2019 (12) TMI 122 - AT - Service Tax

Refund of unutilized CENVAT credit - input services - Group Medical Insurance - Insurance on assets and business activities - Rent-a-Cab and bus pass - Food coupons/sodexo coupons - 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 come to the conclusion that the impugned service falls under the exclusion clause as provided in Clause (c) of Rule 2(l) - appellants are not entitled to cenvat credit of service tax paid on Group Medical Insurance Service. Insurance on assets and business activities - HELD THAT - The Commissioner (Appeals) has rightly rejected the CENVAT credit to the tune of ₹ 2,27,123/- after examining the various invoices relating to CENVAT credit and there are no infirmity in his findings and therefore appellant is not entitled to cenvat credit on insurance on assets and business activities to the tune of ₹ 2,27,123/- - Credit not allowed. Rent-a-Cab and bus pass - HELD THAT - This falls in 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 - Credit not allowed. Food coupons/sodexo coupons - HELD THAT - These services are in the nature of welfare service and purely for personal consumption of employees as these are perquisites allowed to the employees. Further the Commissioner (Appeals) has given reasons for denying the cenvat credit on sodexo coupon and there are no fault in that and upheld the same - credit not allowed. Extended period of limitation - 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 - the demand for the normal period of one year is upheld and invocation of extended period is not tenable. Penalties - HELD THAT - The penalties under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC (1)(c) of Central Excise Act, 1944 set aside. The matter is 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 by way of remand.

Summary

Issues:
- Eligibility of cenvat credit on various services under Section 73 of the Finance Act.
- Interpretation of the definition of 'input service' under Rule 2(l) (C).
- Applicability of exclusion clause in the definition of 'input service'.
- Liability for demand, interest, and penalty.
- Bar on limitation for demanding taxes.
- Denial of cenvat credit on medical insurance, group insurance, assets insurance, rent-a-cab, bus pass, and food coupons.

Analysis:
1. Eligibility of Cenvat Credit: The appellant's appeal contested the demand of ineligible cenvat credit and interest amount confirmed by the Commissioner. The audit team pointed out the availed credit, leading to a show-cause notice for recovery. The Assistant Commissioner confirmed a demand, dropped another, imposed interest, and penalty under Section 78(1). The Commissioner further confirmed the demand and reduced the penalty. The appellant challenged this order, leading to the present appeal.

2. Interpretation of 'Input Service': The appellant argued that the denial of cenvat credit on certain services was not lawful, citing the definition of 'input service' and exclusion clauses under Rule 2(l) (C). The appellant emphasized that certain services, like medical insurance for directors and foreign employees, were essential under statutory obligations. Legal precedents were cited to support the argument.

3. Applicability of Exclusion Clause: The learned counsel contended that services like insurance on assets and business activities, rent-a-cab, bus pass, and food coupons were integral to business operations and should not be excluded from cenvat credit. Legal references were provided to support the claim that these services fell within the definition of 'input service' and were not primarily for personal use.

4. Liability and Penalties: The learned AR defended the impugned order, arguing against cenvat credit on medical and group insurance policies, assets insurance, rent-a-cab, bus passes, and food coupons. The Commissioner partly allowed certain credits but rejected others, stating that the appellant was not entitled to credit for services not directly related to output services.

5. Bar on Limitation: The Tribunal analyzed the submissions and material on record, upholding the denial of cenvat credit on group medical insurance and assets insurance. The exclusion clause was deemed applicable, and the appellant's entitlement to credit was restricted based on the nature of the services provided.

6. Final Decision: The Tribunal confirmed the demand for the normal period, rejected the invocation of the extended period, and set aside penalties. The matter was remanded to the original authority for re-quantification of the demand for the normal period regarding the services for which the appellant was liable to pay, partially allowing the appeal.

*(Order Pronounced in Open Court on 29/11/2019)*