2017 (12) TMI 722 - AT - Service Tax

CENVAT credit - service tax paid to various insurance companies for Group Insurance Scheme of employees - case of Departmnet is that the insurance of employees is only a welfare measure and has no relation to the manufacture of their final product and cannot be treated as an input service - Held that - even after the amendment to the definition of input service w.e.f 1.4.2011, these services on which CENVAT credit has been denied fall in the definition of input service because they are not primarily for the personal use which has been excluded from the definition - the service charge and the service tax on insurance of plant and machinery, goods in transit, cash in transit and insurance on vehicles and laptops and also group insurance of all employees against sickness being an integral part of the manufacturing business and the same form part of the manufacturing cost of the final product and used in or in relation to the manufacture of final product - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of CENVAT credit on service tax paid to insurance companies for various schemes.

Analysis:
The appeal challenged the Commissioner (A)'s order rejecting the appellant's appeal regarding the denial of CENVAT credit on service tax paid to insurance companies for different schemes. The department contended that insurance for employees is a welfare measure unrelated to manufacturing, thus not an input service. The appellant argued that the impugned order ignored evidence and binding judicial precedents. They asserted that services like life insurance and health insurance qualify as input services. The appellant highlighted that the insurance premiums for welfare schemes form part of manufacturing costs. The appellant also pointed out the amendment to the definition of input service from 1.4.2011 and provided evidence of premium payment before the amendment. The Commissioner (A) noted that while CENVAT credit was allowed in the past, the amendment excluded these services from the definition of input service.

The AR supported the findings of the impugned order, while the appellant argued for the inclusion of insurance services as input services. The Tribunal, after reviewing submissions and evidence, found that even post-amendment, the disputed services qualified as input services, not for personal use. The Tribunal emphasized that insurance on plant, machinery, goods, and group insurance for employees against sickness are integral to manufacturing and constitute manufacturing costs. Citing legal precedents, the Tribunal held that these services are used in or related to manufacturing, as established in various cases and by the High Court of Karnataka. The Tribunal noted that service tax was paid before the 2011 amendment based on the evidence presented. Consequently, the Tribunal ruled that the denial of CENVAT credit by both authorities was legally unsustainable, setting it aside and allowing the appellant's appeal.

The judgment, delivered by S.S. Garg, Judicial Member, on 27.11.2017, overturned the Commissioner (A)'s decision and allowed the appellant's appeal, emphasizing the inclusion of insurance services as input services for CENVAT credit based on their relevance to manufacturing activities and costs.