Cenvat credit on employee insurance services upheld where denial went beyond the show cause notice.

Cenvat credit on service tax paid for employees' group insurance, mediclaim and life insurance was treated as admissible where the insurance services were connected with the manufacturing activity and aligned with the requirement to insure employees under the Employees State Insurance Act. The authorities were also held not to travel beyond the show cause notice: a denial based on an unpleaded allegation that the cover extended to family members could not be sustained. On the facts stated in the notice, the credit claim stood allowed and the denial was unsustainable.

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Issues: Whether Cenvat credit on service tax paid on group insurance, mediclaim and life insurance for employees was admissible, and whether the authorities could deny credit on the basis of a factual allegation not made in the show cause notice.

Analysis: The show cause notice alleged only that credit had been taken on insurance services for employees and contained no allegation that the insurance cover extended to family members. An adjudicating authority and the first appellate authority cannot travel beyond the notice and enlarge the case on a ground not pleaded therein. On the facts alleged in the notice, the employee insurance services were treated as connected with the manufacturing activity, especially in view of the statutory requirement to insure employees under the Employees State Insurance Act and the applicability of the same to the appellant.

Conclusion: Cenvat credit was admissible and the denial of credit was unsustainable; the assessee succeeded on the issue.

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