2009 (7) TMI 568 - AT - Service Tax

Cenvat Credit- Input services- The assessee, a manufacturer, took Cenvat Credit of service tax on the insuarance premium in respect of (a) transit insurance of induction furnace and transformer, (b) group personal accidental policy and (c) group health guard policy of company staff. The Assistant Commissioner disallowed said credit on the ground that said services could not be said to be services used in or in relation to the manufacture. The Commissioner (Appeals) set-aside the order of the assistant Commissioner by holding that the said services were covered by the definition of Input Service and hence Cenvat Credit had been taken correctly in respect of the same. In the light of the decision of Millipore India Ltd. v. CCE 2009 -TMI - 32592 - CESTAT, BANGALORE, Held that the definition of input has two limbs and second limb of the definition covers the activities relating to business and the list of the activities is not exhaustive. The insurance of the capital goods whether in the factory or in transit and similarly the group insurance of the workers and the staff is very much part of the business activity and every manufacturer or service provider has to use these services for his business. Therefore, the order of commissioner (Appeals) is upheld.

Summary

Issues:
- Appeal against disallowance of Cenvat credit for insurance services
- Interpretation of the definition of "input service" under Cenvat Credit Rules, 2004

Analysis:
1. The appeal was filed by the Revenue against the order-in-appeal setting aside the disallowance of Cenvat credit for insurance services by the Commissioner (Appeals). The respondent, a manufacturer of various steel products, had taken Cenvat credit for insurance services related to transit insurance, group personal accidental policy, and group health guard policy. The Asstt. Commissioner disallowed the credit, but the Commissioner (Appeals) reversed this decision, considering the services as covered under the definition of "input service."

2. The Revenue argued in the appeal that insurance services were not explicitly mentioned in the definition of "input service" and that the group health guard policy was for staff, not directly engaged workers in manufacturing. However, the Tribunal noted that the definition of "input service" has a broad scope, including activities relating to business not exhaustively listed. The Tribunal considered insurance of capital goods and group insurance for workers and staff as integral to business activities, supporting the Commissioner (Appeals)'s decision.

3. The Tribunal referenced a previous case, Millipore India Ltd. v. CCE, where it was held that services like medical and personal accident policies and insurance, affecting the cost of goods, should be treated as "input services." Drawing from this precedent, the Tribunal concluded that insurance services fall under the category of "activities relating to business," as per the definition of "input service." Consequently, the Tribunal dismissed the Revenue's appeal and disposed of the Cross Objection in favor of the respondent.

This detailed analysis of the judgment highlights the interpretation of the definition of "input service" under the Cenvat Credit Rules, 2004 and the application of this definition to insurance services in the manufacturing sector, providing a comprehensive understanding of the legal reasoning behind the decision.