2011 (12) TMI 399 - AT - Service Tax

Disallow CENVAT credit on service tax paid on insurance services relating to Group Medical Claim and Group Personal Accident Policies - Held that - In respect of accident group insurance policy insurance coverage to the employees in area of health and granting cover for risks are statutory requirements under the Employees State Insurance Act 1948 and the same should be treated as input services - decided in case of CCE Bangalore-III Commissionerate Versus Stanzen Toyotetsu India (P.) Ltd. (2011 - TMI - 204471 - KARNATAKA HIGH COURT) Group Insurance Health Policy is referred only to employees but in the present case undisputedly the coverage is for both the employees and the family members - It is not clear whether the benefit of cover given to the family members involved any additional premium in which case the services relating to said coverage cannot be treated as input services - matter is remanded for fresh consideration in the light of observations made above after granting reasonable opportunity of hearing to both sides.

Summary

Issues:
Disallowance of CENVAT credit on service tax paid on insurance services for Group Medical Claim and Group Personal Accident Policies.

Analysis:
The appeal was filed by the department against the order of the Commissioner (Appeals) disallowing CENVAT credit on insurance services for Group Medical Claim and Group Personal Accident Policies. The original authority demanded a sum along with interest and imposed a penalty under Rule 15 (3) of CENVAT Credit Rules, 2004. The Commissioner (Appeals) held that these services should be treated as 'input services' and allowed the appeal, leading to the department's appeal. The department argued that providing insurance to workers' family members is a welfare measure and lacks nexus with the manufacture of excisable goods, justifying the denial of credit. The respondent, however, cited precedents where Group Insurance Health Policy was considered 'input services' and emphasized the statutory obligation under the Employees State Insurance Act, 1948.

The Tribunal considered the submissions and records, specifically addressing the accident group insurance policy. Referring to a decision of the Hon'ble High Court of Karnataka, the Tribunal highlighted the statutory obligations on employers to provide insurance services under the Employees State Insurance Act, 1948. The Tribunal noted that the Group Insurance Health Policy covered both employees and their family members, raising a question regarding the additional premium for family coverage. As the issue of family coverage was not adequately addressed by the authorities below, the Tribunal disposed of the appeal by upholding the Commissioner (Appeals)'s decision on Group Accident Policies but remanding the matter concerning Group Health Policy for fresh consideration in light of the observations made.

In conclusion, the judgment clarified the treatment of insurance services as 'input services' for CENVAT credit purposes, emphasizing statutory obligations and the scope of coverage for employees and their family members. The Tribunal's decision highlighted the need for a thorough review of the terms and nature of the insurance policies to determine the eligibility of services as 'input services,' ensuring a fair opportunity for both parties to present their case.