Denial of Cenvat credit on insurance policies upheld, penalty set aside. Liability to pay confirmed.

The Tribunal confirmed the denial of Cenvat credit on the Medi-claim Policy for employees and Group Personal Accident Insurance Policy amounting to Rs. 8,37,191. The penalty of Rs. 83,000 imposed under Rule 15(1) of the Cenvat Credit Rules, 2004 was set aside. The appellant was held liable to pay the denied amount, but the penalty was deemed unjustified due to the interpretative nature of the issue. The appeal was dismissed, and the decision was pronounced on 31/05/2019.

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Issues Involved:
1. Eligibility of Cenvat credit on Medi-claim Policy for employees and Group Personal Accident Insurance Policy.
2. Imposition of penalty under Rule 15(1) of the Cenvat Credit Rules, 2004.

Issue-wise Detailed Analysis:

1. Eligibility of Cenvat credit on Medi-claim Policy for employees and Group Personal Accident Insurance Policy:

The core issue in this case is whether the appellant is entitled to avail Cenvat credit on input services relating to Medi-claim Policy for employees and Group Personal Accident Insurance Policy. The appellant argued that these policies are not primarily for personal consumption but are indirectly related to the manufacture of the final product and are a statutory requirement under various Labour Laws. However, the Tribunal noted that post-01.04.2011, the definition of 'input service' explicitly excludes services such as life insurance and health insurance when used primarily for personal use or consumption of any employee. The Tribunal referred to the Larger Bench decision in the case of Wipro Ltd., which upheld the exclusion clause in Rule 2(l)(C) of the Cenvat Credit Rules, 2004, stating that services excluded by the Legislature cannot be claimed for Cenvat credit, regardless of statutory requirements under other laws. Consequently, the Tribunal confirmed the denial of Cenvat credit on the Medi-claim Policy for employees and Group Personal Accident Insurance Policy amounting to Rs. 8,37,191/-.

2. Imposition of penalty under Rule 15(1) of the Cenvat Credit Rules, 2004:

The appellant also challenged the imposition of a penalty of Rs. 83,000/-. The Tribunal observed that the issue involved relates to the interpretation of the definition of 'input service'. Given the complexities and the fact that the exclusion clause was a matter of interpretation, the Tribunal found that the imposition of the penalty was not justified. Therefore, the penalty under Rule 15(1) of the Cenvat Credit Rules, 2004, was set aside.

Conclusion:

The Tribunal dismissed the appeal, confirming the demand of Rs. 8,37,191/- as the appellant is liable to pay this amount. However, the penalty of Rs. 83,000/- was set aside due to the interpretative nature of the issue. The order was pronounced in Open Court on 31/05/2019.

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