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TMI Blog2024 (3) TMI 1407X X X X Extracts X X X X X X X X Extracts X X X X ..... facture of the product and, therefore, activities in relation to business can cover all activities that are related to the functioning of a business. The Bombay High Court in Ultratech Cement [2010 (10) TMI 13 - BOMBAY HIGH COURT], after considering the earlier judgment of the Bombay High Court in Coca Cola, took the view that the definition of 'input service' in rule 2(l) of the CENVAT Rules consists of three categories of services, and CENVAT credit of service tax paid on all such services would be available to an assessee. The judgment of the Supreme Court in Maruti Suzuki [2009 (8) TMI 14 - SUPREME COURT] would not come to the aid of the department to contend that unless there is a clear nexus between 'input service' and 'manufacturing activity', CENVAT credit cannot be claimed. The appellant would be entitled to avail CENVAT credit of the service tax paid on procuring insurance policies for the employees. Insurance for family members of employees - HELD THAT:- It has been found as a fact in the present case that the appellant is entitled to avail CENVAT credit of the service tax paid on the insurance premium for the employees and their family members in terms of the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to establish integral connection between the service and the business of manufacture of final product, in order to be categorized as 'input service' under such definition clause, for the benefit of Cenvat credit on the service for the period prior to the amendments made in 2011?" 2. M/s. Tata Teleservices (Maharashtra) Limited the appellant is a company registered under the Companies Act, 1956 and is engaged in providing telephone services to subscribers under a license from the Department of Telecommunication in the Government of India. The appellant is registered with the Service Tax Department under the service category of 'telecommunication services'. 3. A show cause notice dated October 23, 2012 was issued to the appellant for the period April 01, 2007 to March 31, 2011 alleging that the appellant had availed CENVAT credit of the service tax paid on group medical policies and accident insurance policies extended to the employees and their families and utilized such CENVAT credit for payment of service tax on output services, but as such insurance policies were in the nature of welfare and/or incentive to the employees, these services cannot be considered as 'input service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since in rendering of such nature of services/business as output services, such additional facilities/benefits in form of contractual obligation and also meeting the social requirements as an employer, it becomes essential to provide these facilities to its employees." (emphasis supplied) 6. The appellant also pointed out that life insurance services were also linked to 'activities relating to business', and hence the appellant would also be entitled to avail CENVAT credit of the service tax paid on the policies under the inclusive part of the definition of 'input service'. In this connection, the appellant pointed out : "Without prejudice to the submission made in the above paragraph, we would further like to submit that in any case, CENVAT credit should be allowed on the Life Insurance services since these services are used in relation to activities relating to business and hence, are also covered in the inclusive limb of the definition of input service given the following interpretation elaborated above on the phrases used under, inclusive limb of definition 'input services': - The phrase 'activities relating to business' is of wide import and the use of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or used in the business of providing output service. In the absence of adequate material justifying the eligibility as input service, I deny the amount of Rs. 88,53,123/- availed as CENVAT credit. 15. The Noticee have cited various decisions in support of their claim of entitlement to the impugned Cenvat credit. Firstly, the facts in all these cases are distinguishable considering the input services and output service involved in the present case. Secondly, most of the decisions have been passed before the decision of Hon'ble Supreme Court in the case of Maruti Suzuki (supra) and Manikgarh Cement (supra). Therefore, the ratio of such cases cannot be applied to the present case. Moreover, the Noticee failed to discharge the burden of proof regarding the admissibility of CENVAT credit as required under sub-rule (6) of Rule 9 of Cenvat Credit Rules, 2004. 16. In view of the foregoing, I hold that availed Cenvat credit of Rs. 88,53,123/- is a case of wrong availment of ineligible CENVAT credit." (emphasis supplied) 8. When the appeal came up for hearing, the Division Bench noted the plea of the appellant that insurance policies were taken in the name of the employees and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surance premium by the employer for the employees and their family members, referred the matter to a Larger Bench of the Tribunal. This is how the matter has been placed before this Larger Bench of the Tribunal. 11. The issue concerns the definition of 'input service' under rule 2(l) of the CENVAT Rules. The definition, as it stood prior to 01.04.2011, is reproduced below : "2(l) ― 'input service' means any service,- (i) used by a provider of taxable service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence had not been placed to establish that 'insurance services' impact the efficiency in providing 'output services', nor the appellant had produced any evidence to prove nexus of 'insurance service' with 'output services', namely, 'telecommunication service'. The Commissioner, therefore, held that in such circumstances 'insurance services' cannot be said to be services used for providing output services or used in relation to the business of output service. The decisions relied upon by the appellant to substantiate that the appellant was entitled to avail CENVAT credit were distinguished as they had been delivered prior to the decision of the Supreme Court in Maruti Suzuki India Ltd. vs. Commissioner of Central Excise, Delhi-III 2009 (240) E.L.T. 641 (SC) and the decision of the Tribunal in Commissioner of Central Excise, Nagpur vs. Manikgarh Cement Works 2010 (18) STR 275 (Tri.