2019 (12) TMI 721 - AT - Service Tax

CENVAT Credit - input service - health and life insurance policies for employees - period 2009-10 and 2010-11 - whether the said input services are excluded from the scope of input services during the relevant period? - HELD THAT - Prior to 01.04.2011, there was no specific exclusion of any service from the definition of input service . It is a settled legal position that during that period any service which was used in the course of business qualified as input service for that business - impugned order deserves to be set aside. Even otherwise, the learned counsel has also demonstrated that they are also covered by the Employees State Insurance Act and therefore the Commissioner (Appeals) has erred in holding that they are not so covered by ESI Rules. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of CENVAT credit on health and life insurance policies of workers.
2. Interpretation of input service under CENVAT Credit Rules 2004.
3. Applicability of Employees State Insurance Act 1948.

Analysis:
1. The appeal challenged the denial of CENVAT credit on health and life insurance policies of workers by the original authority. The appellant, a proprietary concern selling motorcycles and providing maintenance services, had obtained service tax registration and availed CENVAT credit under CENVAT Credit Rules 2004. A show-cause notice sought to disallow CENVAT credit on insurance policies of workers, proposing recovery, interest, and penalties. The original authority dropped a portion of the demand but confirmed the rest, leading to the appeal.

2. The appellant argued that pre-2011, health and life insurance policies were not excluded from the definition of input service under CENVAT Credit Rules 2004. Citing a Karnataka High Court judgment, they contended that such policies were admissible as they were mandatory under the Employees State Insurance Act 1948, showing a nexus with the final output. The appellant relied on legal precedents to support their position that all conceivable services used in business were considered input services before the specific exclusion post-2011. The first appellate authority distinguished the case from the Karnataka High Court judgment based on ESI applicability, prompting the appellant to provide evidence of ESI registration.

3. The tribunal considered the arguments and legal positions presented. It noted that before April 1, 2011, no services were specifically excluded from being classified as an "input service." Therefore, any service utilized in business during that period qualified as an input service. Additionally, the tribunal acknowledged the appellant's coverage under the Employees State Insurance Act, contradicting the Commissioner (Appeals)'s assertion that they were not covered by ESI Rules. Consequently, the tribunal allowed the appeal, setting aside the impugned order and granting consequential relief.

This detailed analysis of the judgment addresses the issues raised, the arguments presented, and the tribunal's decision, providing a comprehensive overview of the legal reasoning and outcomes involved in the case.