2022 (9) TMI 1121 - AT - Central Excise

Disallowance of input service credit - group mediclaim policy - personal accident policy - time limitation - HELD THAT - The issue in respect of the admissibility of cenvat credit in respect of group mediclaim policy and personal accident policy is no longer res integra for the period prior to the amendments made in April 2011 to the Cenvat Credit Rules. Admittedly in this case the entire period of dispute is prior to April 2011. The Commissioner (Appeals) should not have denied Cenvat Credit in respect of group mediclaim policy and personal accident policy to the extent it pertains to the employee only. However, the case law cited above although say that the benefit should not be admissible to that part of the service which is in respect of the family members of the employees, as the breakup of the part which is in respect of the employees and that in respect of family members of the employee is not there, the matter needs to be remanded back to the original authority for determination of the credit amount which is in respect of the family members of employee. Time Limitation - HELD THAT - The facts in respect of availment of Cenvat Credit in respect of these services was in the knowledge of the Revenue, neither the show cause notices nor the order-in-original have given any reason for invoking extended period of limitation - In absence of any finding of existence of the ingredients required for invocation of extended period of limitation, there are no merits in invoking the same for making the demand of inadmissible cenvat credit. The order to this extent is set aside and also the order to the extent it pertains to imposition of penalty under Rule 15(1) of Cenvat Credit Rules. The appeal is partly allowed to the extent as indicated above and the matter remanded back to the original authority for redetermination of the inadmissible cenvat credit i.e. in respect of the insurance services pertaining to the family members of the employee of the appellant.

Summary

Issues Involved:
1. Disallowance of input service credit on insurance policies.
2. Recovery of inadmissible input service credit.
3. Imposition of penalty.
4. Invocation of extended period of limitation.

Detailed Analysis:

1. Disallowance of Input Service Credit on Insurance Policies:
The primary issue revolves around the disallowance of input service credit on various insurance policies, including group mediclaim and personal accident policies. The Commissioner (Appeals) disallowed the credit on these policies, stating they are perquisites to employees and not essential for business activities. However, the Tribunal referenced multiple case laws, including Sundaram Brake Linings and Titan Industries Ltd., which held that insurance for employees is related to business activities and should qualify as input service. The Tribunal concluded that the Commissioner (Appeals) should not have denied the credit for insurance policies pertaining to employees but upheld the disallowance for policies covering family members.

2. Recovery of Inadmissible Input Service Credit:
The Tribunal noted that the Commissioner (Appeals) upheld the recovery of inadmissible input service credit amounting to Rs. 16,24,896/- along with interest under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 11A of the Central Excise Act, 1944, and Section 11AB. The Tribunal directed the original authority to re-quantify the eligible credit, separating the portion attributable to employees from that of their family members.

3. Imposition of Penalty:
The Commissioner (Appeals) reduced the penalty from Rs. 10,00,000/- to Rs. 7,50,000/- under Rule 15(1) of the Cenvat Credit Rules. The Tribunal, however, found no justification for imposing the penalty since the facts regarding the availment of Cenvat Credit were known to the Revenue, and there was no evidence of willful suppression or misstatement by the appellant.

4. Invocation of Extended Period of Limitation:
The Tribunal observed that neither the show cause notices nor the order-in-original provided sufficient reasons for invoking the extended period of limitation. The absence of findings to justify the extended period led the Tribunal to set aside the invocation of the extended period for demanding inadmissible credit.

Conclusion:
The Tribunal partly allowed the appeal, setting aside the disallowance of Cenvat Credit for insurance policies related to employees but upheld the disallowance for policies covering family members. The matter was remanded to the original authority for re-determination of the inadmissible credit amount. The Tribunal also set aside the imposition of penalty and the invocation of the extended period of limitation. The adjudicating authority was directed to resolve the matter within three months.