2019 (6) TMI 959 - AT - Service Tax

CENVAT Credit - input services - purchase of Group Insurance Policy to the extent of 4/5 times of the tax paid - HELD THAT - The entire credit availed towards purchase of Accident Group Insurance policy is admissible to the Appellant and it had rightly availed so - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of CENVAT credit on input services towards purchase of Group Insurance Policy to the extent of 4/5 times of the tax paid.

Analysis:
The case involved the denial of CENVAT credit on input services related to the purchase of a Group Insurance Policy. The Appellant, engaged in providing Manpower Supply Services, availed CENVAT credit on Service Tax paid for insurance premium, which was later contested during an audit. The audit officers claimed the credit was inadmissible, leading to a dispute that reached the Commissioner (Appeals) level. The Commissioner held that while CENVAT credit was admissible for insurance services, for Group Health Insurance policies covering up to 5 family members of an employee, the credit for the employee should be limited to 1/5th of the total Service Tax paid on the premium. The Appellant challenged this decision before the CESTAT specifically on this aspect.

During the appeal hearing, the Appellant relied on various precedents to support the admissibility of CENVAT credit on the entire Service Tax paid for the Group Insurance policy. On the other hand, the Respondent referred to a case law indicating that when additional premiums are involved for family members' coverage, those services may not qualify as input services. The central issue was the admissibility of CENVAT credit for a Group Insurance accident policy covering family members of employees, which was not a statutory requirement under the Employee State Insurance Act 1948. The Appellant argued for full credit based on precedents, while the Respondent highlighted the need for differential premiums to restrict the credit to the employee's portion only.

After considering the arguments and case laws presented, the CESTAT examined the factual evidence provided by the Appellant, including a Declaration Certificate from the Insurance Company stating no additional premium was charged for family members' coverage. This additional evidence, permitted by the Bench, supported the Appellant's claim that the entire credit availed for the Accident Group Insurance policy was justified. Consequently, the CESTAT allowed the appeal, setting aside the Commissioner's order-in-appeal that had restricted the CENVAT credit. The judgment emphasized the importance of verifying premium allocations for employee and family coverage to determine the admissibility of CENVAT credit accurately.