Appellant denied cenvat credit on foreign subsidiaries' insurance service. Penalties upheld, interest due.

The Tribunal upheld the decision that the appellant, a Global IT Service Company, was not entitled to avail cenvat credit on the amount attributable to foreign subsidiaries for 'Errors & Omissions Liability Insurance Service' as input services. Penalties were confirmed, and interest was payable if the appellant did not maintain a sufficient balance in their cenvat credit account.

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Issues:
Whether the appellant is entitled to avail cenvat credit on the service of Errors and Omissions Liability Insurance Policy or notRs.

Analysis:
The appellant, a Global IT Service Company, appealed against the denial of cenvat credit on an 'Errors & Omissions Liability Insurance Policy' covering both the appellant and its subsidiaries. The issue revolved around whether the appellant could avail cenvat credit for the insurance policy amount attributable to its foreign subsidiaries. The appellant contended that the insurance policy was procured as a Business Support Service (BSS) for the subsidiaries, qualifying as an export of service under specific conditions. However, the Revenue argued in favor of the impugned orders.

The Tribunal examined the facts and submissions. It noted that the appellant had debited the insurance policy amount to the subsidiaries on a cost basis, indicating that the appellant did not receive the services for that proportionate amount and thus was not entitled to cenvat credit. The Tribunal rejected the appellant's argument that they provided BSS to the subsidiaries, as the insurance policy was obtained as a global policy for all subsidiaries, and the appellant charged service tax only for Indian subsidiaries.

Furthermore, the Tribunal held that the appellant was not entitled to cenvat credit for the insurance policy amount attributable to foreign subsidiaries, as the service tax paid was not refundable, and the appellant was not entitled to avail cenvat credit for services provided to third parties. The Tribunal also noted that the appellant's contention that the foreign entities and the appellant were the same was contradicted by the appellant's recovery of amounts from subsidiaries, indicating they were distinct legal entities.

In conclusion, the Tribunal upheld the impugned orders, ruling that the appellant was not entitled to cenvat credit for the insurance policy amount attributable to foreign subsidiaries. It also confirmed the imposition of penalties and clarified that interest was not payable if the appellant maintained a sufficient balance in their cenvat credit account during the relevant period.

Therefore, the appeals were disposed of with the decision that the appellant was not entitled to avail cenvat credit on the amount attributable to foreign subsidiaries for 'Errors & Omissions Liability Insurance Service' as input services. Penalties were upheld, and interest was payable if the appellant did not maintain a sufficient balance in their cenvat credit account.

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