By TIOL News Service

MUMBAI, JULY 26, 2016: THE appellant is an exporter of various services. Being an exporter, they were unable to utilise the credit so accumulated for discharge of tax dues. In accordance with the provisions of CCR, 2004, appellant sought refund of this accumulated credit for April 2010 which the original authority sanctioned to the extent of Rs.49,07,748/- while rejecting claim of Rs.13,38,804/-. The rejected portion relates to the service tax paid on the premium charged on group insurance scheme. The principal ground for rejection was that the cover of group insurance is not restricted to the employees of the appellant but extends to their family members, which according to the refund sanctioning authority, amounted to procurement of services not entirely for the purpose of rendering ‘output service'.

The Commissioner (Appeals)upheld the findings of the lower authority and the matter is before the CESTAT.

The appellant submitted that the insurance policy documents would reveal that this is a "family floater scheme" in which the amount of premium payable does not increase merely because family members are included in the coverage. It is also the contention of the appellant that as the total amount of premium payable for the employee pool will not be any less even if the family members were not included, the consideration paid to insurer is entirely for business purpose. Reliance is placed on the decision in Stanzen Toyotetsu - 2011-TIOL-866-HC-KAR-ST.

The AR justified the denial of refund and placed reliance on the decisions in Semco Electric Pvt Ltd - 2011-TIOL-965-CESTAT-MUM & Infosys Ltd. - 2014-TIOL-409-CESTAT-BANG, which held that credit cannot be availed on input service of insurance premium to the extent that is attributable to the coverage of family members of the employees.

The Bench observed –

"6. Having heard both the sides, it appears that tax paid on insurance premium is eligible for availment as CENVAT Credit and the short-point for determination is the extent to which the premium does not relate to coverage of employees under the group insurance scheme. In the instant case, the appellant is charged with a premium which does not vary with the number of dependents who are additionally covered by the same insurance scheme. In other words, even if none of the dependents were within the coverage, the premium amount would not alter or vary. Accordingly no part of the premium can clearly be distinguishable as or attributable to the extension of coverage to family members…."

The appeal was allowed with consequential relief of refund of credit accumulated.

(See 2016-TIOL-1851-CESTAT-MUM)