance Act allows treatment for family members, they should be eligible for the credit. Additionally, they cited a decision by the Larger Bench to support their claim that if expenses are part of the cost of production, credit should be allowed. On the contrary, the respondent contended that previous Tribunal decisions specified that the credit is only available for the insurance cost attributable to employees, not their family members. The judge analyzed the arguments and found that the ESI Act does not mandate coverage for employees' families, and the service tax on insurance for family members is not related to the business of the assessee. While acknowledging the decision cited by the respondent, the judge ruled against granting the credit for insurance costs related to family members.

Issue 2: Invocation of extended period for penalty assessment:
The question of whether the extended period could be invoked for penalty assessment was raised by the appellant. The appellant pointed out that the Commissioner (Appeals) had waived the penalty under specific rules, which, according to them, negated the need for invoking the extended period. The judge agreed with this argument, stating that when the penalty under a particular section is waived, the extended period does not apply. Consequently, the demand was limited to the normal period. The appellant also argued that the entire credit had been disallowed, contrary to precedent decisions. The judge agreed that if the appellant was eligible for some credit, the demand should be limited accordingly. However, due to the lack of relevant data, the matter was remanded to the original adjudicating authority for a fresh assessment based on the identified costs and taxes. The appellant was directed to provide necessary information within a specified timeframe for re-quantification of the demand.

In conclusion, the judgment remanded the matter to the original adjudicating authority for re-quantification of the demand, limited to the normal period, based on the information provided by the appellant. Failure to furnish the required data within the stipulated time would empower the adjudicating authority to proceed with the assessment based on available information.