2017 (10) TMI 840 - AT - Central Excise

CENVAT credit - scope of input - ESI, Insurance and PF - whether ESI, Insurance, PF etc., would form part of the value of the Man-power Supplier Services or not - Held that - Tribunal in number of cases laid down that the same would constitute a part of the Man-power Service . There are various Commissionerate circulars also laying down that the service tax is required to be paid on the value including EPF and ESI contributions. In the present case, the service providers have given the break-up of the various factors, in which case, the Revenue has been able to pick-up the value of Insurance or PF etc. Presuming that the service provider would have raised only one consolidated figure bill for the entire service of Man-power Supply, the Revenue would not have been able to find out as to what is the break-up of the value of the impugned service. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of proportionate Cenvat credit on service tax paid on ESI, Insurance, and PF by the appellant.
- Interpretation of the definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004.
- Validity of the order passed by the original adjudicating authority and Commissioner (Appeals).
- Applicability of Tribunal decisions and Commissionerate circulars on the issue.
- Impact of the amendment to the definition of "input service" from 01.04.2011.
- Availability of credit to the appellant on service tax paid by the service provider.

Analysis:
The judgment involves a dispute regarding the denial of Cenvat credit on service tax paid on ESI, Insurance, and PF by the appellant, engaged in the manufacture of "Tyre Machinery and Tyre Mould." The Revenue contended that post-amendment of the "input" definition, such credits were not available to the appellant. The original adjudicating authority confirmed the demand, leading to appeals rejected by the Commissioner (Appeals), prompting the present appeals.

The Tribunal analyzed the submissions made by both parties and noted that the service provider had paid service tax on the full value of services, including Insurance, PF, etc. The Revenue had not objected to this at the time of tax receipt. The issue of whether ESI, Insurance, PF formed part of the value of Man-power Supplier Services had been previously decided by the Tribunal and Commissionerate circulars supported the inclusion of EPF and ESI contributions in the taxable value.

The Commissioner (Appeals) had restricted the credit to the actual value of the service, which the Tribunal found unjustified. The services received by the appellant were "Security and Man-power Supply Services," making the tax paid on these services creditable to the appellant. The Tribunal highlighted that the appellant had availed the credit of service tax paid by the service provider and disallowing a part of it would disrupt the assessment at the service provider's end.

Moreover, the Tribunal referenced a previous decision emphasizing that duties paid by the input supplier were creditable to the input recipient, even if not mandatorily payable. The Tribunal also addressed the Revenue's objection regarding the change in the definition of "input service" from 01.04.2011, clarifying that exclusions only applied to specific insurance coverage, not insurance for workers as an input credit service.

Consequently, the Tribunal found no justifiable reasons to deny credit to the appellant, setting aside the impugned orders and allowing all three appeals with consequential relief.