2016 (7) TMI 1174 - AT - Service Tax

Refund of unutilized cenvat credit - export of services - input services - service tax paid on the premium charged on group insurance scheme - Held that - it appears that tax paid on insurance premium is eligible for availment as CENVAT Credit and the short-point for determination is the extent to which the premium does not relate to coverage of employees under the group insurance scheme. In the instant case, the appellant is charged with a premium which does not vary with the number of dependents who are additionally covered by the same insurance scheme. In other words, even if none of the dependents were within the coverage, the premium amount would not alter or vary. Accordingly no part of the premium can clearly be distinguishable as or attributable to the extension of coverage to family members. - Credit allowed - Decided in favor of assessee.

Summary

Issues:

1. Refund of accumulated credit under CENVAT Credit Rules, 2004 for service tax paid on group insurance premium.
2. Interpretation of input service in relation to services directly utilized in the manufacture of output or rendering output service.

Analysis:

Issue 1: Refund of accumulated credit under CENVAT Credit Rules, 2004 for service tax paid on group insurance premium

The appellant, an exporter of services registered under the Finance Act, 1994, sought a refund of accumulated credit for service tax paid on the premium charged on a group insurance scheme. The original authority partially allowed the refund but rejected a portion related to the premium covering family members, arguing it was not entirely for the purpose of rendering output service. The Commissioner (Appeals) upheld this decision. The appellant contended that the premium paid for the insurance scheme was entirely for business purposes, as the total premium payable for the employee pool would remain the same even without family members. The Tribunal referred to a previous decision and held that the appellant was entitled to take credit for the service tax paid on the insurance premium, as it was an eligible input service. The Tribunal found that no part of the premium could be attributed to the extension of coverage to family members, leading to the allowance of the appeal with a refund of the accumulated credit.

Issue 2: Interpretation of input service in relation to services directly utilized in the manufacture of output or rendering output service

The Authorized Representative argued that the credit of input service could only be availed if directly related to services used in manufacturing output or rendering output service. Citing previous Tribunal decisions, the Representative contended that credit could not be claimed on the insurance premium attributable to the coverage of family members of employees. However, the Tribunal determined that the premium charged did not vary with the number of dependents covered, indicating that no part of the premium could be attributed to the extension of coverage to family members. The Tribunal's decision was in favor of the appellant, allowing the refund of the accumulated credit. The judgment emphasized the eligibility of tax paid on insurance premium for CENVAT Credit, provided it was not related to coverage of family members, aligning with the appellant's argument and the decision cited in support of the appeal.