2023 (1) TMI 386 - AT - Central Excise

Denial of CENVAT Credit - premium paid for group insurance to cover employees opting for voluntary separation scheme (VSS) - HELD THAT - The dispute stands resolved by response of the Larger Bench of the Tribunal in M/S. RELIANCE INDUSTRIES LTD., VADODRA VERSUS COMMISSIONER CENTRAL EXCISE SERVICE TAX (LTU) , MUMBAI 2022 (4) TMI 1357 - CESTAT MUMBAI (LB) relating to denial of credit availed in March 2007, where it was held that the appellant would be entitled to avail CENVAT credit on the service tax paid on insurance premium for employees who had opted for the Voluntary Separation Scheme . Appeal allowed.

Summary

Issues:
Denial of CENVAT credit for premium paid for group insurance under voluntary separation scheme (VSS).

Analysis:
The appellant, a manufacturer of excisable goods, was issued a show cause notice for denying CENVAT credit, specifically for the premium paid for group insurance under a voluntary separation scheme (VSS). The order-in-original denying the credit was upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal. The appellant argued that a similar dispute had been resolved by a response from the Larger Bench of the Tribunal in a previous case. The Authorized Representative contended that the final decision in the connected appeal was pending. Upon consideration, the Tribunal found that the issue had been conclusively settled by the Larger Bench, which held that the premium paid for providing mediclaim under the VSS had a direct nexus to the manufacturing operations, making it eligible for CENVAT credit under Rule 2(l) of the 2004 Rules.

The Tribunal referred to various judgments, including those of the Bombay High Court, to support the conclusion that the insurance premium paid by the appellant for mediclaim of employees under the VSS constituted an 'input service' as per Rule 2(l) of the 2004 Rules. It was emphasized that the eligibility of credit under the Rules was not linked to the manner in which duty was discharged on finished goods. The Tribunal highlighted the importance of judgments like Ultratech Cement and Coca Cola India in establishing the entitlement to credit for services forming part of the value of the final product.

Moreover, the Tribunal discussed the definition of 'employee cost' under CAS-7, emphasizing that medical benefits related to employees and dependents, even under schemes like VRS or retirement, were integral to employee costs. Relying on the precedent decision in a similar dispute involving the same appellant, the Tribunal set aside the impugned order and allowed the appeal. The judgment was pronounced in open court on 22/12/2022.