Tata Teleservices (Maharashtra) Ltd Vs Commissioner of Service Tax (CESTAT Mumbai)
Summary: The CESTAT Mumbai allowed the appeal of Tata Teleservices (Maharashtra) Ltd against an order confirming recovery of ₹88,53,123 of CENVAT credit under Rule 14 of the CENVAT Credit Rules, 2004, along with interest under Section 75 of the Finance Act, 1994 and an equivalent penalty under Rule 15. The dispute concerned CENVAT credit availed during 2007-08 to 2011-12 on insurance policies covering employees against workplace accidents, employees and their families under group mediclaim, and vehicles.
The adjudicating authority had denied the credit principally on the ground that there was no statutory obligation to obtain employee and family insurance and therefore the expenditure did not qualify as an input service connected with the appellant’s telecom business. The Tribunal noted that entitlement to credit on employee insurance was already settled by judicial precedent, particularly Fiamm Minda Automotive Ltd. v. Commissioner of Central Excise, Delhi-III, which followed the decision in Stanzen Toyotetsu India Pvt. Ltd. v. CCE, Bangalore.
The Tribunal held that the personal accident insurance credit could not be disallowed in the absence of any finding that the coverage extended beyond the workplace. It further held that vehicle insurance qualified as an input service, noting that there was nothing to establish use of the vehicles outside business activities and that insurance of vehicles is statutorily mandated. On group mediclaim insurance covering employees’ family members, the Tribunal relied upon the Larger Bench decision holding such insurance to be an eligible input service under Rule 2(l), including for the period prior to 01.04.2011, without requiring proof of an integral connection with the business of manufacture. Consequently, the demand founded on alleged ineligibility of the insurance-related CENVAT credit was held unsustainable and the impugned order was set aside, allowing the appeal.
List of Cases Discussed / Relied Upon
- Fiamm Minda Automotive Ltd. v. Commissioner of Central Excise, Delhi-III, 2011 (22) STR 210 (Tri.-Del)
- Stanzen Toyotetsu India Pvt. Ltd. v. CCE, Bangalore, 2009 (14) S.T.R. 316 (Tri.-Bang.)
- H.E.G. Ltd. v. CCE, Raipur, 2008 (9) S.T.R. 372 (T)
- Tata Teleservices (Maharashtra) Ltd. v. Commissioner of Service Tax, Mumbai-II, Larger Bench Order No. 05/2024 dated 18th March 2024
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal of M/s Tata Teleservices (Maharashtra) Ltd, directed against order1 of Commissioner of Service Tax, Mumbai-II confirming proposal for recovery of ₹ 88,53,123 taken as CENVAT credit under rule 14 of CENVAT Credit Rules, 2004, along with appropriate interest under section 75 of Finance Act, 1994, while imposing penalty of like amount under rule 15 of CENVAT Credit Rules, 2004, rests on binding precedent insofar as eligibility of the three ‘input services’ is concerned.
2. It is seen from the records that the demand pertains to 2007-08 to 2011-12 during which appellant had taken credit of tax component in the premium paid for policies insuring employees against accident at workplace, insuring employees and families through group ‘mediclaim’ and insuring of vehicles. Relying on the broad principles for segregation of taxable services utilized in connection with the business which, for the appellant, was rendering of ‘telecom services’, the adjudicating authority was convinced that, with lack of any statutory obligation devolving on the appellant to obtain insurance for the employees and their families, entitlement of CENVAT credit was not a matter of right. Of the credit taken, ₹ 82,56,303 pertains to tax paid on group ‘mediclaim’ policy while ₹ 46,262 and ₹ 1,34,199 pertain to personal accidental insurance policies and vehicle insurance respectively. We also note that that there is no finding on the manner in which vehicle insurance would not be ‘input service’ in accordance with rule 2(l) of CENVAT Credit Rules, 2004 but entitlement thereof was denied along with the other two.
