Cenvat of service tax paid on Employees Health Insurance and Group Accidental Insurance Policy eligible

Diamond Beverages Private Limited Vs Commissioner of CGST & CX (CESTAT Kolkata)

CESTAT Kolkata held that CENVAT Credit of service tax paid on Employees Health Insurance and Group Accidental Insurance Policy is within the scope and ambit of input service as provided under Rule 2(l) of the Cenvat Credit Rules, 2004.

Facts- On the basis of audit objection of Central Excise (Internal Audit) and by alleging contravention of Cenvat Credit Rules, 2004, suppression of material facts during the period May 2011 to March 2012 as regards irregular availment and utilization of Cenvat Credit attributable to certain input services, a Show Cause cum Demand Notice dated 26.04.2016 was issued for recovery of Cenvat Credit of Service Tax amounting to Rs.2,98,842/- along with interest and proposal for imposition of penalty.

The Applellant reversed the entire credit with regard to motor vehicles and ‘rent a cab’ service wand paid necessary interest. However, the Appellant did not agree with the contention of the Department that Cenvat Credit on Employees Group Insurance, Health Insurance, Personal Accident Policy were not available to them in the scenario of facts of their case.

Conclusion- Held that the Appellant was under the obligation and compulsion to cover the risk factor as well as safety of their employees through Employees Health Insurance and Group Accidental Insurance Policy and it would be an erroneous view if such coverage is treated as “primarily for consumption of employees” and thereby excluded the same from the scope and ambit of input service as provided under Rule 2(l) of the Cenvat Credit Rules, 2004. Accordingly, the employees who are not covered under ESI Scheme are well covered under the insurance policy for any untoward eventuality, therefore, it is also a moral obligation on the part of the employer to look after the welfare of the employees who are working inside or outside of the premises. Moreover, insurance coverage to the employees is mandatorily required as per the Factories Act. I find that Rule 2(l)(ii)(BA) & (C) of the Cenvat Credit Rules, inter alia excludes life insurance and health insurance from the purview/ambit of the definition of input service when such service is used primarily for personal use and consumption.

Please become a Premium member. If you are already a Premium member, login here to access the full content.