2018 (2) TMI 1016 - AT - Central Excise

CENVAT credit - outdoor catering availed for their canteen for the period after 1.4.2011 - Held that - there is no evidence that the canteen services have been used primarily for personal use of employees. Provision of canteen is a statutory requirement in large factory and thus it cannot be said that the canteen is provided primarily for personal use of employees. In these circumstances, cenvat credit on outdoor catering services availed for maintaining canteen cannot be disallowed except for the part where the amount is recovered from the employees. The demand of recovery of cenvat credit on canteen services is set aside - the matter is remanded to the Commissioner (Appeals) to decide afresh - appeal allowed by way of remand.

Summary

Issues Involved:
1. Disallowance of credit in respect of outdoor catering service for canteen after 1.4.2011.
2. Disallowance of credit in respect of group insurance policy.
3. Imposition of penalty and demand of interest.

Analysis:

Issue 1: Disallowance of credit in respect of outdoor catering service for canteen after 1.4.2011
The counsel for the assessee argued that credit for outdoor catering service availed for the canteen post 1.4.2011 was wrongly disallowed. Referring to a High Court decision, it was contended that credit for canteen services, being mandatory, cannot be denied. The Tribunal found that there was no evidence to suggest the canteen was primarily for personal use of employees, as it is a statutory requirement in a large factory. Therefore, cenvat credit on outdoor catering services for maintaining the canteen cannot be disallowed, except for the amount recovered from employees. Consequently, the demand for recovery of cenvat credit on canteen services was set aside, along with the penalty imposed.

Issue 2: Disallowance of credit in respect of group insurance policy
The impugned order allowed the credit for service tax paid on insurance services, which was challenged by the Revenue. They argued that the definition of input service post 1.4.2011 excluded medical insurance. The Tribunal noted that the definition of input service is inclusive but qualified by exclusions, including life and health insurance primarily for personal use. As the lower authorities did not examine the nature of the insurance cover, the matter was remanded to the Commissioner (Appeals) for a fresh decision based on whether the insurance cover was exclusively for injuries or damages to factory employees or included family members and other aspects.

Issue 3: Imposition of penalty and demand of interest
The Tribunal set aside the penalty imposed on disallowed cenvat credit for outdoor catering service, as the disallowance itself was overturned. The matter of interest demand was not specifically addressed in the summary provided.

In conclusion, the appeal of the assessee was allowed, the appeal of Revenue was allowed by way of remand, and the cross objections were disposed of accordingly. The judgment provided detailed reasoning for each issue, citing relevant legal precedents and interpretations to arrive at its decision.