2019 (5) TMI 1137 - AT - Service Tax

CENVAT credit - recovery of wrongly availed CENVAT Credit - input services - rent-a-cab service - vehicle insurance - group insurance medi-claim service - staff welfare - travel expenses - period of dispute is prior to 1.4.2011 as well as after - HELD THAT - The definition of input service prior to 1.4.2011 had a wide ambit and it included the words activities relating to business . There are several decisions of the High Courts as well as Tribunal which have consistently held that almost all the services narrated above are eligible for credit as it is availed for the business of manufacture / for providing output service - the credit availed in respect of the services prior to 1.4.2011 would be eligible. Period post 1.4.2011 - HELD THAT - The definition of input services was amended so as to include certain exclusion clauses. As per clause (B) for definition of input services, the services provided way of renting of motor vehicle would be eligible only if the vehicle is capital goods for the service provider - In the present case, there is no evidence adduced by the appellant that the renting of motor vehicle was capital goods for the service provider - the credit availed on rent-a-cab service is not eligible. Vehicle insurance - maintenance and repair of motor vehicle - HELD THAT - Clause (BA) of the definition of input services excludes general insurance service as well as repair and maintenance of motor vehicles. Therefore, as per the exclusion clause the credit availed on vehicle insurance as well as maintenance and repair of vehicle is not eligible. Health insurance / medi-claim benefit given to the employees - HELD THAT - As per the exclusion clause (C) all the services availed primarily for personal use or personal consumption of an employee is not eligible for credit - In the present case, the insurance policies are not taken under any statutory mandate. It is an incentive given to the employees. The primary and most direct beneficiary of such insurance policy is the employee and not the company or the employer whereas in the case of workmen s compensation policy or any other policy which is required to be taken under statutory mandate, the primary beneficiary is the company or the employer and not the employee - In the present case, the insurance policy is not availed under any statutory obligation and it is for the personal consumption of the employee and therefore not eligible for credit. Therefore, the credit availed on all the services after 1.4.2011 are not eligible. Penalty - HELD THAT - It can be seen that the issue whether credit is eligible on these services were under litigation for long time and interpretational one - Penalty not warranted and is required to be set aside. Appeal allowed in part.

Summary

Issues:
Recovery of wrongly availed credit of service tax on input services for air travel agency service and Business Auxiliary Service.

Analysis:
The case involved the appellants, registered service providers for air travel agency service and Business Auxiliary Service, who were issued a Show Cause Notice for the recovery of wrongly availed credit of service tax on input services amounting to ?1,28,610. The services in question included rent-a-cab service, vehicle insurance, group insurance medi-claim service, staff welfare, and travel expenses. The original authority confirmed the demand, along with interest and penalty, which was upheld by the Commissioner (Appeals), leading to the current appeal.

The appellant's counsel argued that the definition of input services before 1.4.2011 was broad, encompassing "activities relating to business," making the services availed during that period eligible for credit as they were used for providing output services. The counsel also relied on a High Court decision to support the eligibility of credit on health insurance services not for personal consumption.

The respondent's representative supported the findings of the impugned order, contending that services availed after 1.4.2011 were not eligible for credit due to exclusion clauses introduced in the definition of input services post-amendment. The respondent argued that services like vehicle insurance, maintenance, rent-a-cab, health insurance, staff welfare, and travel expenses were not eligible for credit as they were used for personal consumption.

After hearing both sides, the tribunal held that services availed before 1.4.2011 were eligible for credit as the definition of input services during that period had a broader scope. However, for services availed after 1.4.2011, the tribunal found that the credit on rent-a-cab service, vehicle insurance, maintenance, and repair of vehicles, health insurance, staff welfare, and travel expenses was not eligible due to exclusion clauses. The tribunal differentiated between services availed under statutory mandate and those for personal consumption, ruling that only services prior to 1.4.2011 were eligible for credit.

Regarding the penalty imposed, the tribunal considered the long-standing litigation and interpretational issues surrounding the eligibility of credit on the services, ultimately waiving the penalty. The impugned order was modified to allow credit only for services availed prior to 1.4.2011, and the penalty was set aside, partially allowing the appeal.