2015 (10) TMI 1793 - AT - Central Excise

Tribunal allows CENVAT Credit on Insurance Premiums, citing nexus with manufacturing activities.

The Tribunal ruled in favor of the appellant, allowing the appeal regarding the availment of CENVAT Credit on Service Tax paid on Employees Personal/Group ... CENVAT credit on employee personal/group insurance - input service - nexus with manufacture - CAS-4 manufacturing cost - inadmissible credit and penaltyCENVAT credit on employee personal/group insurance - input service - nexus with manufacture - CAS-4 manufacturing cost - inadmissible credit and penalty - CENVAT Credit availed on Service Tax paid on premium for Employee Personal/Group Insurance is admissible as an input service where there is nexus with manufacture and it forms part of manufacturing cost under CAS-4. - HELD THAT: - The Tribunal found that the Group Insurance scheme for workers bears a nexus with and is integrally connected to the manufacture of the final product and thus qualifies as an input service under the Cenvat Credit Rules, 2004. The appellant had availed and utilized CENVAT credit under a bona fide belief and regularly disclosed the credit in ER-1 returns. The Tribunal followed the ratio of the Hon'ble Bombay High Court in Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd., which held that services having nexus or integral connection with manufacture qualify as input services. The Tribunal also noted that staff insurance is recognised as part of manufacturing cost under CAS-4. Applying these principles, the demand and penalty confirmed by the lower authority, which treated the credit as inadmissible, could not be sustained. [Paras 5]Impugned order confirming demand and imposing penalty set aside; CENVAT credit on employee personal/group insurance held admissible and appeal allowed.Final Conclusion: Appeal allowed; the order confirming demand and imposing penalty was set aside on the ground that employee group/personal insurance qualifies as an input service having nexus with manufacture and forms part of manufacturing cost under CAS-4, and consequential relief to the appellant to follow. Issues:- Availment of CENVAT Credit on Service Tax paid on premium of Employees Personal/Group Insurance Service.Detailed Analysis:Issue 1: Availment of CENVAT Credit on Insurance ServiceThe appellant appealed against the Order-in-Appeal confirming a demand of &8377; 29,740/- with interest and penalty for availing CENVAT Credit on Service Tax paid on Employee Personal/Group Insurance premium. The appellant argued that they believed the insurance cost was part of production cost as per CAS-4 Standards, citing Commissioner Vs. M/s GTC Industries Ltd. The appellant contended that regular ER-1 Returns disclosed the credit availed, challenging the Revenue's claim of non-disclosure. The appellant sought to set aside the order, claiming the credit availed was not deliberate or conscious. The Revenue, represented by the AR, supported the lower authorities' findings.Issue 2: Legal InterpretationThe Tribunal analyzed whether there was a valid nexus between the insurance expenses for the Group Insurance Scheme and manufacturing activities. Referring to the decision of the Hon'ble Bombay High Court in Commissioner of Central Excise, Nagpur Vs. Ultratech Cement Ltd., the Tribunal held that services with a nexus to the manufacture of the final product qualify as input services under Rule 2(1) of the Cenvat Credit Rules, 2004. It was established that staff insurance was part of the manufacturing cost under CAS-4 standards. Following the precedent set by the Bombay High Court, the Tribunal set aside the impugned order, allowing the appeal and any consequential relief as per the law.In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal and providing relief based on the legal interpretation of the nexus between insurance expenses and manufacturing activities as per relevant legal precedents and standards.