2014 (2) TMI 820 - AT - Central Excise

Eligibility to CENVAT Credit - Whether the appellant would be eligible for Cenvat credit of service tax paid on the premium for Group Insurance Policy provided by the appellant to their workers - Interest under Rule 15 - Held that - Cenvat credit in respect of Medical Insurance Policy provided by the Appellant to their employees is sought to be denied only on the ground that the same has no nexus with the manufacture of final product and is not an input service. In the show cause notice, there is no allegation that the medical insurance cover also includes the family members of the employees and for this reason the Cenvat credit would not be admissible - prima facie, it is not disputed that the entire cost of Medical Insurance Policy is included in the cost of production of the goods and for this reason also, the Cenvat credit would be admissible - appellant have a prima facie case in their favour. The requirement of pre-deposit of Cenvat credit demand, interest thereon and penalty , therefore, is waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal - Stay granted.

Summary

Issues involved:
- Eligibility for Cenvat credit of service tax paid on Group Insurance Policy for workers

Analysis:
1. Issue of Cenvat credit eligibility: The dispute revolved around the appellant's eligibility for Cenvat credit of service tax paid on the premium for a Group Insurance Policy provided to their workers. The Department contended that the insurance cover for workers did not qualify as an input service eligible for Cenvat credit, leading to a demand for the recovery of Rs.10,90,606. The Addl. Commissioner upheld this decision, stating that the insurance cover for workers did not have a nexus with the manufacture of the final product.

2. Appeal and Commissioner (Appeals) decision: The appellant appealed to the Commissioner (Appeals), who affirmed the Addl. Commissioner's order. The Commissioner (Appeals) noted that the insurance policy covered not only the workers but also their family members, citing a previous Tribunal judgment that indicated Cenvat credit might not apply to amounts related to family members. The appellant challenged this decision, emphasizing statutory obligations to provide insurance to workers and citing relevant case law.

3. Arguments and Tribunal decision: The appellant argued that the entire insurance premium cost was part of the final product's cost, making them eligible for Cenvat credit. The Departmental Representative countered, highlighting that coverage extended to family members might disqualify certain portions from Cenvat credit. The Tribunal noted that the show cause notice did not mention coverage of family members and ruled that grounds not in the notice could not be considered. Citing previous court judgments and a Tribunal decision, the Tribunal found in favor of the appellant, waiving the pre-deposit requirement and staying the recovery pending appeal disposal. The Tribunal determined that the appellant had a prima facie case in their favor, allowing the appeal and granting the stay.