2013 (11) TMI 1498 - AT - Service Tax

CENVAT Credit - Whether appellant is entitled to the Service Tax credit of Service Tax paid by the appellant on the personal insurance of its employees - Held that - period of demand in the present appeal is August 2005 to March 2008 before the amendment carried out under Notification No.3/2011-CE(NT), dt.01.03.2011 made effective from 01.04.2011, when life insurance and health insurance services for the employees were specifically excluded from the definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 - Following decision of Surani Ceramics Ltd. Vs. CCE Rajkot 2011 (8) TMI 311 - CESTAT, AHMEDABAD - Decided in favour of assessee.

Summary

Issues involved:
Whether the appellant is entitled to the Service Tax credit of Service Tax paid on the personal insurance of its employees.

Analysis:
The appellant filed an appeal against OIA No.SA/43/ Vapi/2011, questioning the entitlement to Service Tax credit on personal insurance of employees. The appellant argued that the period in question was before the amendment of Rule 2(l) of CENVAT Credit Rules, 2004, citing various case laws where credit on insurance of employees was allowed. The Revenue reiterated the stand taken by the first appellate authority.

Upon hearing both sides and reviewing the case records, the Bench referred to the judgment in the case of Surani Ceramics Ltd. Vs. CCE Rajkot, where it was held that service tax paid on insurance premium for workmen's compensation can be considered as an activity related to the business. The Bench emphasized that the insurance premium was to fulfill a legal obligation of providing compensation to workers in case of injury in the factory, thus being relatable to business activity. The Bench also noted the decision of the Tribunal, Bangalore in a similar case, and held that the CENVAT credit of service tax paid on insurance for workmen's compensation is admissible.

The period of demand in the appeal was before the specific exclusion of life insurance and health insurance services for employees from the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004. As the appellant's case aligned with the cited case laws, the appeal was allowed based on the admissibility of CENVAT credit on insurance for workmen's compensation. The amendment that excluded life insurance and health insurance services for employees from the definition of 'input service' was effective from 01.04.2011, which did not apply to the period in question (August 2005 to March 2008), further supporting the appellant's entitlement to the Service Tax credit.

In conclusion, the appellant was held entitled to the Service Tax credit of Service Tax paid on personal insurance of its employees based on the legal obligations and business activity nexus established through relevant case laws and the pre-amendment period under consideration.