2016 (6) TMI 676 - AT - Service Tax

Refund - accumulated Cenvat Credit - export of services - Rule 5 of the Cenvat Credit Rules 2004 eligibility of input services - Held that - The insurance of dependants of the employees cannot be considered to be having nexus with providing output services by the appellant - the insurance services availed by appellant for dependants/family members does not qualify as input service. Refund on various input services allowed expect Insurance Services of dependants of the employees - decided partly in favor of assessee.

Summary

Issues:
Refund claim rejection under Rule 5 of Cenvat Credit Rules 2004 for accumulated credit; Denial of credit on various services due to lack of nexus with output service; Eligibility of insurance services as input services; Quantification of eligible credit for insurance services; Refund of credit on services other than insurance services.

Analysis:
The appellants filed a refund claim under Rule 5 of the Cenvat Credit Rules 2004, seeking a refund of accumulated Cenvat Credit. The claim was rejected as the authorities found no nexus between certain input services and the output services exported without payment of service tax. The Commissioner (Appeals) upheld the denial of credit on various services, leading to the current appeal.

The main contention revolved around the eligibility of insurance services as input services. The AR argued that the insurance services availed by the appellant covered not only employees but also their dependents, making it ineligible as an input service. The tribunal, referring to precedents, highlighted that insurance for dependents does not have a nexus with providing output services. Therefore, while the insurance services for employees were deemed eligible for credit, those for dependents were not. The matter was remanded for quantification of credit eligible for insurance services of employees only.

Regarding the remaining services listed in a detailed table, the tribunal relied on various judgments such as KPMG Vs CCE and CST, Bangalore Vs Mercedes Benz Research & Development India, among others. It was concluded that the refund of credit on all services, except insurance services, was eligible as input services. Consequently, the refund of credit for services other than insurance services was allowed.

In conclusion, the impugned order was modified to allow the refund of credit for service tax paid on all services except insurance services. The issue of refund for insurance services was remanded for quantification of eligible credit on service tax paid for employees' insurance. The appeal was partly allowed in favor of the appellant.