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2018 (11) TMI 1526 - AT - Service TaxCENVAT Credit - input service - Medical Insurance Service - period prior to 1-4-2011 - Rule 2(l) of the Cenvat Credit Rules, 2004 - Held that - Even in the case of health insurance of the workmen, when employees fall sick, it is necessary that they are provided proper treatment so that they are brought back to work without loss of man hours and disruption of manufacturing lines and the employer may take insurance for arranging proper medical attendance for sick workman or other employees of the company. Therefore, the medical insurance in relation to the employees of the company are also within the broad definition of input service given at Rule 2(l) of the Cenvat Credit Rules, 2004. The Hon ble Karnataka High Court in the matter of CCE v. Micro Labs Ltd. 2011 (6) TMI 115 - KARNATAKA HIGH COURT has held that Service Tax paid on group insurance and health insurance policy for employees is an input service on which credit can be allowed. There is no dispute about the fact that the issue in question is prior to 1.4.2011 i.e before the amendment in Rule 2(l) ibid. The definition of input service, post amendment contains exclusion clause and the said exclusion specifically excludes the life insurance/health insurance. The need for exclusion would arise only when such services are otherwise covered by the definition earlier i.e before amendment. Tribunal in the matter of M/s. Wipro Ltd. Vs. CCE, Bangalore-III 2018(4) TMI 149- CESTAT BANGALORE has observed that the legislature in its wisdom has excluded certain service from the availment of CENVAT credit w.e.f. 1.4.2011, when such service are otherwise covered by the main definition clause of the input service - Since the insurance has been specifically excluded post-amendment, this itself shows that it was included in pre-amendment period. Appeal dismissed - decided against Revenue.
Issues:
Admissibility of Cenvat Credit on "Medical Insurance Service" Analysis: 1. The Revenue filed an Appeal against the order allowing Cenvat Credit on "Medical Insurance Service" by the Commissioner (Appeals-II) CGST & Central Excise. The Revenue challenged the decision mainly based on precedents from the Hon'ble High Court of Karnataka and the Hon'ble CESTAT in a similar case involving Axis Bank Ltd. 2. The ld. Authorised Representative for the Revenue argued that the credit was wrongly allowed as the service did not meet the requirement of being "used in or in relation to the manufacture." However, the ld. Chartered Accountant for the respondent supported the decision, stating that the medical insurance was necessary for the business activities and had a direct nexus with the business operations. 3. The definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004 was crucial in determining the admissibility of the Cenvat Credit. The Tribunal emphasized that services like medical insurance for employees, which ensure proper treatment and minimize disruptions in manufacturing, fall within the broad definition of input services. 4. Precedents from the Hon'ble Karnataka High Court supported the view that services like group insurance and health insurance for employees constitute input services eligible for credit. The Tribunal noted that the Revenue did not challenge these decisions, making them binding precedents. The decision in the case of Stanzen Toyotetsu India (P) Ltd. was particularly influential. 5. The Tribunal cited its own decisions, such as the matter of Affinity Express India Pvt. Ltd. Vs. CCE, Pune-I, to reinforce the entitlement of input service credit on medical insurance. The consistent application of legal principles in various cases supported the allowance of Cenvat Credit on such services. 6. The Tribunal also referred to a recent decision involving Deloitte Support Services India Pvt. Ltd. Vs. CCE, Hyderabad-IV, where the issue of Cenvat credit on insurance services was settled in favor of the appellants based on legal precedents and established principles. The decision was upheld by the Hon'ble Andhra Pradesh High Court. 7. The Tribunal highlighted that the issue at hand pertained to a period before the relevant amendment in Rule 2(l) of the Cenvat Credit Rules, 2004. The exclusion of life insurance/health insurance post-amendment indicated that such services were initially covered by the definition of input services. The legislative intent behind the exclusion clause was significant in interpreting the admissibility of Cenvat Credit. 8. Considering the legal precedents, consistent decisions, and the legislative framework, the Tribunal rejected the Revenue's appeal, affirming the admissibility of Cenvat Credit on "Medical Insurance Service." The judgment was pronounced on 20-11-2018 by Shri Ajay Sharma, Member (Judicial) at the Appellate Tribunal CESTAT MUMBAI.
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