3. We have heard Learned Counsel for the appellant and Learned Authorized Representative.
4. The issue of entitlement to avail CENVAT credit of tax discharged on procurement of insurance coverage for employees is no longer res integra inasmuch as several decisions of the Tribunal have settled the entitlement there of and it was held, in Fiamm Minda Automotive Ltd v. Commissioner of Central Excise, Delhi-III [2011 (22) STR 210 (Tri – Del)], that
‘3. On each of the disputed items, the submissions of both sides and the findings are recorded as follows:-
(a) Group insurance/mediclaim policy
(i) The party is aggrieved that the credit of the service tax paid on mediclaim insurance and group insurance policy taken for their employees/staffs who are not covered by the ESI has been disallowed. This has been disallowed on the ground that the same cannot be considered as input service in terms of the activities relating to business.
(ii) Learned Authorised Representative for the company submits that in respect of category of employees and officials who are not covered by the ESI, they are required to make compensation in the event of illness/accident. As a prudent business proposition, they incurred expenses by taking mediclaim insurance and personal accident insurance and these expenditures are clearly in the course of business activities covering possible risks involved which may result in payment of huge sum. Such an approach is part of business activities and therefore this should be treated as input service. He relies on the decision of the Tribunal in the case of Stanzen Toyotetsu India Pvt. Ltd. v. CCE, Bangalore reported in 2009 (14) S.T.R. 316 wherein the credit of service tax paid on group insurance and health policy for the employees and the workers have been allowed.
(iii) Learned SDR submits that it is not mandatory for the appellants to take mediclaim policy and accident policy for their employees and the same is only a welfare measure and therefore cannot be treated as having nexus with the business activities and held to be input service. He relied on the decision of the Tribunal in the case of H.E.G. Ltd. v. CCE, Raipur reported in 2008 (9) S.T.R. 372 (T) = 2008 (223) E.L.T. 212.
(iv) I have carefully considered the submissions from both the sides and perused the records. I find that the division bench of the Tribunal in the case of Stanzen Toyotetsu India Pvt. Ltd. has allowed the credit in respect of the service tax paid on group insurance and health policy for the employees and workers. Therefore, I hold that there is a merit in the appeal filed by the appellant. The appeal on this issue is, therefore, allowed.
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There is no finding that accident coverage has been taken for persons and episodes beyond the workplace. It, therefore, has to be presumed that ₹ 46,262 taken as credit thereto is towards eligible ‘input service’ and not to be disallowed.
5. Though the adjudicating authority has not rendered any finding on the ineligibility of credit of ₹ 1,34,199 taken on insurance of vehicles, there is nothing on record to suggest that the vehicles had been deployed for activities other than the business activities of the appellant. Moreover, vehicles are statutorily mandated to be insured and denial of the credit thereof is not in consonance with the intent of CENVAT Credit Rules, 2004.
6. On the issue of group ‘mediclaim’ policy, which was, admittedly, extended to the families of employees, the division bench had referred for constitution of Larger Bench of the Tribunal and which, by interim order2 in the present dispute before us, held that
‘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 CENVAT credit of the service tax paid for procuring insurance for the family members of the employees can be availed. The decisions to the contrary do not lay down the correct position in law.
51. Thus, in view of the aforesaid discussion, it has to be held that CENVAT credit of the service tax paid on the insurance premium paid for the family members of the employees would also be admissible.
52. The answer to the reference made to the Larger Bench is as follows:
“The appellant would be entitled to avail CENVAT credit of the service tax paid by the appellant on the insurance premium paid for procuring insurance services for the employees and their family members, as the said service would be an ‘input service’ under rule 2(l) of the CENVAT Rules, both under the main limb of the definition as also under the inclusive limb of the definition. It is not necessary for the appellant to establish an integral connection between the service and business of manufacture for the said service to be categorized as ‘input service’ under rule 2(l) of the CENVAT Rules for the period prior to 01.04.2011.”’
Consequently, the demand from the finding of ineligibility is not sustainable.
7. In view of the above, the impugned order is set aside to allow the appeal.
(Order pronounced in the open court on 12/08/2025)
