By TIOL News Service

MUMBAI, JAN 23, 2015: CENVAT credit availed in respect Insurance auxiliary services during the period July to December, 2010 was denied by the lower authorities. It is the stand of the department that the premium paid by the appellant in respect of group insurance/insurance of their employees including retired employees/mediclaim is not covered under the definition of 'input services' and it has no direct nexus with the manufacture, storage and clearance of the final products.

The appellant submitted that the above component is a part of the costing of the final product in terms of CAS-4 and, therefore, the same is CENVATable. Reliance is also placed on the decisions in Coca Cola India Pvt. Ltd. vs. CCE, Pune-III - 2009-TIOL-449-HC-MUM-ST & Millipore India Ltd. vs. CCE Bangalore-II - 2009-TIOL-490-CESTAT-BANG which decision was upheld by the Karnataka High Court.

The AR submitted that in the case of Millipore India (supra), insurance premium for retired employees was not an issue; that there has to be a nexus between the expenditure and the manufacture. Inasmuch as since the element of nexus is absent with respect to insurance premium paid for securing the life/health of the retired employee, the credit has been rightly denied.

The Bench observed -

"3. …, I agree with the ruling of the Hon'ble Karnataka High Court in the case of Millipore India Ltd. (supra), wherein, after examining the CAS-4 Standards, the Hon'ble High Court accepted that all factors have to be taken into consideration while fixing the cost of the final products. The Hon'ble High Court further observed that the definition of 'input services' is too broad. Further it is not disputed in the facts of the case that the premium so paid in the present appeal has formed part of the cost of excisable goods on which excise duty has been paid on removal. Therefore, the appellant is entitled to avail cenvat credit for the insurance premium paid in respect of group insurance/insurance of employees including retired employees/mediclaim which are covered under the definition of 'input services' and have a nexus…."

The appeal was allowed with consequential benefits.

(See 2015-TIOL-181-CESTAT-MUM)