2018 (10) TMI 93 - AT - Service Tax

Cash refund of accumulated CENVAT Credit - export of output services - input services namely, Group Mediclaim Top-up Policy - Rule 5 of the CENVAT Credit Rules, 2004 - Held that - There is no dispute of the fact that the top-up Mediclaim policy is in addition to the regular Mediclaim policy extended by the appellant to its employee and the amount of Service Tax has been paid by the appellant on the premium amount of the top-up policy. Learned AR for the Revenue has disputed the fact that nowhere in the impugned order it is stated that the appellant had not collected the Service Tax amount along with the premium of the top-up policy from the respective employees. For the limited purpose of verification of the fact whether the amount of service Tax claimed as credit by the appellant has been recovered from their employees, the matter is remanded to the adjudicating authority - appeal allowed by way of remand.

Summary

Issues:
1. Admissibility of cash refund of accumulated CENVAT Credit relating to Service Tax paid on input services.
2. Interpretation of Circular issued by the CBE&C regarding the treatment of supplies made by the employer to employees.

Analysis:
1. The appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise & Service Tax. The dispute revolved around the admissibility of cash refund of accumulated CENVAT Credit related to Service Tax paid on input services, specifically the Group Mediclaim Top-up Policy. The appellant contended that the Service Tax paid on the top-up policy should be admissible as credit based on a Circular issued by the CBE&C. The appellant argued that the top-up policy was provided as support service to the employee and, therefore, should be eligible for credit. The Commissioner (Appeals) had remanded the matter for verification of invoices and documents, but later erred in precluding the appellant from raising the issue again in the second round of litigation. The Tribunal found that the top-up policy was indeed in addition to the regular Mediclaim policy, and remanded the case to verify if the Service Tax amount claimed as credit was recovered from the employees.

2. The second issue involved interpreting the Circular issued by the CBE&C regarding the treatment of supplies made by the employer to employees. The Circular clarified that activities provided by the employer to employees for consideration are liable to tax. It specified that where employees pay for such services or where amounts are deducted from their salary, there is no doubt regarding the consideration. The Circular also addressed situations where services are provided against a portion of the salary foregone by the employee. It emphasized that CENVAT credit for inputs and input services used to provide such services would be eligible under existing rules. The Circular highlighted that such goods or services should not be construed for personal use of an employee but as part of the taxable service provided to them. In the case at hand, the Tribunal found that the top-up Mediclaim policy was indeed provided as a service to the employees, and the payment of Service Tax on the premium amount was a key consideration. The matter was remanded to verify if the Service Tax amount claimed as credit was recovered from the employees.

In conclusion, the Tribunal allowed the appeal by way of remand, emphasizing the need for further verification regarding the recovery of Service Tax from the employees.