2014 (8) TMI 744 - AT - Service Tax

General and Life Insurance Service - Credit utilized for service provided by Insurance agent - Revenue contends that appellants are not provider of the output service of Insurance Auxiliary Service undertaken by the Insurance Agent and the present appellants are paying service tax as recipient of such service, hence cannot avail and utilize the credit of service tax paid on taxable service to be used in or in relation to providing Insurance Auxiliary Service - Held that - appellants in present appeals were entitled to utilize CENVAT Credit of the Service Tax paid on various input services for discharge of the Service Tax liability on the output service of Insurance Auxiliary Service - there is no one to one correlation required between the input service and the output service under the CENVAT Credit Scheme and, therefore, the demands confirmed against the appellants for recovery of CENVAT Credit availed by them for discharging Service Tax liability on Insurance Auxiliary Service is clearly unsustainable and accordingly, we set aside the same - Following decision of M/s TATA AIG LIFE INSURANCE CO LTD and others Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI & THANE-II 2014 (4) TMI 637 - CESTAT MUMBAI - Decided against Revenue.

Summary

Issues:
Common issue involving utilization of CENVAT credit for payment of service tax on services rendered by an Insurance Agent.

Analysis:
The case involved M/s. HDFC Standard Life Insurance Co. Ltd. utilizing credit for service tax paid on input services for payment of service tax on services provided by an Insurance Agent. The Revenue contended that the appellants cannot avail credit as they are not the providers of the output service of Insurance Auxiliary Service. The adjudicating authority upheld the demand based on Rule 3 & 4 of the Cenvat Credit Rules, stating that only providers of taxable service can use the credit for duty on output service. However, the Tribunal referred to a previous decision regarding the definition of "output service" and concluded that appellants are entitled to avail CENVAT Credit for payment of Service Tax on Insurance Auxiliary Service as they are considered providers of the output service under the law.

The Tribunal highlighted that the legal position remained the same before and after a specific date, emphasizing that the appellants were entitled to utilize CENVAT Credit for Insurance Auxiliary Service. It referenced decisions by High Courts and previous Tribunal rulings to support the appellants' entitlement to the credit. The Tribunal clarified that a legal fiction deems the service recipient as a service provider, allowing for the full effect of utilizing CENVAT Credit for service tax payment. It also noted that no direct correlation is required between input and output services under the CENVAT Credit Scheme, rendering the demands against the appellants unsustainable.

Based on the above analysis, the Tribunal set aside the impugned order and allowed the appeals. Additionally, in the appeal filed by the Revenue challenging the order on time bar grounds, the Tribunal dismissed the appeal as infructuous due to allowing the appellant's appeal on merits.