2018 (5) TMI 1498 - AT - Central Excise

CENVAT credit - input services - various insurance policies, namely, Medical Insurance, Accidental insurance and Group insurance Policy relating to Group Gratuity and Motor Vehicle Insurance - services relating to Staff Welfare Expenses, Food and Beverages etc. - Held that - the Hon ble Karnataka High Court in Micro Labs Ltd s case 2011 (6) TMI 115 - KARNATAKA HIGH COURT has held that the credit of service tax paid on the premium of various insurance policies taken for employees under the Labor Laws, is admissible to credit. Therefore, the credit availed on the service tax paid on the premiums of insurance policies for the employees, in the course of discharging their duty as required under the provisions of Labor Laws are admissible to credit. Admittedly the credit on staff welfare expenses, food and beverages and on motor vehicle insurance, is not admissible. Appeal allowed in part.

Summary

Issues Involved:
1. Entitlement to credit of service tax paid on various insurance policies, staff welfare expenses, food and beverages, and motor vehicle insurance.

Analysis:
The appeal before the Appellate Tribunal CESTAT Ahmedabad involved the question of whether the appellant was entitled to credit of service tax paid on different insurance policies, staff welfare expenses, food and beverages, and motor vehicle insurance during the relevant period. The appellant contended that the service tax paid on insurance policies such as Group Insurance Policies for employees and policies related to gratuity should be admissible for credit. They relied on the judgment of the Hon'ble Karnataka High Court and a previous Tribunal case to support their argument. The Authorized Representative for the appellant argued that the credit of service tax paid on staff welfare policies should also be allowed.

On the other hand, the Revenue's Authorized Representative contended that post an amendment after April 1, 2011, insurance policies on Motor Vehicle were no longer considered input services and hence not eligible for credit. The Revenue's position was that the credit availed on staff welfare expenses, food and beverages, and motor vehicle insurance should not be allowed.

After considering the arguments from both sides, the Tribunal referred to the judgment of the Hon'ble Karnataka High Court and its own previous decision, which held that the credit of service tax paid on insurance policies for employees under Labor Laws was admissible. Consequently, the Tribunal ruled that the credit on premiums of insurance policies for employees, as required under Labor Laws, was eligible for credit. However, it was noted that the credit on staff welfare expenses, food and beverages, and motor vehicle insurance was not admissible. As a result, the impugned order was modified to allow credit for insurance policies related to employees while denying credit for other expenses. The appeal was partly allowed based on this analysis.