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2025 (4) TMI 442 - AT - Central ExciseCENVAT Credit - Service Tax paid on health/medical insurance of employees their dependents retired employees CISF security - credit taken on the basis of documents which are not proper - Group medical/health insurance policy taken for employees - Security services provided by CISF - extended period of limitation - penalty. Eligibility to avail CENVAT credit on health/medical insurance service which were utilized by the appellants during the course of manufacture of petroleum products in their petroleum refinery at Mahul Mumbai - input services or not - HELD THAT - There is no dispute that the appellants are eligible to avail CENVAT credit. It can be seen from the factual matrix of the case that the said services were utilized by the appellants during the course of manufacture of petroleum products as the employees and CISF security personnel are essentially required in their manufacturing operations. On careful reading of the definition of input service under Rule 2 (l) of CCR 2004 it is found that it provides for three categories of services out of which the first category viz. (i) means part of the definition generally cover services which are used directly or indirectly in or in relation to manufacture of final goods or for providing of output services; the second category viz. (ii) inclusion part of the definition specifically state certain services used in relation to various activities which is used in relation to the manufacture of final products or provision of output services both of which are covered under the scope of input services . Further the third category viz. (iii) exclusion part of the definition provided under Clauses (A) (B) (BA) and (C) specifically provide for certain services or portion of such services which are not included in the above definition of input service . However there are certain exceptions to this exclusion which are also given in the form of except for provision of certain services except when used by certain category of persons when such services are not primarily used for specified use etc. Therefore in order to come to the conclusion that a particular service is covered as input service either it could be covered under category (i) or (ii) of the definition of input service as explained above and such input service should not fall under the exclusion clauses mentioned in the third category (iii) above. Group medical/health insurance policy taken for employees - HELD THAT - The appellants are mandatorily required to take medical/health insurance for their employees in compliance with the above statutory requirement. However for those employees who are not covered by the ESI scheme general medical/health insurance has been taken by the appellants. The insurance coverage under sample copies of the insurance policy produced by the appellants dated 01.04.2011 01.04.2012 given by the insurer M/s New India Assurance Company Limited perused wherein it is seen that the insured is the appellants company M/s Hindustan Petroleum Company Limited itself. Therefore it is evident that the beneficiary of such services is the appellants and not the individual employees. Therefore the embargo put on the input services used primarily for personal use or consumption of any employee for exclusion from the scope of coverage of input service under Clause (C) of Rule 2(l) of CCR of 2004 does not apply to the present case. The dispute in respect of availment of Cenvat credit on medical insurance service is no more open to debate as in a number of cases the Tribunal has held the same as admissible - relaince can be placed in M/S. HONDA MOTORCYCLE SCOOTER INDIA PVT. LTD. VERSUS CCE DELHI-III 2016 (8) TMI 308 - CESTAT CHANDIGARH . Security services provided by CISF - HELD THAT - The CISF has been tasked with providing security to all petroleum oil refineries recognizing their strategic importance and the need for robust security measures including fire safety counter terrorist attack etc. As such security services have become mandatory the health/medical insurance incurred in connection with such security staff shall also be considered as integral part of the security services which are essential input service required to be used in manufacture of petroleum products. Further security services have also been specifically provided in the inclusive part of the definition of input service under Rule 2(l) ibid. Therefore Service Tax paid on medical/health insurance services for CISF Security are eligible to be availed of as CENVAT credit. The Service Tax paid on medical/health insurance services for an amount of Rs.2, 04, 63, 415/- are eligible for availing CENVAT credit as per statutory provisions. Therefore to this extent the impugned order is not legally sustainable. Penalty - HELD THAT - In view of the specific findings given by the learned Commissioner in the impugned order that the disputed amount in respect of ineligible CENVAT credit with respect to health/medical insurance claim of dependant family members of employees having been paid and appropriated it is not found that there exists any ground for imposition of penalty on the appellants and for levy of any interest on the above disputed amount which have been confirmed as part of the adjudged demands in the impugned order. Invocation of extended period of limitation - HELD THAT - The Hon ble Supreme Court in the case of Bharat Petroleum Corporation Limited Vs. Commissioner of Central Excise Nashik Commissionerate 2025 (1) TMI 989 - SUPREME COURT have held that extended period is not invokable in the case where the document/details alleged to have been suppressed were known to the department. Conclusion - i) CENVAT credit on health/medical insurance services for employees and CISF security personnel is admissible as these services are necessary for statutory compliance and integral to manufacturing operations. ii) The documentation used by the appellants for claiming CENVAT credit is valid and the provisional nature of some documents do not affect their admissibility. iii) The penalty imposed for alleged irregular availment of CENVAT credit is unwarranted given the voluntary reversal of credit by the appellants. iv) The invocation of the extended period for demand is unjustified as the department was previously aware of the relevant facts. Appeal disposed off.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were:
ISSUE-WISE DETAILED ANALYSIS Eligibility for CENVAT Credit on Health/Medical Insurance Services The relevant legal framework is Rule 2(l) of the CENVAT Credit Rules, 2004, which defines 'input service' and includes services used in relation to the manufacture of final products, but excludes services used primarily for personal use or consumption by employees. The appellants argued that the medical insurance was a statutory requirement under Section 38 of the Employees' State Insurance Act, 1948, and essential for their manufacturing operations. The Court noted that the insurance was taken by the company itself, not for individual employees, thus not falling under the exclusion for personal use. The Court referred to precedents, including cases where the Tribunal and High Courts allowed CENVAT credit for insurance services required by statute, concluding that such services constitute an activity relating to business. The Court found that the services in question were necessary for compliance with statutory obligations and thus eligible for CENVAT credit. Documentation for CENVAT Credit The appellants used provisional premium payment certificates for claiming CENVAT credit, which the department contested. However, the Court found that final invoices from the insurer were provided, making the documentation valid. The Court emphasized that the use of provisional certificates did not render the credit inadmissible. Imposition of Penalty The appellants had reversed the credit for ineligible services before the issuance of the Show Cause Notice. The Court found no grounds for imposing a penalty, as the appellants acted voluntarily and maintained sufficient credit balance. The Court referenced the Commissioner's findings, which confirmed the reversal and appropriateness of the documentation. Invocation of Extended Period The Court examined the applicability of the extended period for demand under Section 11A(5) of the Central Excise Act, 1944. It cited a Supreme Court judgment, which held that the extended period is not applicable when the department is aware of the facts. The Court noted that similar issues were addressed in previous notices, making the invocation of the extended period inappropriate. SIGNIFICANT HOLDINGS The Court concluded that:
The Court partially set aside the impugned order, allowing CENVAT credit for Rs. 2,04,63,415/- related to eligible input services and upheld the reversal of Rs. 1,24,30,723/- for ineligible services. The appeal and the miscellaneous application were disposed of accordingly.
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