2018 (4) TMI 605 - AT - Service Tax

CENVAT credit - input services - Mediclaim Insurance Policy taken for their employees and their family members - Held that - The Appellant has already reversed the credit pertaining to the period after March 2011 - In case of credit availed on impugned services prior to March 2011, the credit is available on impugned services viz. Mediclaim and Health Insurance Services as held by the Hon ble High Court in the case of BNY Mellon International Operations (I) Pvt. Ltd. Versus Commissioner of Central Excise, Pune-III 2016 (12) TMI 161 - CESTAT MUMBAI . Penalty - Held that - demand prior to March 2011 set aside, penalty also not imposable - In case of penalty imposed for the period after March 2011, it is found that the credit has been reversed at the time of investigation and there is no reason to hold the Appellant guilty of any suppression or malafide intention, penalty set aside. Appeal allowed in part.

Summary

Issues:
1. Disallowance of cenvat credit on "Mediclaim Insurance Policy" as input service.
2. Imposition of penalties under the Finance Act and Cenvat Credit Rules, 2004.

Analysis:
1. The appeal was filed against the Order-in-Appeal passed by the Commissioner disallowing cenvat credit on "Mediclaim Insurance Policy" for the period 2006-07 to 2011-12. The adjudicating authority held that health insurance for employees is not an input service for the output services provided by the Appellant, leading to the recovery of credit and imposition of penalties.

2. The Appellant argued that the insurance services were used in relation to their business, making them eligible for credit. They cited judgments where similar credits were allowed and emphasized that the term "input service" encompasses all services used in relation to business activities. They also contended that even coverage of family members under the policy should qualify as an input service based on precedents.

3. The revenue supported the findings of the impugned order disallowing the credit. However, the Tribunal, after considering both sides and reviewing the records, found that the Appellant had already reversed the credit post-March 2011. They held that credit on the insurance services, including Mediclaim and Health Insurance, was allowable based on previous judgments and tribunal decisions.

4. Referring to relevant precedents, the Tribunal concluded that the Appellant was entitled to credit on the impugned services before March 2011. They set aside the demand and penalties imposed for that period. For the post-March 2011 period, where the credit had been reversed during investigation, the Tribunal found no suppression or malafide intention, leading to the setting aside of the penalty. The impugned order was modified accordingly, and the appeal was partly allowed.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's decision based on legal precedents and interpretations of relevant laws and regulations.