Tribunal allows appeal on canteen & insurance credit disallowance post 1.4.2011, penalties set aside.

The Tribunal allowed the appeal of the assessee regarding the disallowance of cenvat credit for outdoor catering services for the canteen post 1.4.2011, except for the amount recovered from employees. The demand for recovery of cenvat credit on canteen services was set aside, along with the penalty imposed. The matter of disallowance of credit in respect of a group insurance policy was remanded for further examination to determine if the insurance cover was exclusively for injuries to factory employees. The penalty imposed on the disallowed cenvat credit for outdoor catering service was set aside, and the interest demand was not specifically addressed.

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Issues Involved:
1. Disallowance of credit in respect of outdoor catering service for canteen after 1.4.2011.
2. Disallowance of credit in respect of group insurance policy.
3. Imposition of penalty and demand of interest.

Analysis:

Issue 1: Disallowance of credit in respect of outdoor catering service for canteen after 1.4.2011
The counsel for the assessee argued that credit for outdoor catering service availed for the canteen post 1.4.2011 was wrongly disallowed. Referring to a High Court decision, it was contended that credit for canteen services, being mandatory, cannot be denied. The Tribunal found that there was no evidence to suggest the canteen was primarily for personal use of employees, as it is a statutory requirement in a large factory. Therefore, cenvat credit on outdoor catering services for maintaining the canteen cannot be disallowed, except for the amount recovered from employees. Consequently, the demand for recovery of cenvat credit on canteen services was set aside, along with the penalty imposed.

Issue 2: Disallowance of credit in respect of group insurance policy
The impugned order allowed the credit for service tax paid on insurance services, which was challenged by the Revenue. They argued that the definition of input service post 1.4.2011 excluded medical insurance. The Tribunal noted that the definition of input service is inclusive but qualified by exclusions, including life and health insurance primarily for personal use. As the lower authorities did not examine the nature of the insurance cover, the matter was remanded to the Commissioner (Appeals) for a fresh decision based on whether the insurance cover was exclusively for injuries or damages to factory employees or included family members and other aspects.

Issue 3: Imposition of penalty and demand of interest
The Tribunal set aside the penalty imposed on disallowed cenvat credit for outdoor catering service, as the disallowance itself was overturned. The matter of interest demand was not specifically addressed in the summary provided.

In conclusion, the appeal of the assessee was allowed, the appeal of Revenue was allowed by way of remand, and the cross objections were disposed of accordingly. The judgment provided detailed reasoning for each issue, citing relevant legal precedents and interpretations to arrive at its decision.

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