2019 (10) TMI 219 - AT - Service Tax

CENVAT Credit - input services - Group Medical Insurance Service - Catering services - Transportation of Employees - extended period of limitation - penalties. Group Medical Insurance - HELD THAT - This Tribunal in the case of BHARAT FRITZ WERNER LTD. VERSUS COMMISSIONER OF CENTRAL TAX, BANGALORE NORTH WEST COMMISSIONERATE 2019 (6) TMI 67 - CESTAT BANGALORE has held that cenvat credit is not permissible under the Group Medical Insurance Service - This Tribunal has relied upon the decision of the Larger Bench in the case of M/S. WIPRO LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-III. 2018 (4) TMI 149 - CESTAT BANGALORE and then come to the conclusion that the impugned service falls under the exclusion clause as provided in Clause (c) of Rule 2(l). Therefore, by following the ratio of the said decision in the case of Bharat Fritz Werner Ltd., it is held that the appellants are not entitled to cenvat credit of service tax paid on Group Medical Insurance Service - credit not allowed. Catering service - HELD THAT - Larger Bench decision of the Tribunal in the case of Wipro Ltd. wherein the Tribunal after considering the exclusion clause provided in Clause (c) w.e.f. 01.04.2011 has held that Outdoor Catering Service is not eligible for input service credit post amendment dated 01.04.2011. Therefore, Commissioner has rightly denied the credit on Catering Service - credit not allowed. Transportation of Employees - HELD THAT - This falls under the definition of input service as it is directly related to the productivity of the employees working with the appellant and this facility is only from the factory to the residence of the employees and back which in my opinion falls in the definition of input service and the exclusion clause is not applicable as far as this service is concerned - Therefore, by relying upon the ratios of the M/S RELIANCE INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, LTU, MUMBAI 2016 (8) TMI 123 - CESTAT MUMBAI , it is held that the appellants are entitled to cenvat credit of service tax on this service. Extended period of limitation - Penalties - HELD THAT - The issue involved in the present case relates to interpretation of the definition of input service and therefore extended period cannot be invoked and penalties cannot be imposed. Demand for the normal period set aside - the invocation of extended period is not tenable in the present case and also the penalties under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC (1)(c) of Central Excise Act, 1944 is set aside. The matter remanded back to the original authority to re-quantify the demand for the normal period with regard to all the impugned services which the appellant is liable to pay - appeal allowed in part.

Summary

Issues:
- Cenvat credit on Group Medical Insurance
- Cenvat credit on Catering Service
- Cenvat credit on Transportation of Employees
- Interpretation of the definition of 'input service'
- Invocation of extended period and imposition of penalties

Cenvat Credit on Group Medical Insurance:
The appellant appealed against the rejection of cenvat credit on Group Medical Insurance, arguing that it falls under the definition of 'input service' as it is a statutory obligation. The appellant cited a relevant case to support their argument. However, the tribunal held that Group Medical Insurance does not qualify for cenvat credit based on a previous decision and the exclusion clause in Rule 2(l). The tribunal distinguished a High Court decision cited by the appellant and denied the cenvat credit on Group Medical Insurance.

Cenvat Credit on Catering Service:
Regarding cenvat credit on Catering Service, the tribunal upheld the Commissioner's decision to deny the credit. The tribunal relied on a Larger Bench decision that stated Outdoor Catering Service is not eligible for input service credit post-amendment dated 01.04.2011. Therefore, the tribunal concluded that the denial of cenvat credit on Catering Service was justified.

Cenvat Credit on Transportation of Employees:
The tribunal found that cenvat credit on Transportation of Employees is permissible as it directly relates to the productivity of employees. The tribunal emphasized that this service is essential for the employees' transportation between the factory and their residence, falling within the definition of 'input service.' Relying on a previous decision, the tribunal allowed the cenvat credit on Transportation of Employees.

Interpretation of the Definition of 'Input Service' and Penalties:
The tribunal determined that the issue at hand involved the interpretation of the definition of 'input service,' leading to the conclusion that the extended period cannot be invoked, and penalties cannot be imposed. The tribunal confirmed the demand for the normal period and set aside the penalties under the relevant rules. The matter was remanded back to the original authority for re-quantification of the demand for the normal period. The appeal was partly allowed, emphasizing the importance of correctly interpreting the definition of 'input service' in such cases.