2014 (4) TMI 637 - AT - Service Tax

Appellants win appeal, can utilize CENVAT Credit for Service Tax on Insurance Auxiliary Service.

M/s TATA AIG LIFE INSURANCE CO LTD and others Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI & THANE-II

The appeals filed by the appellants, including M/s TATA AIG Life Insurance Co. Ltd., M/s ICICI Prudential, and M/s Birla Sun Life, were allowed. They were ... Demand of service tax - Insurance Auxiliary Service - whether the appellant can utilize CENVAT Credit available with them for payment of service tax - Held that:- only change in the legal provision is the omission of Explanation under Rule 2(p). An Explanation only clarified the position. By omission of the explanation, the meaning does not undergo any change. Therefore, both prior to 19.4.2006 as also w.e.f. 19.4.2006, the meaning of the expression ‘output service', ‘provider of taxable service' and ‘person liable for paying service tax' remain the same. Since in the case of Insurance Auxiliary Service, the liability to pay Service Tax is on the service recipient in terms of Rule 2 (1)(d)(iii) of the Service Tax Rules, 1994, the appellants are the providers of the output service as defined in law. Therefore, the appellants are entitled to avail CENVAT Credit on the input services used for providing the output service. Consequently, there is no bar in utilization of CENVAT Credit for payment of Service Tax on Insurance Auxiliary Service by the appellants. There is no one to one correlation required between the input service and the output service under the CENVAT Credit Scheme and, therefore, the demands confirmed against the appellants for recovery of CENVAT Credit availed by them for discharging Service Tax liability on Insurance Auxiliary Service is clearly unsustainable - Decided in favour of assessee. Issues Involved:- Appellants' liability for Service Tax on Insurance Auxiliary Service and utilization of CENVAT Credit- Interpretation of Cenvat Credit Rules regarding availing credit on input services- Discrepancy in views of adjudicating authorities on CENVAT Credit utilization- Legal position on utilizing CENVAT Credit for payment of Service Tax on Insurance Auxiliary Service- Applicability of Rule 6(3)(c) on CENVAT Credit utilizationAnalysis:Issue 1: Appellants' liability for Service Tax on Insurance Auxiliary Service and utilization of CENVAT CreditThe appeals involved the liability of appellants, including M/s TATA AIG Life Insurance Co. Ltd., M/s ICICI Prudential, and M/s Birla Sun Life, for Service Tax on Insurance Auxiliary Service. The question was whether appellants could utilize CENVAT Credit available to them for discharging the Service Tax liability on the said service. The period in question ranged from September 2004 to March 2008.Issue 2: Interpretation of Cenvat Credit Rules regarding availing credit on input servicesThe primary issue revolved around the interpretation of Cenvat Credit Rules, specifically Rule 2(p), (q), and (r), and whether the appellants were entitled to avail CENVAT Credit on input services used for providing the output service of Insurance Auxiliary Service. The legal provisions defining 'output service,' 'provider of taxable service,' and 'person liable for paying Service Tax' were crucial in determining the appellants' eligibility for CENVAT Credit.Issue 3: Discrepancy in views of adjudicating authorities on CENVAT Credit utilizationThe adjudicating authorities had conflicting views on the utilization of CENVAT Credit for payment of Service Tax on Insurance Auxiliary Service. Some held that there was no restriction on availing credit beyond 20% of the Service Tax payable, while others disagreed. This discrepancy led to the consolidation of appeals for consideration and disposal.Issue 4: Legal position on utilizing CENVAT Credit for payment of Service Tax on Insurance Auxiliary ServiceThe Tribunal analyzed various legal precedents, including decisions from High Courts and previous Tribunal rulings, to determine the legal position on utilizing CENVAT Credit for Service Tax payment. The Tribunal emphasized that the appellants, as providers of the output service, were entitled to avail CENVAT Credit on input services, dismissing the Revenue's contention against such utilization.Issue 5: Applicability of Rule 6(3)(c) on CENVAT Credit utilizationThe Tribunal clarified that the cap of 20% fixed under Rule 6(3)(c) did not apply to Insurance Auxiliary Service, as it fell under sub-clause (zy) specified in sub-rule (5) of Rule 6. Therefore, the entire Service Tax Credit could be utilized for the discharge of Service Tax on Insurance Auxiliary Service.In conclusion, the appeals filed by the appellants were allowed, affirming their entitlement to utilize CENVAT Credit for Service Tax payment on Insurance Auxiliary Service. The Revenue's appeal was rejected based on the legal and factual positions established during the proceedings.