2019 (6) TMI 67 - AT - Central Excise

Appellant denied Cenvat credit for employee life insurance post-amendment. Extended limitation period and penalties rejected. Remanded for re-quantification.

Bharat Fritz Werner Ltd. Versus Commissioner Of Central Tax, Bangalore North West Commissionerate

The Tribunal held that the appellant is not entitled to avail Cenvat credit on life insurance policies for employees post the amendment effective from ... CENVAT Credit - input services in the nature of the employee benefit - life insurance of employees - period July 2013 to March 2017 - extended period of limitation - penalty - HELD THAT:- The period involved in the present case is after the amendment in the definition of ‘input service’. The definition of ‘input service’ post amendment contained exclusion clause and the exclusion clause was effective from 01.04.2011 and clause (C) of the said exclusion specifically excluded the services provided in relation to Life Insurance and Health Insurance. These services prior to 01.04.2011 have been held to be covered by the definition of ‘input service’. In fact the need for exclusion would arise only when the services are otherwise covered by the definition. The Legislature in its wisdom has excluded certain services from the availment of cenvat credit w.e.f. 01.04.2011 when such services are otherwise covered by the main definition clause of the input service. Extended period of Limitation - Penalty - HELD THAT:- The issue involved in the present case relates to interpretation of the definition of ‘input service’ therefore extended period cannot be invoked and penalties cannot be imposed - the penalties under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC (i)(c) of Central Excise Act, 1944 set aside - extended period also not available. The matter is remanded back to the original authority to re-quantify the demand for the normal period which the appellant is liable to pay - appeal allowed by way of remand. Issues Involved:1. Entitlement to avail Cenvat credit on life insurance policies for employees.2. Applicability of exclusion clause in Rule 2(l)(C) of Cenvat Credit Rules, 2004.3. Invocation of the extended period of limitation.4. Imposition of penalties under Rule 15(2) of Cenvat Credit Rules, 2004.Issue-Wise Detailed Analysis:1. Entitlement to Avail Cenvat Credit on Life Insurance Policies for Employees:The appellant argued that the Group Life Insurance Service received from SBI Life Insurance Company Ltd. was a statutory obligation under the EPF and Factories Act, 1952. The appellant contended that this service should not be excluded from the definition of 'input service' as per Rule 2(l) of Cenvat Credit Rules, 2004. The appellant further stated that these insurance costs form part of wages/salaries and thus should be considered as part of the assessable value of the final goods manufactured.2. Applicability of Exclusion Clause in Rule 2(l)(C) of Cenvat Credit Rules, 2004:The respondent argued that post-amendment, the definition of 'input service' specifically excludes life insurance and health insurance services as per Clause (C) of Rule 2(l). The appellant's reliance on the statutory obligation was refuted, stating that even if the insurance is a statutory requirement, it is still excluded by the legislative amendment. The Tribunal referred to the Larger Bench decision in Wipro Ltd. Vs. CCE, Bangalore-III, which confirmed that services excluded by the amended definition cannot be claimed for Cenvat credit.3. Invocation of the Extended Period of Limitation:The appellant argued against the invocation of the extended period of limitation, citing that there was no intention to evade duty and the department was aware of the credit being taken. The Tribunal found merit in this argument, noting that the issue involved interpretation of the definition of 'input service,' which does not justify invoking the extended period.4. Imposition of Penalties under Rule 15(2) of Cenvat Credit Rules, 2004:The Tribunal held that penalties cannot be imposed as the issue pertains to the interpretation of the definition of 'input service.' Consequently, penalties under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC (i)(c) of Central Excise Act, 1944 were set aside.Conclusion:The Tribunal concluded that the appellant is not entitled to avail Cenvat credit on life insurance policies for employees post the amendment effective from 01.04.2011. The exclusion clause in Rule 2(l)(C) specifically excludes such services. However, the extended period of limitation was not applicable, and penalties were not justified. The Tribunal remanded the matter back to the original authority to re-quantify the demand for the normal period of one year.