2024 (10) TMI 49 - AT - Central Excise

Recovery of wrongly availed as credit of service tax and cess - input service - GTA - Mediclaim premium - period from 2007-08 to 2010-11 (upto Feb/2011). GTA Service - HELD THAT - As per exclusion (BA) to the said provision only services of general insurance business, servicing, repair and maintenance, in so far as they relate to a motor vehicle was excluded. The said definition also permitted credit of outward transportation upto the place of removal when it related to activities relating to business. Further it was only from 01/04/2011, that the definition of the term Input service given under Rule 2(l) of the CENVAT Credit Rules was substituted vide N/N. 3/2011-CE(NT) dated March 1, 2011, inter alia, deleting the phrase activities relating to business , thus, limiting the wide scope of the term Input services . In CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., 2010 (10) TMI 13 - BOMBAY HIGH COURT , the Hon ble Bombay High Court, examined availing credit of service tax in the context of a manufacturing unit and had held that the definition of input service is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product, during that relevant time. Even post the amendment to the definition of the term Input service given under Rule 2(l) of the CENVAT Credit Rules, a Larger Bench of this Tribunal in the case of M/S. THE RAMCO CEMENTS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY 2023 (12) TMI 1332 - CESTAT CHENNAI-LB examined whether CENVAT credit on GTA services for outward transportation of goods from the factory to the buyer s premises be denied in cases where the goods are sold on FOR (buyer s premises) basis. The order held that the place of removal whether at the factory premises or at the buyers premises has to be ascertained by applying the judgments of the Supreme Court in COMMISSIONER CENTRAL EXCISE, MUMBAI-III VERSUS M/S. EMCO LTD. 2015 (8) TMI 200 - SUPREME COURT and COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. 2015 (4) TMI 857 - SUPREME COURT . The invoice is on FOR destination basis and no separate freight charges are included in the invoice. In the circumstances stated the GTA services form a part of the cost of the goods and are activities relating to business which in terms of the CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., 2010 (10) TMI 13 - BOMBAY HIGH COURT would make it an eligible input under the definition of input services during the relevant time. Insurance premium for personal insurance services - HELD THAT - Larger Bench of the Tribunal in the case of M/S. RELIANCE INDUSTRIES LTD., VADODRA VERSUS COMMISSIONER CENTRAL EXCISE SERVICE TAX (LTU) , MUMBAI 2022 (4) TMI 1357 - CESTAT MUMBAI (LB) had examine the issue whether CENVAT credit could have been availed by the appellant on the Service Tax paid on insurance premium for availing medi-claim facility for employees who had opted for voluntary separation scheme, prior to 01/04/2011. It held that the scheme was an integral part of the employee cost and forms a part of the final product and would certainly be entitled to CENVAT credit of such service. The appellant was eligible for input credit on Service Tax paid for GTA and on insurance premium for personal insurance services, during the relevant time and the credit disallowed and demanded on the said services in the impugned order needs to be set aside along with the interest involved on the same and the penalty imposed and is so ordered. Appeal disposed off.

Summary

Issues:
- Dispute regarding availment of credit on GTA services and Mediclaim insurance premium.
- Interpretation of the definition of "input service" under Rule 2(l) of CENVAT Credit Rules, 2002.
- Applicability of case laws and circulars in determining eligibility for credit on GTA services and Mediclaim insurance premium.

Analysis:

The appeal before the Appellate Tribunal CESTAT Chennai involved a dispute over the availment of credit on GTA services and Mediclaim insurance premium by the appellant, a manufacturer of cast articles of iron and aluminum. The appellant had availed CENVAT credit on various input services during the period from 2007-08 to 2010-11, which the revenue contended were ineligible under Rule 2(l) of CENVAT Credit Rules, 2004. The Adjudicating Authority confirmed the recovery of an amount wrongly availed as credit and dropped other demands. The appellant, aggrieved by the order, appealed before the Commissioner (Appeals), who upheld the decision. The appeal before the Tribunal was limited to GTA services and Mediclaim insurance, excluding the demand on fuel charges.

In the hearing, the appellant's counsel argued that the appellant was entitled to credit on GTA services for outward transportation as the sale took place at the customer's place under FOR destination basis contracts. Reference was made to relevant circulars and a Tribunal decision supporting the appellant's position. Regarding Mediclaim insurance service, reliance was placed on a Tribunal decision allowing credit on such services. The Authorized Representative for the respondent supported the findings in the impugned order.

The Tribunal analyzed the definition of "input service" under Rule 2(l) of CENVAT Credit Rules, 2002, and relevant case laws. The definition included services used in relation to setting up, modernization, renovation, or repairs of a factory, among other activities. The Tribunal referred to a Bombay High Court judgment emphasizing that the definition of "input service" extends to all services used in relation to the business of manufacturing the final product.

The Tribunal further discussed the applicability of case laws and circulars in determining eligibility for credit on GTA services and Mediclaim insurance premium. It cited a Tribunal decision allowing credit on insurance premium for personal insurance services before a specific exclusion came into effect. Ultimately, the Tribunal held that the appellant was eligible for input credit on GTA services and insurance premium for personal insurance services during the relevant period. The credit disallowed and demanded in the impugned order was set aside, along with interest and penalties. The appellant was granted consequential relief as per the law, and the appeal was disposed of accordingly.