-Mum), which followed the decision of the Supreme Court in Maruti Suzuki. 17. To appreciate the issue, it would be useful to refer to certain decisions which have examined the definition of 'input service' in rule 2(l) of the CENVAT Rules. 18. In Commissioner of Central Excise, Bangalore-II vs. Millipore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was right in holding that the service tax paid in all these cases would fall within the input services and the assessee is entitled to the benefit thereof." (emphasis supplied) 19. In Axis Bank, the Bombay High Court examined whether 'Group Insurance Health Policy' taken by an employer for the employees would be 'input service' as defined in rule 2(l) of the CENVAT Rules. The question that had been urged for consideration of the High Court by the Revenue was: "(a) Whether the Group Insurance Health Policy taken by the assessee for its employees, is an "input service" as defined under Rule 2(1) of the Cenvat Credit Rules, 2004 and the CESTAT was right in allowing the CENVAT Credit on the same?" 20. This question was answered by the High Court in the following manner : "4. Re Question (a) :- (i) Respondent-Assessee during period April, 2003 to March, 2011, took CENVAT Credit of service tax paid to the Insurance Companies. This on account of Insurance taken out for its employees. (ii) The authorities under the Act denied the benefit of CENVAT Credit taken on the service tax paid to the Insurance Companies for Insurance of its employees. This on the ground that, this expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to work with a peace of mind. Thus, the benefit to the employee is incidental and not the primary purpose or the object of taking the insurance cover for the employees. The service would, therefore, be covered in the main limb of the definition contained rule 2(l). The Bombay High Court also found that in any view of the matter, the service would also be covered by the inclusive part of the definition of 'input service' in rule 2(l). 22. The Commissioner has distinguished the aforesaid decisions on which reliance was placed by the appellant by placing reliance on the decision of the Supreme Court in Maruti Suzuki and the decision of the Tribunal in Manikgarh Cement Works that followed the judgment of the Supreme Court. 23. The judgment of the Supreme Court in Maruti Suzuki was in the context of 'input' defined under rule 2(k) and not 'input service' defined under rule 2(l) of the CENVAT Rules and, therefore, would not be applicable to the present issue. This judgment of the Supreme Court was considered by the Bombay High Court in Commissioner of Central Excise, Nagpur vs. Ultratech Cement Ltd. 2010 (20) S.T.R. 577 (Bom.) and it was held that the definition of 'input service' in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would, therefore, be appropriate to refer to the decision of the Bombay High Court in Coca Cola, wherein the definition of 'input service' under rule 2(l) of the CENVAT Rules, as it stood prior to amendment made on 01.04.2011, came up for interpretation. The issue was as to whether the appellant, a manufacturer of non-alcoholic beverage bases, was eligible to avail credit of the service tax paid on advertising services, sales promotion, market research and the like services that had been availed. The High Court held that the expression 'means and includes' is exhaustive and that the expression 'business' is an integrated/continued activity and is not confined or restricted to mere manufacture of the product and, therefore, activities in relation to business can cover all activities that are related to the functioning of a business. The definition of 'input service' was divided into five limbs/categories, and it was held that if an assessee could satisfy any one of the five limbs, then credit of the input service would be available, even if the assessee did not satisfy other limbs of the above definition. The Bombay High Court ultimately observed: "39. The definition of input serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of the final product. This test will also apply in the case of sales promotion." (emphasis supplied) 27. The Bombay High Court in Ultratech Cement, after considering the earlier judgment of the Bombay High Court in Coca Cola, took the view that the definition of 'input service' in rule 2(l) of the CENVAT Rules consists of three categories of services, and CENVAT credit of service tax paid on all such services would be available to an assessee. The relevant portion of the judgment of the Bombay High Court is reproduced below : "27. The definition of 'input service' as per rule 2(l) of CENVAT Rules (insofar as it relates to the manufacture of final product is concerned), consists of three categories of services. The first category, covers services which are directly or indirectly used in or in relation to the manufacture of final products. The second category, covers the services which are used for clearance of the final products up to the place of removal. The third category, includes services namely : (a) Services used in relation to setting up, modernization, renovation or repairs of a factory, (b) Services used in an office relating to such factory, (c) Services l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was not brought to the notice of the High Court in Manikgarh Cement. This apart, the reasoning and the arguments which found acceptance of the Bombay High Court in Coca Cola, do not seem to have been pleaded before the Bombay High Court in Manikgarh Cement. 