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CX - If insurance cover in respect of which credit has been claimed is exclusively in respect of injuries or damages to factory employee, then credit would be admissible: CESTAT

By TIOL News Service

MUMBAI, JAN 19, 2018: THE assessee as well as Revenue are in appeal against the order passed by the Commissioner(A).

The assessee submits that the credit in respect of the service of outdoor catering availed for their canteen for the period after 1.4.2011 has been disallowed. Further, they had already reversed the credit relating to service tax paid on the amount recovered from the employees in this regard. It is emphasized that credit of canteen services which are mandatory in nature cannot be denied [Ultratech Cement Ltd. - 2010-TIOL-745-HC-MUM-ST referred]; that in these circumstances no penalty should have been imposed and no interest should be demanded.

It is the submission of the AR that the impugned order wrongly allows the credit of CENVAT in respect of group insurance policy and wrongly restricts the penalty to 50% of the amount of inadmissible credit in respect of outdoor catering service only.

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

(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;

After considering the submissions, the CESTAT observed –

Outdoor Catering Service:

++ there is no evidence that the canteen services have been used primarily for personal use of employees. Provision of canteen is a statutory requirement in large factory and thus it cannot be said that the canteen is provided primarily for personal use of employees. In these circumstances, CENVAT credit on outdoor catering services availed for maintaining canteen cannot be disallowed except for the part where the amount is recovered from the employees.

Noting that the appellant assessee had already reversed the credit insofar as it pertains to the amount recovered from the employees, the demand of recovery of CENVATcredit on canteen services was set aside and consequently the penalty.

Insurance services:

++ A perusal of the definition of input service shows that it consists of an inclusive definition which is qualified by exclusions. The exclusions include the life insurance and health insurance services which are used primarily for personal use or consumption by any employee. In this case the lower authorities have not examined the exact nature and the insurance cover in respect of which credit has been claimed is exclusively in respect of injuries or damages to the factory employee, then the credit would be admissible. However, if the coverage of the said policy includes the entire family and all the exigencies, then it can be said that the said insurance cover is primarily for personal use.

To examine the aforesaid facts, the matter was remanded to the Commissioner (Appeals).

Conclusion:

The appeal of the assessee was allowed and that of Revenue was allowed by way of remand.

(See 2018-TIOL-259-CESTAT-MUM)


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