2019 (1) TMI 1815 - AT - Service Tax

CENVAT Credit - input services - life/health insurance used/utilized for the benefit of the employees - HELD THAT - The definition of input service contained in Rule 2 (l) ibid was substituted vide Notification No. 3/2011 C.E. (N.T.), dated 01.03.2011 w.e.f. 01.04.2011. Under the substituted rule, services used by a provider of output service was recognized as input service for the purpose of taking of Cenvat credit of the service tax paid thereon. However, in the said definition clause, exclusions were provided with regard to certain services, on which service tax paid cannot be treated as input service. Clause (C) in the definition of input service has excluded life insurance service, when the same are used/utilized primarily for personal use or consumption of any employee. The nature of use of the disputed service has not been properly dealt with by the authorities below. Since, the definition on input service clearly excludes life insurance from its purview, when used for the personal benefit of the employee, in absence of ascertainment of actual use, it is difficult to address the issue in hand, whether the credit should be extended or not. The matter is required to be examined at the original level for correct appreciation with regard to fulfilment of the requirement of the above statutory provision - Appeal allowed by way of remand.

Summary

Issues:
1. Whether the life/health insurance service used for the benefit of employees qualifies as an 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis:
The appeals were filed against the order of the Commissioner (Appeals) where the appellant's claims for Cenvat benefit on service tax paid for life/health insurance for employees were rejected. The appellant argued that since they bore the premium cost, the service tax should be eligible for Cenvat credit. The appellant cited various tribunal decisions and circulars to support their case. On the contrary, the Revenue contended that the insurance payment was for employee benefit, not business purposes, and Rule 9 of the Cenvat Credit Rules was not complied with. The Revenue relied on tribunal decisions to justify the denial of Cenvat benefit.

The Tribunal noted that the definition of 'input service' excludes life insurance used for personal employee benefit. As the actual use of the service was not properly determined, the Tribunal found it challenging to decide on extending the credit. The Tribunal emphasized the need for a thorough examination at the original level to determine compliance with statutory provisions. Consequently, the impugned order was set aside, and the matter was remanded to the adjudicating authority for a fresh review. The original authority was instructed to consider relevant provisions, tribunal decisions, and CBEC circulars before deciding on the service's classification as an input service. The appellant was to be granted a personal hearing during the fresh adjudication.

In conclusion, the appeals were allowed by way of remand for a detailed reassessment of whether the disputed service qualified as an input service under the Cenvat Credit Rules, emphasizing the importance of proper evaluation and compliance with statutory provisions.