TMI Blog2016 (6) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided to Jammu & Kashmir are not subject to levy of service tax, whether such services would fall into the definition of output service during the relevant period is itself doubtful. As per the definition of input service, only if the service provider uses for providing output service will the service be qualified as input service. In any case, the services rendered to Jammu & Kashmir do not fall in the category of exempted services. - Rule 6(3)(1) of CENVAT Credit Rules will not apply. Further, the group insurance services availed for the benefit of employees qualify as input services. The period involved is prior to 01/04/2011 when the definition of input service had a wide ambit. -disallowance of credit on insurance services is illega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CENVAT credit on service tax paid on insurance premium in respect of dependants / family members of the employees. A show-cause notice was issued raising the above allegations. After due process of law, the original authority disallowed the credit and confirmed the demand of ₹ 1,30,291/- along with interest on the first count and ₹ 2,39,191/- along with interest on the second count besides imposing equal amount of penalties. The appellant filed appeal before the Commissioner(Appeals) and vide the order impugned herein, the Commissioner(Appeals) upheld the same. Hence this appeal. 2. On behalf of the appellant, the learned counsel Shri Lalit Mohan Chandna opened his arguments by adverting to the contents of the show-cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . With regard to the second allegation i.e. disallowance of credit on service tax paid on insurance premium, the learned counsel submitted that the policies were taken for the benefit of the employees. The nature of the policy being floater policy, it included the family members also without extra premium. He pleaded that the appeal may be allowed. 3. Against this, the learned AR supported the findings in the impugned order. He submitted that the services provided by appellant to Jammu Kashmir are exempted services. The Finance Act, 1994 as well as the CENVAT Credit Rules, 2004 is not applicable to Jammu Kashmir. That therefore the appellants cannot avail credit on input services used for providing output services in Jammu Kashmir. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d includes services on which no service tax is leviable under Section 66 of the Finance Act. Since the service provided to the state of J K are not liable to service tax, as Section 64 of Chapter V of Finance Act, 1994 excludes the applicability of service tax to the state of Jammu and Kashmir, these services are neither taxable nor exempted. As per Rule 1(2) of CENVAT Credit Rules, 2004 Nothing contained in these rules relating to availment and utilization of credit of service tax shall apply to the Jammu Kashmir. From the forgoing, I find that the appellant irregularly availed CENVAT credit on the input services for providing output services to the state of Jammu Kashmir. In this regard, the demand confirmed by the lower authority is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provider of output service avails CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output services, then the manufacturer or provider of output service shall maintain separate accounts for --- (a) (b) The above provision speaks about the situation when the service provider is rendering output services which are chargeable to tax as well as exempted services. The services rendered in Jammu Kashmir are not chargeable to service tax and therefore are not taxable services. But this does not make them exempted services also. A service becomes an exempted service when by notification or law, the service tax payable on such service is exempted. Rule 6(2) does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand of ₹ 1,30,291/- being the credit availed on input services on the services provided to Jammu Kashmir as unsustainable. 9. The second demand is with regard to the credit availed on service tax paid on insurance service. On examination of the documents, it is seen that the policy is a floater policy. The premium is uniform to all employees and has no regard to the number of dependants of each employee. Therefore the group insurance services availed for the benefit of employees qualify as input services. The period involved is prior to 01/04/2011 when the definition of input service had a wide ambit. On such score, I hold that the disallowance of credit on insurance services is illegal and unjustified. 10. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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