2019 (6) TMI 66 - AT - Central Excise

CENVAT Credit - input services - Insurance on Public liability/Staff - Workmen compensation and Membership fee paid to various associations etc. - denial on account of nexus - period involved is after the amendment in the definition of input service - HELD THAT - The only ground which the learned consultant for the appellant has taken to justify the availment of cenvat credit on Medi-claim Policy for Employees and Group Personal Accident Insurance Policy is that the appellant is statutorily required to take the said policy under various Labour Laws - I find that this argument of the learned consultant has no force in view of the exclusion clause provided in the definition of input service w.e.f. 01.04.2011. These services prior to 01.04.2011 have been held to be covered by the definition of input service . The Legislature in its wisdom has excluded certain services from the availment of cenvat credit w.e.f. 01.04.2011 when such services are otherwise covered by the main definition of the input service . Penalty - HELD THAT - The issue involved in the present case relates to interpretation of the definition of input service and therefore the imposition of penalty of ₹ 83,000/- under Rule 15(1) of the Cenvat Credit Rules is not justified - Penalty set aside. Demand upheld - penalty set aside - appeal allowed in part.

Summary

Issues Involved:
1. Eligibility of Cenvat credit on Medi-claim Policy for employees and Group Personal Accident Insurance Policy.
2. Imposition of penalty under Rule 15(1) of the Cenvat Credit Rules, 2004.

Issue-wise Detailed Analysis:

1. Eligibility of Cenvat credit on Medi-claim Policy for employees and Group Personal Accident Insurance Policy:

The core issue in this case is whether the appellant is entitled to avail Cenvat credit on input services relating to Medi-claim Policy for employees and Group Personal Accident Insurance Policy. The appellant argued that these policies are not primarily for personal consumption but are indirectly related to the manufacture of the final product and are a statutory requirement under various Labour Laws. However, the Tribunal noted that post-01.04.2011, the definition of 'input service' explicitly excludes services such as life insurance and health insurance when used primarily for personal use or consumption of any employee. The Tribunal referred to the Larger Bench decision in the case of Wipro Ltd., which upheld the exclusion clause in Rule 2(l)(C) of the Cenvat Credit Rules, 2004, stating that services excluded by the Legislature cannot be claimed for Cenvat credit, regardless of statutory requirements under other laws. Consequently, the Tribunal confirmed the denial of Cenvat credit on the Medi-claim Policy for employees and Group Personal Accident Insurance Policy amounting to ?8,37,191/-.

2. Imposition of penalty under Rule 15(1) of the Cenvat Credit Rules, 2004:

The appellant also challenged the imposition of a penalty of ?83,000/-. The Tribunal observed that the issue involved relates to the interpretation of the definition of 'input service'. Given the complexities and the fact that the exclusion clause was a matter of interpretation, the Tribunal found that the imposition of the penalty was not justified. Therefore, the penalty under Rule 15(1) of the Cenvat Credit Rules, 2004, was set aside.

Conclusion:

The Tribunal dismissed the appeal, confirming the demand of ?8,37,191/- as the appellant is liable to pay this amount. However, the penalty of ?83,000/- was set aside due to the interpretative nature of the issue. The order was pronounced in Open Court on 31/05/2019.