2021 (10) TMI 296 - AT - Central Excise

CENVAT Credit - input services - employee compensation insurance service - period from May 2015 to April 2016 - denial of credit on the ground that the said service cannot be considered as an input service w.e.f. 01.04.2011 - HELD THAT - The phrase input service defined under Rule 2 (l) ibid has specifically excludes the life/health insurance taken by the employer for the personal use or consumption of any employee. In this case, it is not the case of Revenue that the insurance service was meant primarily for personal use by the employees. Rather, the insurance policy in this case was taken by the appellant in respect of its employees as per the statutory mandates provided under the Employee s State Insurance Act, 1948 and the Workmen s Compensation Act, 1923. Larger Bench of this Tribunal in the case of DHARTI DREDGING AND INFRASTRUCTURE LTD VERSUS COMMISSIONER OF CENTRAL TAX, SECUNDERABAD GST 2021 (4) TMI 853 - CESTAT HYDERABAD , by relying upon the judgment of Hon ble Madras High Court in the case of M/S. GANESAN BUILDERS LTD VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI-II 2017 (7) TMI 720 - CESTAT CHENNAI has held that the intention of the insurance policy is to protect the employees who work at the site and not primarily for personal use or consumption of the employee and thus, the premium paid by the employer on such service should be considered as input service. Appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of Cenvat benefit for service tax on employee compensation insurance service.

The judgment deals with the denial of Cenvat benefit concerning service tax paid on employee compensation insurance service. The period in question is from May 2015 to April 2016. The Commissioner (Appeals) upheld the adjudication order, denying the appeal on the grounds that the disputed service did not qualify as an input service as per the Cenvat Credit Rules, 2004. The Commissioner also stated that insurance service for the personal benefit of the employee is explicitly excluded from the definition of input service under Rule 2 (l).

The appellant's advocate argued that the appellant, as a commercial establishment, was obligated by law to insure its employees for protection. She emphasized that the insurance policy was a group policy covering all employees, not for individual benefit. The advocate cited relevant judgments, including one from the Hon'ble Madras High Court and a decision from the Larger Bench of the Tribunal, to support the appellant's position.

The Revenue's representative reiterated the findings in the impugned order during the proceedings. After hearing both sides and examining the records, the Tribunal noted that the insurance policy was taken by the appellant as required by statutory mandates to protect its employees, not for personal use. Citing previous judicial pronouncements, the Tribunal concluded that the premium paid for such services should be considered as an input service, as the intention was to safeguard employees at the workplace, not for personal consumption.

Based on the settled legal position and precedents cited, the Tribunal found no merit in the Commissioner (Appeals)'s order. Consequently, the Tribunal allowed the appeal in favor of the appellant by setting aside the previous order. The operative part of the order was pronounced in the open court by the Tribunal.