2024 (4) TMI 34 - AT - Service Tax

CENVAT Credit - marine insurance - credit on premium paid for insurance for software engineers is denied as it is not a statutory requirement - Extended period of Limitation - HELD THAT - This is a case where Revenue took a stand that the definition of input service with effect from 01.04.2011 excluded health insurance, life insurance etc. when used primarily for personal use or consumption of any employee as pleaded in this case, hence tax paid for such insurance premiums were not eligible for credit as input service . Being a mixed question of fact and law, it was felt by the Commissioner (Appeals) with an intent to do justice between the parties that a verification of facts may be required before deciding the legal point, instead of summarily accepting or rejecting them. Hence the remand of the matter by the Commissioner (Appeals) for examining the facts and deciding the same based on the CENVAT Credit Rules, 2004 cannot be faulted. The Appellant is agreed upon that the general insurance business which stood specified in Rule 2(1)(BA) of CENVAT Credit Rules 2004 is applicable not for capital goods only. The definition of input service as per Rule 2(l) ibid, covers not only the services used directly or indirectly in or in relation to the manufacture of the final product but also includes activities related to business - The CENVAT Credit Rules, 2004 was introduced by superseding the CENVAT Credit Rules, 2002 and Service Tax Credit Rules, 2002, with the object to extend credit of service tax and excise duty across goods and services. Hence the change in the definition of input service with effect from 01.04.2011 to excluded health insurance, life insurance etc. when used primarily for personal use or consumption of any employee, cannot be read to restrict tax paid on insurance for capital goods only, without the Rules specifically saying so. Extended period of limitation - HELD THAT - The dispute involves interpretation of the statutory provisions of the CENVAT Credit Rules, 2004 involving the definition of input service and does not involve mis-declaration, with intention to evade payment of duty. This is also clear from the fact that the matter is being remanded by the Commissioner ((Appeals) for verification of facts in consonance with the law. Hence the extended period could not have been evoked nor penalty could have been imposed. While allowing the remand, the invocation of the extended period and the imposition of penalty in the impugned order is set aside - Appeal disposed off by way of remand.

Summary

Issues involved:
The issues involved in the judgment are the eligibility of CENVAT credit on service tax paid on various insurance services and the interpretation of the definition of 'input service' under the CENVAT Credit Rules, 2004.

Eligibility of CENVAT credit on insurance services:
The appellant, engaged in providing various services, had availed ineligible CENVAT credit on service tax paid on insurance services. The original authority allowed credit on marine insurance but disallowed credit on insurance for software engineers, stating it was not a statutory requirement. The appeal was remanded to re-quantify the credit not examined initially. The appellant contended that the definition of 'input service' under the Rules was broader, covering various services, and argued for the credit eligibility. The Revenue argued that the appellant suppressed facts regarding insurance schemes, making them liable for penalty. The Tribunal upheld the remand decision by the Commissioner (Appeals) for a factual verification before deciding on the legal point.

Interpretation of 'input service' under CENVAT Credit Rules, 2004:
The Tribunal agreed with the appellant that the definition of 'input service' was not limited to capital goods only, as specified in Rule 2(1)(BA) of the Rules. It was noted that the Rules aimed to extend credit across goods and services, and the change in the definition from 01.04.2011 did not restrict tax paid on insurance for capital goods only. Referring to legal precedents, the Tribunal emphasized that any service used in relation to the business of manufacturing final products would be an eligible input service. The dispute was deemed to involve interpretation of statutory provisions and not mis-declaration, leading to the setting aside of the extended period invocation and penalty imposition in the impugned order.

Conclusion:
The Tribunal allowed the remand, set aside the invocation of the extended period, and the penalty imposed in the impugned order. The appeal was disposed of accordingly, emphasizing the need for factual verification in cases involving the interpretation of legal provisions.