Cenvat credit on statutory insurance services remains admissible where the cover supports factory operations and employee welfare obligations.

Cenvat credit remained available on insurance premium paid for employees' compensation insurance, public liability insurance, and related insurance services for the period after 1-4-2011. The exclusion introduced from that date was read as applying only to insurance primarily for personal use or consumption of employees, not to insurance obtained to meet statutory obligations or to support factory operations. Applying Rule 2(l) of the Cenvat Credit Rules, 2004, the Tribunal treated such insurance as input service because it was connected with employee welfare requirements and protection against manufacturing risks. Credit was therefore held admissible and denial of credit was unsustainable.

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Issues: Whether Cenvat credit was admissible on insurance premium paid towards employees compensation insurance policy, public liability insurance, and related insurance services for the period after 1-4-2011.

Analysis: The period in dispute was post 1-4-2011, when exclusion of certain insurance services was introduced, but only in respect of insurance primarily for personal use or consumption of employees. The insurance in question was taken to satisfy statutory and operational requirements connected with the factory, including employee welfare obligations and protection against risks arising from factory operations. The Tribunal followed earlier decisions holding that insurance obtained to comply with statutory obligations and to facilitate manufacturing activity remains within the ambit of input service credit. Rule 2(l) of the Cenvat Credit Rules, 2004 was applied in that light, and the exclusion was held not to cover the services involved here.

Conclusion: Cenvat credit on the insurance services was admissible and the denial of credit was unsustainable.

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