CESTAT, AHMEDABAD BENCH
Surani Ceramics Ltd.
Commissioner of Central Excise, Rajkot
ORDER NO. A/1357/WZB/AHD. OF 2011
APPEAL NO. E/811 OF 2010
AUGUST 2, 2011
1. During the course of audit of the records of the respondent M/s. Surani Ceramics it was noticed that they have availed cenvat credit of service tax paid on workmen’s compensation (general insurance) on the amount of insurance paid to M/s The New India Assurance Company Ltd. Proceedings were initiated to deny the cenvat credit on the ground that the input service was not used in relation to the manufacture of final product namely ceramic tiles. Both the lower authorities have taken the view that cenvat credit of service tax paid is admissible and in the impugned order the learned Commissioner relied upon the decision of the Tribunal in the case of Millipore India Ltd. v. CCE  22 STT 536(Bang. CESTAT) which is directly on the same service and in favour of the party. He also relied upon the decision of the Larger Bench in the case of CCE v. GTC Industries Ltd.  17 STT 63 (Mum. – CESTAT).
2. Nobody is present on behalf of the respondent. The learned DR on behalf of Revenue submits that the decision of the Larger Bench in the case of GTC Industries Ltd. (supra) has been set aside and matter remanded to the Tribunal again. Therefore the reliance on that decision is not correct. As regards Millipore India Ltd., he submits that in view of the decision of the Hon’ble High Court of Gujarat in the case of CCE & Cus. v. Gujarat Heavy Chemicals Ltd.  34 STT 587/18 taxmann.com 193 this stands overruled and also an appeal has been filed against the decision.
3. I have considered the submissions made by the learned DR. I have gone through the decision of the Hon’ble High Court of Gujarat in Heavy Chemicals Ltd. (supra). In this case the Hon’ble High Court was considering the eligibility of service tax paid on security services provided at residential quarters of workers as cenvat credit. Hon’ble High Court came to the conclusion that such security services cannot be stated to be the service used by the manufacturer in relation to the manufacture of final product. Hon’ble High Court also took note of the decision of the Hon’ble Bombay High Court in the case of CCE v. Manikgarh Cement  29 STT 230. Further the Hon’ble High Court also referred to the decision of Hon’ble Bombay High Court in the case of CCE v. Ultratech Cement Ltd.  29 STT 244 and observed that the observations of Bombay High Court m the case of Ultratech Cement Ltd. (supra) could not be applied to the situation in the case of Gujarat Heavy Chemicals Ltd. (supra) since providing canteen facilities, to the workers was mandatory and failure to do so to attracted penal conclusions. In the case of Coca-Cola India (P.) Ltd. v. CCE  22 STT 130 (Bom.) and in the case of Ultratech Cement Ltd. (supra) the Hon’ble Bombay High Court took the view that for eligibility of service tax to be taken as cenvat credit, it should be coming under the definition of input service in terms of definition of input service and the definition of input service is that the same should be related to the business activity of the assessee. In fact the decision of the Hon’ble Supreme Court in the case of Maruti Suzuki Ltd. 2010 (256) E.L.T. A58 (S.C)] wherein a view was taken that for eligibility of inputs in cenvat credit, nexus with the manufacture is a must was differentiated. It was held that the nexus with manufacture is required only in the case of inputs and in the case of input service it should be relatable to the business activity. The question that arises in this case is whether the service tax paid on insurance premium for workmen’s compensation (general insurance) can be considered as an activity related to the business. In case of an accident within the factory, the compensation has to be paid by the company in accordance with the law and this is obligatory. To fulfil this legal obligation, the assessee has taken insurance. Therefore it can be said that in this case the insurance premium is definitely relatable to business activity and is to fulfil one of the legal obligations of providing compensation to worker in case of injury in the factory. Therefore the issue in this case is similar to the one which was under consideration in the case of Ultratech Cement Ltd. (supra) by the Hon’ble Bombay High Court. Further, I also find that the decision of the Tribunal Bangalore in the case of Millipore India Ltd. (supra) is also directly on the same service. No stay has been granted and only an appeal has been filed. Therefore I have to follow the decision of Co-ordinate Bench. Under these circumstances, I hold that cenvat credit of service tax paid on insurance taken to pay workmen’s compensation to the Insurance Company is admissible. Accordingly appeal filed by the Revenue is rejected.