2020 (2) TMI 1195 - AT - Central Excise

CENVAT Credit - input services - various insurance policies - Money Insurance, Public Liability Insurance, Product Liability Insurance, Loss of Profit for Unit and Fidelity Guarantee Policy - Group Personal Accident policy - HELD THAT - The Money Insurance, Public Liability Insurance, Product Liability Insurance, Loss of Profit for Unit and Fidelity Guarantee Policy are availed in or in relation to the manufacturing activity as has been discussed by the various decisions relied by the ld. counsel for the appellant - reliance can be placed in the case of JSW STEEL (SALAV) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD 2017 (2) TMI 318 - CESTAT MUMBAI and M/S. WHEELS INDIA LTD. VERSUS COMMISSIONER OF GST CENTRAL TAX, CHENNAI NORTH COMMISSIONERATE 2019 (7) TMI 150 - CESTAT CHENNAI - the disallowance of credit in respect of these insurance policies is unjustified and requires to be set aside - credit allowed. Group Personal Accident policy - penalty - HELD THAT - The appellant has to establish that the personal accident policy is intended only for the employee and that separate premium is not collected for each dependent. Even though the matter was adjourned to this date, directing the appellant to produce copy of the policy or any other evidence to establish that separate premium has not been collected for each dependent, the appellant has failed to do so - Since the appellant has not furnished sufficient evidence, the rejection of credit in respect of Group Personal Accident policy is legal and proper - credit disallowed - taking note of the fact that the issue is interpretational one, the penalty imposed is unwarranted and requires to be set aside. Appeal allowed in part.

Summary

Issues: Disallowance of credit of service tax paid on various insurance policies.

Analysis:
1. Dispute Overview: The appellants received a Show Cause Notice proposing to disallow the credit of service tax paid on several insurance policies. The original authority disallowed the credit for certain services, leading to an appeal before the Commissioner (Appeals). The Commissioner allowed the credit for workmen compensation policy but disallowed it for other insurance policies, prompting the appellants to approach the Tribunal.

2. Arguments by Appellant: The appellant's counsel argued that the rejected insurance policies were essential for indemnifying risks arising in the manufacturing business. Various policies like Money Insurance, Public Liability Insurance, Product Liability Insurance, Loss of Profit for Unit, and Fidelity Guarantee Policy were availed to cover different aspects of potential losses. The counsel cited relevant case laws to support the argument.

3. Arguments by Respondent: The respondent's representative supported the decision to disallow the credit, stating that the services fell under the exclusion part and were not directly related to manufacturing activities.

4. Tribunal's Decision: The Tribunal analyzed the nature of each insurance policy and its relevance to manufacturing activities. It found that insurances like Money Insurance, Public Liability Insurance, Product Liability Insurance, Loss of Profit for Unit, and Fidelity Guarantee Policy were indeed related to manufacturing activities based on precedents and case laws cited by the appellant. Consequently, the disallowance of credit for these policies was deemed unjustified and set aside. However, in the case of the Group Personal Accident policy, the appellant failed to provide evidence that the policy only covered employees without separate premiums for dependents. As a result, the credit disallowance for this policy was upheld. Despite upholding the disallowance, the penalty imposed was considered unwarranted and set aside.

5. Final Verdict: The impugned order was modified to set aside the disallowance of credit for most services except the Group Personal Accident Insurance Policy. The penalty related to the Group Personal Accident Insurance Policy was also set aside. The appeals were partly allowed with consequential relief as applicable.