Partial win for Mercedes-Benz India in Cenvat Credit appeal on employee insurance services

The appeal by M/s. Mercedes-Benz India Pvt. Ltd. against the denial of Cenvat Credit on insurance services for family members of employees was partly allowed by the Appellate Tribunal CESTAT Mumbai. The Tribunal upheld the denial of credit for family members, citing that such insurance is considered a perquisite and not directly related to business activities. However, the penalty imposed was set aside due to a genuine doubt in the appellant's interpretation of the law. The judgment was pronounced on 04/04/2018 by Mr. Raju, Member (Technical).

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Issues:
Denial of Cenvat Credit on input services of insurance used for family members of employees.

Analysis:
The appellant, M/s. Mercedes-Benz India Pvt. Ltd., filed an appeal against the denial of Cenvat Credit on insurance services for family members of their employees. The appellant's counsel argued that a previous decision in their favor and other tribunal cases supported their claim. However, the Assistant Commissioner relied on the impugned order and a different tribunal decision. The presiding Member analyzed the submissions and found that the earlier decision in the appellant's case was based on an erroneous assumption that group insurance for family members is mandatory. The Member differentiated between mandatory group insurance for employees and non-mandatory coverage for their families. The Member also highlighted that the reliance on other tribunal decisions did not directly address the admissibility of credit for family members.

In contrast, the case of Semco Electric Pvt. Ltd., cited by the Assistant Commissioner, specifically discussed the denial of input service credit for insurance taken for the family members of employees. The decision in Semco Electric Pvt. Ltd. emphasized that insurance for family members is considered a perquisite and not directly related to the business activities of the appellant. The Member pointed out that the precedent cited by the appellant was not applicable as it pertained to group insurance for employees or personal accidents, not family members. Consequently, the Member concluded that there was no merit in allowing the credit for family members and upheld the denial.

Regarding the imposition of a penalty, the Member acknowledged the possibility of a genuine doubt in the appellant's interpretation of the law, leading to the setting aside of the penalty. Ultimately, the appeal was partly allowed based on the denial of credit for family members while overturning the penalty. The judgment was pronounced on 04/04/2018 by Mr. Raju, Member (Technical) at the Appellate Tribunal CESTAT Mumbai.

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