2018 (12) TMI 367 - AT - Central Excise

CENVAT Credit - input services - Employees Group Insurance - Personal Accident Insurance Policies - Held that - In the appellant s own case for the period October 2007 to May 2011 the department has allowed credit. The Commissioner (Appeals) have totally disregarded this decision. Instead of analysing the reason for allowing credit on such services after 1/4/2011 the Commissioner (Appeals) has brushed aside this order stating that major part is prior to 1/4/2011. I do not think this is sufficient reason to deviate from abiding the judicial discipline. The mechanical approach to issues without application of mind increases litigations. The Hon ble High Court of Madras in the recent decision in M/s. Ganesan Builders Ltd vs CST Chennai 2018 (10) TMI 269 - MADRAS HIGH COURT has observed that when the insurance policies have been taken for compliance under the labour legislations the same are eligible for credit. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of Cenvat credit on service tax paid for insurance policies.
2. Interpretation of relevant provisions under Employees State Insurance Act, Workmen Compensation Act, and Fatal Accidents Act.
3. Consideration of past decisions and judicial discipline in allowing Cenvat credit.
4. Analysis of recent High Court decision on eligibility of insurance policies for credit.

Issue 1: Eligibility of Cenvat credit on insurance policies:
The appellants, engaged in manufacturing, availed Cenvat credit on service tax paid for Employees Group Insurance and Personal Accident Insurance Policies. The department disputed the eligibility of credit, leading to a show cause notice for recovery and penalties. The original authority allowed the credit, but the Commissioner (Appeals) disallowed it, confirming the demand while waiving the penalty. The Tribunal considered whether the appellants were entitled to avail the credit on these insurance policies.

Issue 2: Interpretation of relevant provisions:
The original authority analyzed provisions under the Employees State Insurance Act, Workmen Compensation Act, and Fatal Accidents Act. It noted that the insurance policies did not specify individual workers but covered risks at the workplace. The authority dropped the demand based on this interpretation. The Commissioner (Appeals) disregarded a previous decision allowing credit post-2011, citing the majority of the period being pre-2011. The Tribunal criticized this mechanical approach and lack of judicial discipline in the Commissioner's decision.

Issue 3: Consideration of past decisions and judicial discipline:
The Tribunal highlighted the importance of abiding by past decisions and judicial discipline. It referenced a previous order allowing credit for similar services post-2011, which the Commissioner (Appeals) overlooked. The Tribunal emphasized the need for a thorough analysis of facts and laws before reversing decisions, to avoid unnecessary litigations and ensure consistency in judgments.

Issue 4: Analysis of recent High Court decision:
The Tribunal referenced a recent High Court decision where insurance policies taken for compliance under labor legislations were deemed eligible for credit. Drawing parallels, the Tribunal found that the original authority correctly applied the law in allowing the credit based on the nature of insurance coverage. It criticized the Commissioner (Appeals) for ignoring relevant facts and laws, ultimately setting aside the impugned order and allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, allowing them to avail the Cenvat credit on the service tax paid for insurance policies, emphasizing the importance of thorough analysis, adherence to past decisions, and judicial discipline in such matters.