Cenvat credit on workers' medical insurance supported waiver of pre-deposit and stay of recovery

Cenvat credit on insurance premium for group medical insurance of workers was treated as prima facie eligible for interim relief because the premium was said to form part of the cost of production and precedent supported credit on worker medical insurance. The demand was also challenged on the basis that the new objection regarding employees' family members was raised only in appeal, and an adjudication or appellate authority cannot go beyond the show cause notice. On that prima facie basis, pre-deposit of the demand, interest, and penalty was waived and recovery was stayed pending disposal of the appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in respect of Cenvat credit demand on insurance premium paid for group medical insurance of workers.

Analysis: The demand was proposed on the ground that the insurance service had no nexus with manufacture and was not an input service. The notice did not allege that the policy covered the employees' family members, and that new ground was introduced for the first time in appeal. An adjudication or appellate order cannot travel beyond the allegations in the show cause notice. Prima facie, the insurance premium formed part of the cost of production, and judicial precedents supported eligibility of credit on medical insurance for workers. These factors established a prima facie case in favour of the appellant for interim relief.

Conclusion: The requirement of pre-deposit of the Cenvat credit demand, interest, and penalty was waived and recovery was stayed pending disposal of the appeal.

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