2012 (8) TMI 684 - AT - Service Tax

Cenvat Credit of service tax paid on Transit Insurance and Group Health Insurance Policy services - input service Held that - Even though the policy covers domestic purchase, movement of goods for job work, imports, domestic sales, exports, etc., the premium paid is linked to domestic sales and exports only - Chartered Accountant submitted that in the case of exports, there is instruction of the Board that when sales are made on FOB basis, Port is the place of removal. Therefore he submitted that in the case of exports, the appellant is eligible for the benefit of service tax credit - if all the sales are made on FOB basis, they will produce evidence to that effect and further, that will not be taken into account for calculation of eligible service tax - matter is remanded to the original authority to finalize quantum of ineligible service tax in respect of transit premium

Summary

Issues:
1. Eligibility for credit on service tax paid on 'Group Health Insurance' policy.
2. Eligibility for credit on 'Transit Insurance' in respect of domestic purchase, sales, etc.

Analysis:

Issue 1: Eligibility for credit on 'Group Health Insurance' policy:
The appellant, engaged in manufacturing wood working machines, sought credit on service tax paid for 'Group Health Insurance' policy. The Chartered Accountant argued in favor of credit eligibility, citing relevant decisions. The DR, however, opposed citing decisions by Single Member Bench. The judge upheld the Division Bench decision, ruling in favor of the appellant's credit eligibility for service tax on 'Group Health Insurance' based on precedent.

Issue 2: Eligibility for credit on 'Transit Insurance':
Regarding 'Transit Insurance', the Chartered Accountant argued that it falls under the inclusive definition of input service as an expenditure related to business activities, distinct from transportation cost. However, the judge sided with the DR, considering transit as part of transportation cost. The judge analyzed the insurance policy, finding the premium linked to domestic sales and exports only. The Chartered Accountant contended that for exports, the appellant is eligible for service tax credit based on the place of removal being the Port for FOB sales. For domestic sales, the Chartered Accountant argued that the place of delivery should be the buyers' premises, contrary to the original authority's conclusion of the factory gate as the place of removal. Due to lack of basis for the original conclusion, the judge remanded the matter to the original authority for further verification and quantification of ineligible service tax on 'transit premium'. The judge also waived the penalty due to arguable issues and existing coverage of the 'Group Health Insurance' matter by decisions.

In conclusion, the judgment ruled in favor of the appellant's credit eligibility for service tax on 'Group Health Insurance' based on precedent. However, for 'Transit Insurance', further verification and quantification were ordered, remanding the matter to the original authority. The penalty imposed on the appellant was set aside due to the arguable nature of the issues and existing coverage of the 'Group Health Insurance' matter by decisions.