2018 (7) TMI 1218 - AT - Service Tax

CENVAT Credit - whether the appellants would be eligible for availing credit on tax paid on repair service provided by Authorized Service Station to insured vehicles? - Held that - The very issue was addressed by this CESTAT Chennai in the case of United India Insurance Co. Ltd. Vs CCE & ST LTU, Chennai 2018 (6) TMI 200 - CESTAT CHENNAI , where it was held that The general insurance service provided by the appellant basically insures the vehicle against damages. It is obvious that such service can be provided to the customer ie., owners of the vehicle only by way of reimbursement of the repair charges. The service tax paid on the bill of the ASS is to be considered as falling within the definition of the input service which is used for providing the output service of the vehicle insurance. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Eligibility for availing credit on tax paid on repair service provided by an Authorized Service Station to insured vehicles.

Analysis:
The issue at hand revolves around the eligibility of the appellants to avail credit on tax paid for repair services provided by an Authorized Service Station (ASS) to insured vehicles. The CESTAT Chennai referred to a previous case involving United India Insurance Co. Ltd. to establish a precedent. The dispute primarily focuses on whether the tax paid on repair services can be considered as an input service under the CCR, 2004. The definition of input service under Rule 2(l) entails any service used by a taxable service provider for offering an output service. In this context, the output service provided by the appellant is general insurance service. The question arises as to whether the tax paid to the ASS for repair services can be deemed as a service utilized for delivering the output service. The adjudicating authority had deliberated on the recipient of the service, emphasizing that the service was provided by the ASS to the vehicle owner through repairs. However, the CESTAT Chennai opined that the insurance service offered by the appellant essentially indemnifies the vehicle against damages, which is facilitated through reimbursement of repair charges to the owners. Consequently, the service tax paid to the ASS was deemed to fall within the ambit of input service essential for providing the output service of vehicle insurance.

Moreover, the appellant's reliance on a previous Tribunal decision and a TRU Circular further supported their claim for Cenvat credit. The Tribunal's distinction between the beneficiary and recipient of a service was pivotal in determining that the appellant, despite not being the direct beneficiary, qualifies as the recipient of the service provided by the ASS. Additionally, the TRU Circular, although pertaining to health insurance services, was deemed relevant in affirming the appellant's entitlement to Cenvat credit as the service receiver. The Revenue's contention regarding the invoices issued by the ASS in favor of the vehicle owners, rather than the appellant, was addressed by acknowledging it as a procedural irregularity that should not impede the appellants' eligibility for credit. The CESTAT Chennai concluded that the denial of credit based on the invoice recipient would be unjustifiable, given that the appellant restricted their credit availed to the portion of the repair bill reimbursed to the owners. Consequently, the impugned orders were set aside, and the appeals were allowed with any consequential benefits as per the law.