Commissioner of Central Excise Vs Oriental Insurance Company Ltd. (Delhi High court)
Delhi High Court held that the re-insurance services were not excluded from the definition of ‘input service’ as defined under Section 2(l) of the CENVAT Credit Rules, 2004 with effect from 01.04.2011.
Facts- The appellant has filed the appeal u/s. 35G of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 (the Act) impugning a final-order passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (CESTAT). By the impugned order, the learned CESTAT had held that the Oriental Insurance Company Ltd. (OIC) is entitled to avail Central Value Added Tax (CENVAT) credit on re-insurance services (Indian as well as Foreign Insurance).
According to the Revenue (appellant), the learned CESTAT’s conclusion is erroneous because by virtue of Rule 2(l) of the CENVAT Credit Rules, 2004 (CCR) as applicable during the period 01.04.2011 to 20.07.2012, CENVAT Credit was unavailable for insurance in respect of a motor vehicle.
Conclusion- In Shriram General Insurance Company Ltd. v. Commissioner of Central Excise, Jaipur-I it is held that a re-insurance service is not in respect of a motor vehicle, but is in respect of the assumed risks of an original insurer and thus, the aforesaid exclusion clause has no application to qualification of re-insurance services as “input service”.
Held that we find no infirmity with the decision of the learned CESTAT that re-insurance services were not excluded from the definition of ‘input service’ as defined under Section 2(l) of the CCR with effect from 01.04.2011.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1.The appellant has filed the above-captioned appeal under Section 35G of the Central Excise Act, 1944 (hereafter ‘the Central Excise Act’) read with Section 83 of the Finance Act, 1994 (hereafter ‘the Act’) impugning a final-order dated 28.01.2021 (hereafter ‘the impugned order’) passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (hereafter ‘CESTAT’). By the impugned order, the learned CESTAT had held that the Oriental Insurance Company Ltd. (hereafter ‘OIC’) is entitled to avail Central Value Added Tax (hereafter ‘CENVAT’) credit on re-insurance services (Indian as well as Foreign Insurance).
2. According to the Revenue (appellant), the learned CESTAT’s conclusion is erroneous because by virtue of Rule 2(l) of the CENVAT Credit Rules, 2004 (hereafter ‘CCR’) as applicable during the period 01.04.2011 to 20.07.2012, CENVAT Credit was unavailable for insurance in respect of a motor vehicle.
Demand cum Show Cause Notice dated 05.12.2014
3. OIC is engaged in the business of providing general insurance service and re-insurance service, being a registered insurer under the provisions of the Insurance Act, 1938 (hereafter ‘the Insurance Act’).
4. The Commissioner, Central Excise Service Tax (hereafter ‘the Commissioner’) issued a Demand-cum-Show Cause Notice dated 05.12.2014. The show cause notice was issued on the basis of a Modus Operandi, Circular No. 29/2013-14 dated 18.03.2014 issued by the Additional Director General, Directorate of Service Tax Mumbai. The said Circular was in respect of wrongful availment of CENVAT Credit in respect of service tax paid on re-insurance premium. It was alleged that insurance companies were wrongfully availing credit in respect of service tax paid on re-insurance premium for discharge of service tax payable on insurance services. According to the Revenue, the service tax on re-insurance premium was not covered within the definition of ‘input service’. It was alleged that insurance companies engaged in providing general insurance services were parties to the Indian Motor Third Party Insurance Pool and were availing input credit on the basis of invoices issued by re-insurers as well as invoices issued by members of the Indian Motor Third Party Insurance Pool, which was constituted to share the risks of motor third party insurance.
5. OIC had availed input credit in respect of re-insurance premium as well as on payments made to pool members of the Indian Motor Third Party Insurance Pool. The Commissioner classified the same under three heads: (i) input credit for service tax paid on re-insurance of Indian business; (ii) input credit for re-insurance business paid under reverse charge mechanism; and (iii) input credit on service tax paid to the Indian Motor Third Party Insurance Pool members. The tabular statement of the input credit availed by the respondent as set out in the show cause notice is reproduced below:
Input Credit availed on Reinsurance Business