31. The Tribunal in Reliance Industries Ltd. vs. Commissioner of C. Ex. & ST (LTU), Mumbai 2016 (42) STR 457 (Tri.-Mumbai) took note of the seemingly contrary views expressed by the Bombay High Court in the aforementioned two judgments in Coca Cola and Ultratech Cement on the one hand, and Manikgarh Cement on the other hand, and made the following observations: "8.2 The reliance placed by the Learned D.R. in the case of Manikgarh Cement (supra) needs to be addressed by us as the lower authorities have also relied upon the very same judgment to hold against the appellant herein. On perusal of the judgment of the Hon'ble High Court of Bombay in the case of Manikgarh Cement (supra) we find that the judgment of the Hon'ble High Court in the case of Coca Cola India Pvt. Ltd. (supra) was not cited before them. Be that as it may, we also find that in the narration of the facts as recorded by the Hon'ble High Court there is nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 2(l) of the 2004 Rules has been conclusively settled by the jurisdictional Bombay High Court in Coca Cola India and Ultratech Cement. It has also been consistently so held in Principal Commissioner v. Essar Oil Ltd. [2016 (41) S.T.R. 389 (Guj.)], Commr. of S.T., Mumbai-II v. Willis Processing Services (India) Pvt. Ltd. [2017 (7) G.S.T.L. 12 (Bom.)] and Commr. of C. Ex. & Service Tax v. Tata Consultancy Services Ltd. [2018 (362) E.L.T. 777 (Bom.)]. It would be pertinent to reproduce the relevant portion of the judgment of the Bombay High Court in Tata Consultancy Services and it is as follows : "2. The Revenue proposes the questions at page Nos. 6 and 7 as substantial questions of law. However, these very questions have been considered by this Court in the two judgments. One rendered in the case of Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd. reported in 2010 (260) E.L.T. 369. That judgment and order has been followed by another Bench in deciding Central Excise Appeal No. 168 of 2017 (The Commissioner, Service Tax, Mumbai-II v. M/s. Willis Processing Services (India) Pvt. Ltd. [formerly known as M/s. Tgrinity Computer Processing (India) Pvt. Ltd.] decided o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the employees. This apart, as noticed above, the Bombay High Court in Axis Bank clearly held that the employer would be entitled to avail CENVAT credit of service tax paid on insurance policy for the employees, both under the 'means' part as also the 'inclusive' part of the definition of 'input service' in rule 2(l) of the CENVAT Rules. 38. Industries involved in banking, software, telecommunication and insurance services depend highly on skilled, quality and experienced manpower for providing quality output services. The employers in such industries face challenges in attracting and retaining the best available talents in the market and, therefore, have to extend benefits which are prevalent in the market to avoid brain drain and attrition. As the nature of such business is highly competitive, an employee acts as an asset depending upon the experience, knowledge and exposure in the field. To retain the best resources for providing the necessary 'output services', industries provide this facility by way of a contractual obligation. 39. What transpires from the aforesaid discussion is that the appellant would be entitled to avail CENVAT credit of the service tax paid on procurin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family of the employees. The said decision was also followed by the Hon'ble Karnataka High Court in the case of Commissioner of Central Excise & Service Tax v. Micro Labs Ltd. - 2012 (26) S.T.R. 383 (Kar.) = 2011 (270) E.L.T. 156 (Kar.) wherein it was held that group insurance health policy, though a welfare measure, is an obligation cast under the statute that the employer has to obey and, therefore, the policy taken by the employer is a service constituting activity relating to business which is covered under the 'input service' definition." (emphasis supplied) 42. The decision of the Tribunal in John Deere India, though decided on 21.07.2015, does not consider the earlier decision of the Tribunal in PTC Software which was delivered on 06.03.2013. The said decision also does not give any reason as to why the CENVAT credit availed on that portion of service tax in respect of family members of the employees cannot be claimed. 43. In Emerson Export, the claim filed for refund of service tax paid on mediclaim policy was denied merely because of the concession made by the learned Chartered Accountant appearing for the appellant. 44. In Infosys Ltd., the decision of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant had not recovered the insurance premium from the employees and had themselves borne the expenditure. 48. Learned authorized representative appearing for the Department has placed reliance on the judgment of the Supreme Court in ALD Automotive Pvt. Ltd. vs. The Commercial Tax Officer, now upgraded as the Assistant Commissioner (CT) & Ors. 2018-TIOL-385-SC-VAT as also to the judgment of the Supreme Court in M/s TVS Motor Company Ltd. vs. The State of Tamil Nadu & Ors. Civil Appeal No. 10560-10564 of 2018 decided on October 12, 2018 These decisions of the Supreme Court hold that input credit is merely a concession which has to be granted within the four walls of the Statute and cannot be claimed as a matter of right. 49. It has been found as a fact in the present case that the appellant is entitled to avail CENVAT credit of the service tax paid on the insurance premium for the employees and their family members in terms of the definition of 'input service' contained in rule 2(l) of the Credit Rules. The aforesaid judgment of the Supreme Court, therefore, would not come to the aid of the Department. 50. The decision of the Tribunal in PTC Software correctly holds that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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