Insurance Company wins input service credit case for repair services rendered by vehicle service stations under cashless scheme

The Tribunal ruled in favor of the appellant, an Insurance Company, allowing them to claim input service credit amounting to Rs.1,96,64,604. Despite the invoices being in the names of vehicle owners, it was established that the repair services were carried out by authorized service stations on behalf of the appellant under a cashless scheme. Citing a Circular by CBEC, the Tribunal recognized the Insurance Company as the service receiver, granting them a 100% waiver of predeposit and staying the recovery of service tax, interest, and penalties pending the appeal.

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Issues involved: Denial of input service credit to the applicant on the grounds of not being the actual service receiver.

Analysis:
The appellant, an Insurance Company providing insurance on motor vehicles, was denied input service credit amounting to Rs.1,96,64,604 on the basis that they were not the actual service receiver. The dispute arose from the repair services provided under a cashless scheme where damaged vehicles were sent to authorized service stations for repair at the expense of the appellant, including service tax. The Revenue contended that since the repair services were availed by the vehicle owners and the invoices were in their names, the appellant was not entitled to claim input service credit.

Upon hearing both sides, it was acknowledged that the repair services for vehicles were carried out by authorized service stations on behalf of the appellant as per the insurance cover provided under the cashless scheme. Referring to a Circular by CBEC dated 26.2.2010, which clarified that the insurance company is considered the service receiver in such situations, the Tribunal found that the appellant was indeed entitled to claim input service credit on the services paid by them. Consequently, the Tribunal granted a 100% waiver of predeposit and stayed the recovery of the service tax, interest, and penalties during the pendency of the appeal.

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