2024 (12) TMI 221 - AT - Central Excise

Utilisation of CENVAT credit taken on the input service - admissible input services or not - insurance services provided in respect of Mediclaim policy taken for parent of employees by the appellants - levy of penalty under Rule 15(1) of CENVAT Credit Rules 2004 - HELD THAT - On plain reading of the provisions of Rule 2(1)(ii) of CCR 2004 input service means any service used by a provider of output service for providing an output service . In other words if any output service is provided services procured for providing such output services will be treated as input service in terms of rule 2 (l)(ii) of CCR, 2004. The facts of the case indicate that the appellants had availed the services from the insurance company M/s Bajaj Allianz General Insurance Co. Ltd. and further provided these services to their employees for a consideration inasmuch as the appellants recovered the insurance premium from their employees - In order to render the said services to the employees the appellants had to use the services from insurance company. Therefore the services availed by the appellants from insurance company i.e. M/s Bajaj Allianz General Insurance Co. Ltd. for providing the said service ought to be treated as input service and accordingly the appellants are eligible to avail CENVAT credit paid on such input service in terms of Rule 2 (l)(ii) of the CCR of 2004. The aforesaid issues have been already dealt in detail by the Coordinate Bench of the Tribunal and the present dispute is no more res integra in view of the decision relied upon by the appellants in the cases of M/S ULTRA TECH CEMENT LTD. VERSUS COMMISSIONER OF CENTRAL TAX TIRUPATI - GST 2019 (9) TMI 888 - CESTAT HYDERABAD . In this case and it has been held that the appellant is required to pay service tax as per the legal provision of Service Tax statute and is entitled to avail credit on input services on the relevant output services. Further in the cases of M/S. SOUTH INDIAN BANK VERSUS THE COMMISSIONER OF CUSTOMS CENTRAL EXCISE AND SERVICE TAX-CALICUT 2020 (6) TMI 278 - CESTAT BANGALORE - LB THE COMMISSIONER OF CENTRAL EXCISE SERVICE TAX CUSTOMS BANGALORE (ADJUDICATION) THE COMMISSIONER OF SERVICE TAX VERSUS M/S. PNB METLIFE INDIA INSURANCE CO. LTD. 2015 (5) TMI 68 - KARNATAKA HIGH COURT the issue in general whether there is a liability to service tax and whether the service tax paid on input service could be eligible to the appellant was decided in their favour in these cases. In view of the settled position of law the issue arising out of the present dispute is no more open for any debate and as such the impugned order passed by the learned Commissioner (Appeals) is liable to be set aside - the impugned order dated 12.11.2021 is set aside - the appeal is allowed in favour of the appellants.

Summary

Issues:
1. Whether the utilization of CENVAT credit on insurance services for a Mediclaim policy for employees' parents is admissible under CENVAT Credit Rules, 2004.
2. Whether penalty under Rule 15(1) of CENVAT Credit Rules, 2004 is applicable.

Analysis:
Issue 1:
The appeal by M/s Siemens Limited challenged the Order-in-Appeal passed by the Commissioner (Appeals) regarding the denial of CENVAT credit on insurance services for a Mediclaim policy for employees' parents. The department objected to the credit claimed on premium charged for the policy. The appellants argued that they provided the insurance service to employees' parents, recovered the premium from employees, paid service tax as a service provider, and reflected this in their returns. The Tribunal analyzed Rule 2(1)(ii) of CCR, 2004, which defines input service as any service used for providing an output service. It concluded that since the appellants provided the insurance service to employees, the services availed from the insurance company should be treated as input services, making them eligible for CENVAT credit.

Issue 2:
The Tribunal referred to a previous decision by a Coordinate Bench in the case of Ultra Tech Cement Limited, which held that a taxpayer is required to pay service tax as per legal provisions and is entitled to avail credit on input services for relevant output services. The Tribunal quoted a paragraph from the decision, emphasizing that employees are considered service recipients when services are sold to them, entitling the taxpayer to avail credit on input services. Further, the Tribunal cited cases like South Indian Bank and Commissioner of Service Tax, which supported the liability to service tax and eligibility of service tax paid on input services. Consequently, the Tribunal held that the impugned order denying CENVAT credit was not open for debate, setting it aside and allowing the appeal in favor of the appellants.

This judgment clarifies the admissibility of CENVAT credit on insurance services provided for employees' parents and highlights the importance of following legal provisions and established case law in determining eligibility for such credits.