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2025 (4) TMI 566 - AT - Central ExciseCENVAT Credit - input services - renting of motor vehicle - Repair and maintenance services relating to motor vehicle - life/medical or health insurance services extended to staff and personnel of CISF security - services of catering health travel - services of miscellaneous nature viz. removal of honey comb removal of debris disposal of canteen waste/medical waste maintenance of garden grass cutting etc. which are not related to manufacturing activities - levy of interet and penalty. Medical/health insurance policy taken for their employees - HELD THAT - The appellants are mandatorily required to take medical/health insurance for their employees in compliance with the above statutory requirement. However for those employees who are not covered by the ESI scheme general medical/health insurance has been taken by the appellants - the beneficiary of such services is the appellants and not the individual employees. Therefore the embargo put on the input services used primarily for personal use or consumption of any employee for exclusion from the scope of coverage of input service under Clause (C) of Rule 2(l) of CCR of 2004 does not apply to the present case. The dispute in respect of availment of Cenvat credit on medical insurance service is no more open to debate as in a number of cases the Tribunal has held the same as admissible - Reliance can be placed in the case of Honda Motorcycle Scooter (I) Pvt. Ltd. Vs. Commissioner of C. Ex. Delhi-III 2016 (8) TMI 308 - CESTAT CHANDIGARH - Service Tax paid on medical/health insurance services for an amount of Rs.35, 42, 452/- are eligible to be availed of Cenvat credit as per statutory provisions. Security services provided by CISF - HELD THAT - CISF has been tasked with providing security to all petroleum oil refineries recognizing their strategic importance and the need for robust security measures including fire safety counter terrorist attack etc. As such security services have become mandatory the health/medical insurance incurred in connection with such security staff shall also be considered as integral part of the security services which are essential input service required to be used in manufacture of petroleum products. Further security services have also been specifically provided in the inclusive part of the definition of input service under Rule 2(l) ibid. Therefore Service Tax paid on medical/health insurance services for CISF Security for an amount of Rs.10, 06, 493/- are eligible to be availed of as CENVAT credit. Service tax paid on maintenance of gardens - HELD THAT - In view of the mandatory nature of services that is required to be engaged by industry in carrying out their manufacturing activity we find that the services engaged by the appellants in respect of maintenance of gardens dry grass cutting in order to avoid fire hazard is found to be eligible input services. Therefore Service Tax paid on such services for an amount of Rs.4, 88, 735/- are eligible to be availed of as CENVAT credit. Service tax paid on the services of search of documents which are stored in safe custody for eight years - HELD THAT - The services of underwater diving services used in the appellants refinery is also found to be an essential services inasmuch as these services are used for removing the debris from the sea near the jetty pumps maintained for receipt of crude petroleum or other petroleum products which are used in processing at their refinery plant. As these services are in the nature of routine repair and maintenance of operational equipment involved in the manufacturing process these are covered as eligible input under Rule 2(l) ibid. Therefore Service Tax paid on the above two services for an amount of Rs.2, 842/- as discussed above are eligible to be availed of as CENVAT credit. Outdoor catering services - HELD THAT - The service is specifically excluded under clause (C) of Rule 2(l) ibid it cannot be included in the eligible input services. Maintenance and repair of asphalt road removal of crushed stones etc. - bus service for travel of CISF security from Vashi to Bandra Station in the city which is outside the refinery plant - maintenance of honeycomb - supply and erection of shamiana which is used for resting of contract workers during shutdown maintenance period - video imaging work programme services in respect of various programs conducted for vendors and for discussion point with employees - HELD THAT - There are no proper justification have been provided by the appellants for treating these services as input services having direct or indirect connection with the manufacturing operations of the appellants. Hence we do not find any reason to differ with the findings of the learned adjudicating authority in rejecting the CENVAT credit taken as ineligible input service to the extent of an amount of Rs.9, 03, 065/- on the above services. Service tax paid on insurance premium in respect of health/medical insurance of family members/dependents of the employees - HELD THAT - The appellants have already reversed the ineligible CENVAT credit prior to the issue of SCN on their own. Levy of interest and penalty - HELD THAT - There do not exist any ground for imposition of penalty on the appellants and for levy of any interest on the above disputed amount which have been confirmed as part of the adjudged demands in the impugned order. In view of detailed discussions on individual input services it is opined that for total amount of Rs. 50, 40, 522/- such services are found to be eligible for availing the service tax paid as CENVAT credit. Therefore to this extent the impugned order is not legally sustainable. Conclusion - The appellants are entitled to CENVAT credit for an amount of Rs. 50, 40, 522/- for services found to be eligible under the statutory provisions. The denial of CENVAT credit for services amounting to Rs.9, 03, 065/- partially upheld which did not qualify as input services. Appeal disposed off.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are: 1. Whether the appellants, M/s Hindustan Petroleum Corporation Limited, are eligible to avail CENVAT credit on various input services utilized during the manufacture of petroleum products under Rule 2(l) of the CENVAT Credit Rules, 2004. 2. Whether the services such as medical/health insurance, security services, maintenance of gardens, and other miscellaneous services qualify as 'input services' for the purpose of CENVAT credit. 3. Whether the penalties imposed on the appellants for availing ineligible CENVAT credit are justified. ISSUE-WISE DETAILED ANALYSIS 1. Eligibility of Medical/Health Insurance as Input Service The appellants argued that medical/health insurance for employees is mandatory under the Employees' State Insurance Act, 1948, and thus should qualify as an input service. The Court examined the definition under Rule 2(l) of the CCR, 2004, and previous judgments, including those of the Karnataka High Court, which supported the inclusion of such insurance as an input service. The Court concluded that the appellants are eligible for CENVAT credit on medical/health insurance services, as these are statutory obligations and not primarily for personal use. 2. Security Services Provided by CISF The appellants contended that security services, including health/medical insurance for CISF personnel, are mandatory and integral to their operations. The Court recognized the strategic importance of security services for petroleum refineries and found that such services are explicitly included in the definition of input service. Thus, the Court allowed CENVAT credit for these services. 3. Maintenance of Gardens The appellants maintained gardens as mandated by the Maharashtra Pollution Control Board. The Court agreed that these services are essential for compliance with environmental regulations and thus qualify as input services. Consequently, the Court allowed CENVAT credit for the maintenance of gardens. 4. Miscellaneous Services The Court evaluated various other services such as document storage, underwater diving for debris removal, and others. It found that services directly related to manufacturing operations or compliance, such as auditing and maintenance, qualify as input services. However, services like outdoor catering and certain transport services were excluded as they did not directly relate to manufacturing operations. 5. Penalties and Interest The Court noted that the appellants had reversed the ineligible CENVAT credit before the issuance of the show cause notice and maintained a sufficient credit balance. Therefore, the Court found no justification for imposing penalties or interest on these amounts. SIGNIFICANT HOLDINGS The Court established several core principles: "The embargo put on the input services used primarily for personal use or consumption of any employee for exclusion from the scope of coverage of 'input service' under Clause (C) of Rule 2(l) of CCR of 2004, does not apply to the present case." "Security services have also been specifically provided in the inclusive part of the definition of 'input service' under Rule 2(l) ibid." The Court concluded that the appellants are entitled to CENVAT credit for an amount of Rs. 50,40,522/- for services found to be eligible under the statutory provisions. It partially upheld the denial of CENVAT credit for services amounting to Rs.9,03,065/- that did not qualify as input services. The appeal was disposed of with the Court allowing CENVAT credit for eligible services and setting aside penalties and interest imposed on the appellants. The miscellaneous applications filed by both parties were also disposed of.
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