2019 (12) TMI 181 - AT - Service Tax

CENVAT Credit - input services - Group Medical Insurance Service - Transportation of employees - Staff Transportation facility service - Catering service/Lunch Banquet/Lunch Coupon - extended period of limitation - penalties. Group Medical Insurance - HELD THAT - This Tribunal in the case of BHARAT FRITZ WERNER LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH WEST COMMISSIONERATE 2019 (6) TMI 67 - CESTAT BANGALORE has held that cenvat credit is not permissible under the Group Medical Insurance Service. This Tribunal has come to the conclusion that the impugned service falls under the exclusion clause as provided in Clause (c) of Rule 2(l) - appellants are not entitled to cenvat credit of service tax paid on Group Medical Insurance Service. Catering Service - HELD THAT - Reliance placed upon the Larger Bench decision of the Tribunal in the case of M/S. WIPRO LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-III. 2018 (4) TMI 149 - CESTAT BANGALORE wherein the Tribunal after considering the exclusion clause provided in Clause (c) w.e.f. 01.04.2011 has held that Outdoor Catering Service is not eligible for input service credit post amendment dated 01.04.2011. Therefore, credit on Catering Service rightly denied. Transportation of Employees - HELD THAT - This falls under the definition of input service as it is directly related to the productivity of the employees working with the appellant and this facility is only from the factory to the residence of the employees and back which falls in the definition of input service and the exclusion clause is not applicable as far as this service is concerned - the appellants are entitled to cenvat credit of service tax on this service. Extended period of limitation - penalty - HELD THAT - The issue involved in the present case relates to interpretation of the definition of input service and therefore extended period cannot be invoked and penalties cannot be imposed. The demand for the normal period of one year is upheld and invocation of extended period is not tenable in the present case - the penalties under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC (1)(c) of Central Excise Act, 1944 also set aside - the matter is remanded back to the original authority to re-quantify the demand for the normal period with regard to all the impugned services which the appellant is liable to pay - Appeal allowed in part by way of remand.

Summary

Issues:
- Cenvat credit on Group Medical Insurance
- Cenvat credit on Catering Service
- Cenvat credit on Transportation of Employees
- Interpretation of the definition of 'input service'
- Invocation of extended period and imposition of penalties

Cenvat credit on Group Medical Insurance:
The appellant contested the denial of cenvat credit on Group Medical Insurance, arguing that it falls within the definition of 'input service' as it is a statutory obligation. The appellant relied on a High Court decision allowing credit on Insurance Service. However, the AR defended the denial, citing a Tribunal decision excluding Group Medical Insurance from 'input service' post-amendment. The Tribunal held that cenvat credit on Group Medical Insurance is not permissible based on the exclusion clause in Rule 2(l), following previous decisions. The Tribunal distinguished the High Court decision cited by the appellant, ultimately denying the credit.

Cenvat credit on Catering Service:
The appellant challenged the denial of cenvat credit on Catering Service, arguing it should be eligible under 'input service' rules. The AR supported the denial, referring to a Tribunal decision stating that Outdoor Catering Service is not eligible post-amendment. The Tribunal upheld the denial of credit on Catering Service based on the exclusion clause post-amendment, in line with previous rulings.

Cenvat credit on Transportation of Employees:
Regarding cenvat credit on Transportation of Employees, the appellant argued it should be considered an 'input service' as it relates to employee productivity. The AR contended that it is for personal consumption and not linked to manufacturing. The Tribunal held that Transportation of Employees falls under 'input service' as it directly impacts employee productivity, allowing the appellant to claim cenvat credit on this service based on previous rulings.

Interpretation of the definition of 'input service' and Extended Period:
The Tribunal analyzed the interpretation of 'input service' in the context of the case, concluding that the extended period cannot be invoked for penalties. The Tribunal confirmed the demand for the normal period of one year, setting aside penalties and remanding the matter to re-quantify the demand for the normal period. The decision was based on the issue of interpreting the 'input service' definition, leading to the partial allowance of the appeal.

This detailed analysis of the judgment highlights the arguments presented by both parties, the legal basis for the decisions, and the Tribunal's conclusions on each issue raised in the case.