By TIOL News Service

MUMBAI, JAN 18, 2018: CENVAT Credit on medical insurance services has been denied to the assessee and, therefore, they are in appeal before CESTAT.

It is submitted that during the period July 2007 to September 2012 they had claimed CENVATCredit in respect of medical insurance for its staff and the same is admissible in view of the Tribunal decision in Reliance Industries Ltd. - 2016-TIOL-322-CESTAT-MUM.

The AR pointed out that the case law cited pertains to the period prior to the amendment of the definition of Input service w.e.f 01.04.2011; that there is a specific exclusion clause in respect of insurance services availed primarily for personal use of employees; that in the instant case, the Commissioner (Appeals) had clearly observed that the policy not only covers the workers but also includes their dependents and, therefore,there is a reason to believe that the said policy may be primarily for the personal use of the employee; that for each employee there will be two or three family members covered by the policy; that most of the people covered in the policy would not be employees.

The exclusion clause (C) of Rule 2(l) as substituted w.e.f 01.04.2011 reads –

The Bench inter alia observed -

+ The decisions cited by the appellant are not relevant, as they relates to the earlier definition of input service when there were no specific exclusion.

+ It is apparent that there are legal requirements relating to providing insurance cover to employees however there are no legal requirements to provide such cover to family members. In these circumstances, it needs to be held that credit is admissible to the extent the insurance cover relates to employees for whom it is mandatory to provide such cover.

+ In respect of family members, it is primarily and solely for personal use of employees.

The impugned order was set aside and the matter was remanded to original authority to examine the facts and allow credit to the extent the same relates to the statutory mandatory cover required to be provided.

(See 2018-TIOL-247-CESTAT-MUM)