TMI Blog2014 (7) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... Group Insurance of all Employees against sickness or accident, the same has been held as cenvatable by the judgements of Hon'ble Karnataka High Court in the cases of Stanzen Toyotetsu India (P) Ltd. (Stanzen Toyotetsu), Micro Labs Ltd. [2011 (6) TMI 115 - KARNATAKA HIGH COURT] and M/s. Millipore India Ltd. (2008 (11) TMI 97 - CESTAT, BANGALORE). Moreover, Group insurance of the employees against accident or sickness is the requirement of Section 38 of the Employees State Insurance Act, 1948, which a manufacturer has to comply with and accordingly, this service would have to be treated as a service used in or in relation to the manufacture of final products whether directly or indirectly, as a manufacturer would not be allowed to carry on manufacturing operations unless he complies with the requirements of Section 38 of the Employees State Insurance Act, 1948. Commissioner, has either ignored previous judgments and not given any findings as to how these judgments are not applicable or has made observations contrary for the judgments of the Tribunal/High Court and has decided the question of eligibility of various insurance services for Cenvat credit on the basis of his own int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (l) of the Cenvat Credit Rules, 2004. Based on this Audit objection, a show cause notice dated 30.01.2009 was issued to the appellant for recovery of allegedly wrongly availed cenvat credit amounting to ₹ 3,05,98,072/- in respect of insurance services during the period from October, 2004 to December, 2007 along with interest thereon under Section 11 AB of the Central Excise Act, 1944 and also for imposition of penalty on the appellant under Rule 15 of the Cenvat Credit Rules read with Section 11 AC of the Central Excise Act, 1944 and also under Rule 25 of the Central Excise Rules, 2002. This show cause notice was issued by invoking extended period under proviso to Section 11 A(1) of the Central Excise Act, 1944 by alleging that the appellant with intent to evade duty by wrongly availing cenvat credit, had concealed the facts of availment of cenvat credit in respect of insurance service from the department. Subsequently, two more show cause notices dated 2.2.2009 and 17.07.2009 were issued for demand of allegedly wrongly availed cenvat credit amounting to ₹ 10,95,676/- and ₹ 10,90,055/- respectively for the period from Jan. 2008 to June, 2008 and July 2008 to Dece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the expression activities relating to business has been deleted. This amendment has to be treated as retrospective amendment, in view of the judgement of the Larger Bench of the Tribunal in the case of Vandana Globla Ltd. reported in 2010 (253) ELT 444 (Tribunal-LB), wherein the Tribunal while examining the scope of the amendment made in the definition of input by insertion of Explanation II to Rule 2 (K) of the Cenvat Credit Rules, 2004 vide notification no.16/2009-CE (NT) dated 7.7.2009, had observed that the amendment made under the notification dated 7.7.2009 was clarificatory in nature and the same would have been retrospective effect. (2) Input Service must have nexus with process of manufacture and for determining the eligibility of 'service' for cenvat credit, it must be shown that the service is used in or in relation to the manufacture of final products. The insurance services do not meet this test. 1.3 Against the above order of the Commissioner, these three appeals have been filed along with stay applications. 2. Though these appeals are listed for hearing of the stay applications, after hearing this matter for sometime, the Bench was of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is eligible for cenvat credit, that most of the judgements had been cited in course of proceedings before the Commissioner, but he has not considered the same and has confirmed the cenvat credit demand on the basis that the amendment to Rule 2 (1) w.e.f. 1.4.2011 by which the expression activities relating to business was deleted, is a retrospective amendment, that the reasons for treating this amendment as retrospective amendment as given by the Commissioner are absolutely incorrect, as just because the Larger Bench of Tribunal in the case Vandana Global Ltd. (supra) has held that amendment to Rule 2(K) of Cenvat Credit Rules, 2004 by adding Explanation II has to be treated as clarificatory in nature and would be applicable retrospectively, it cannot be concluded that the every amendment to Cenvat Credit Rules, 2004 is a retrospective amendment, that the finding that for a service to be covered by the definition of input service , it must have nexus with the manufacture of final product and that insurance services have no nexus with the final product is absolutely incorrect and contrary to the law laid down by Hon'ble Bombay High Court in the case of Ultra Tech Cement Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istry, and security, inward transportation of inputs or capital goods and outward transportation upon the place of removal; With effect from 1.4.2011, the definition of input service was amended and the amended definition is as under:- 2(1) input service means any service - (i) used by a provider of taxable service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal service, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services:- (A) specified in sub-calsues (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the manufacture of final product and that insurance services having no nexus whatsoever with the manufacture of final product are not eligible for cenvat credit, we find that this finding of the Commissioner is contrary to the law laid down by the Hon'ble Bombay High Court in the case of CCE Vs. Ultra Tech Cement (supra), wherein the Hon'ble Bombay High Court while considering the eligibility of outdoor catering service for cenvat credit, has in para-28, 29 and 30 held that - (a) the definition of input service is very vide and covers not only the services which are used directly or indirectly in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, be it prior to manufacture of final products or after the manufacture of final products -- to put it differently, the definition of 'input service' is not restricted to services used in or in relation to the manufacture of final products but extends to all services used in relation to the business of manufacture of final product; (b) the expression 'activities relating to business' in the defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insurance of plant machinery, cash in transit, goods in transit, vehicles computers, etc. against any loss due to accident, natural calamities, etc. In view of this, the services of plant and machinery, transit insurance of goods, insurance of cash in transit, laptop, etc. have to be treated as an activity related to the business and would be eligible for cenvat credit. 9. As regards, the Group Insurance of all Employees against sickness or accident, the same has been held as cenvatable by the judgements of Hon'ble Karnataka High Court in the cases of Stanzen Toyotetsu India (P) Ltd. (supra), Micro Labs Ltd. and M/s. Millipore India Ltd. (supra). Moreover, Group insurance of the employees against accident or sickness is the requirement of Section 38 of the Employees State Insurance Act, 1948, which a manufacturer has to comply with and accordingly, this service would have to be treated as a service used in or in relation to the manufacture of final products whether directly or indirectly, as a manufacturer would not be allowed to carry on manufacturing operations unless he complies with the requirements of Section 38 of the Employees State Insurance Act, 1948. 10. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to how these judgments are not applicable or has made observations contrary for the judgments of the Tribunal/High Court and has decided the question of eligibility of various insurance services for Cenvat credit on the basis of his own interpretation of Rule 2 (1) of Cenvat Credit Rules, 2004 observing that amendment to this rule w.e.f. 01.04.2011 is a retrospective amendment and the insurance services, in question, have no nexus with manufacture of final products. The conduct of the Learned Commissioner amounts to clear judicial indiscipline and irresponsible exercise of adjudication function. Such exercise of adjudication powers in blatant violation of Apex Court's judgment in case of Union of India Vs. Kamlakshi Finance Corporation Ltd., reported in 1991 (55) ELT-433 (SC) requires to be censured as, if allowed to go unchecked, would lead to collapse of entire dispute resolution mechanism. Such adjudication orders burden not only the Assessee who has to incur avoidable expenses on challenging such order before the Courts/Tribunal, but also impose clearly avoidable costs for the Government, as the Tribunal's/Court's valuable time is also consumed in hearing appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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