2023 (8) TMI 790 - AT - Central Excise

Irregular availment and utilization of Cenvat Credit attributable to certain input services - Employees Health Insurance and Group Accidental Insurance Policy - rent a cab , Motor Vehicles Insurance - extended period of limitation - suppression of facts or not - HELD THAT - It is the case of the Appellant that their manufacturing unit is manned by a number number of workers/employees, who are either discharging their duties inside or outside the factory premises in relation to the manufacture and clearance of their dutiable final products. Amongst them some are covered under Employees State Insurance Schemes as per norms laid down in the scheme. Rest remain uncovered from any insurance scheme though they are engaged in various jobs as assigned to them. The company as employer cannot shirk their responsibilities so far the safety and security of the employees is concerned specially if any untoward happening occurs. The employees who are not covered under ESI Scheme are well covered under the insurance policy for any untoward eventuality, therefore, it is also a moral obligation on the part of the employer to look after the welfare of the employees who are working inside or outside of the premises. Moreover, insurance coverage to the employees is mandatorily required as per the Factories Act - it is found that Rule 2(l)(ii)(BA) (C) of the Cenvat Credit Rules, inter alia excludes life insurance and health insurance from the purview/ambit of the definition of input service when such service is used primarily for personal use and consumption. Extended period of limitation - suppression of facts or not - HELD THAT - The Department was at liberty to call for any information, put in query, undertook any verification, if felt necessary. All the factors taken together nullified Department s allegation of willful suppression of facts with intent to evade payment of duty. Accordingly, invocation of extended period is uncalled for - Tribunal in the case of BCH ELECTRIC LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-IV 2013 (9) TMI 551 - CESTAT NEW DELHI has observed the appellant cannot be accused of suppression of the relevant information as it is not the allegation of the department that the appellant in terms of legal requirements were required to give invoice-wise and item-wise details of Cenvat credit which they have not given. Therefore, only normal limitation period would be available to the department for recovery of ineligible Cenvat credit. The impugned order cannot be sustained and is accordingly set aside. The Appeal filed by the Appellant is allowed on limitation with consequential relief, as per law.

Summary

Issues involved:
The issues involved in this case include the disallowance of Cenvat Credit on certain input services, the sustainability of the demand, imposition of penalty, and the limitation of time for issuing the demand.

Disallowed Cenvat Credit on Input Services:
The case involved the disallowance of Cenvat Credit on Employees Health Insurance, Group Accidental Insurance Policy, 'rent a cab', and Motor Vehicles Insurance for the period from May 2011 to March 2012. The Appellant argued that the insurance coverage for employees was a mandatory obligation to ensure their safety and security, and therefore, should not be excluded from the definition of input service. They contended that such coverage was not primarily for personal use and consumption but rather for the welfare of the employees, citing relevant decisions in support of their argument.

Sustainability of Demand and Imposition of Penalty:
The Appellant challenged the sustainability of the demand and imposition of penalty, stating that the demand was not sustainable on merits. They argued that no penalty should be imposed as they had availed the credit under a bona fide belief without any intention to evade duty or tax. The Appellant also contended that the demand was barred by the limitation of time, as there was no willful suppression of facts and all relevant information had been regularly submitted to the department.

Limitation of Time for Issuing Demand:
The Appellant asserted that the demand was barred by the limitation of time since it was not issued within the normal time frame from the date of knowledge of the alleged irregularity. They emphasized that they had regularly submitted the required returns to the department, and there was no willful suppression of facts. Citing relevant case law, the Appellant argued that the extended period for issuing the demand was not applicable in this case, and therefore, the demand notice should be considered time-barred.

Conclusion:
In the judgment delivered by the Appellate Tribunal CESTAT KOLKATA, the disallowance of Cenvat Credit on certain input services for the period from May 2011 to March 2012 was set aside. The Tribunal found in favor of the Appellant, stating that the insurance coverage for employees was a mandatory obligation for the safety and security of the employees, and therefore, should not be excluded from the definition of input service. The Tribunal also held that the demand was barred by the limitation of time and should be dropped along with interest and penalty. The Appeal filed by the Appellant was allowed on limitation with consequential relief, as per law.