Cenvat credit on mandatory worker insurance premium qualifies as input service when linked to manufacture.

Service tax paid on the premium for a group accident insurance policy taken for contract workers was treated as eligible Cenvat credit because the insurance was mandated by the Workmen's Compensation Act, 1923 and was not an optional benefit. Insurance used to discharge a statutory obligation for workers engaged in manufacture was regarded as an input service used in relation to manufacture. The disallowance of credit was therefore set aside, and the related demand and penalty were found unsustainable.

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Issues: Whether the appellant was entitled to Cenvat credit of service tax paid on the premium for group accident insurance policy taken for contract workers, where the insurance was required under the Workmen's Compensation Act, 1923.

Analysis: The insurance policy was obtained by the appellant and the premium, along with service tax, was paid by it. The insurance was not optional but was mandated by law for workers, including contract workers. Service used to discharge a statutory obligation for workers engaged in manufacture was treated as an activity in relation to manufacture and as falling within the definition of input service. The same view had already been taken in the appellant's own earlier matter.

Conclusion: The appellant was entitled to Cenvat credit. The contrary demand and penalty were unsustainable.

Final Conclusion: The disallowance of credit was set aside and the appeal succeeded.

Ratio Decidendi: Insurance service obtained to satisfy a statutory obligation for workers engaged in manufacture constitutes input service when it is used in relation to manufacture.

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