2021 (4) TMI 400 - AT - Central Excise

Tribunal allows Cenvat credit for Club Membership & Insurance Services

M/s Rajratan Global Wire Ltd. Versus Commissioner, Central Goods & Service Tax, Ujjain

The Tribunal ruled in favor of M/s Rajratan Global Wire Ltd., allowing credit for Club Membership Service and Insurance Service. The decision was based on ... CENVAT Credit - input services - Membership of Club Service - Health Insurance Service - credit denied holding that both the services are specifically excluded from the definition of input service, as stands amended, w.e.f. 1 July 2012 - extended period of limitation - HELD THAT:- Both these services are neither for the personal use of the appellant nor for consumption of any one employee, but for the welfare of the employee at large. Tribunal Hyderabad in the case of M/S HYDUS TECHNOLOGIES INDIA PVT LTD. VERSUS CCE, C & ST, HYDERABAD-II [2017 (2) TMI 538 - CESTAT HYDERABAD] has held that the group gratuity scheme for employees is a service for the welfare of the employees at large services stated in clause (c) in the input service definition are held to be excluded only when such services are used primarily for personal use or consumed by any employee Hyderabad Tribunal has denied the insurance service of all the employees if taken by the manufacturer to fall under exclusion clause of the input definition - Hon’ble Madras High Court also in the case of M/S. GANESAN BUILDERS LTD. VERSUS THE COMMISSIONER OF SERVICE TAX [2018 (10) TMI 269 - MADRAS HIGH COURT] has held that insurance also was insured specific and not employee specific. It cannot be for personal use or for consumption of an employee manufacturer held entitled to take credit of service tax paid. Above all, there is no evidence produced by the Department to prove that even these two services were for personal use of the appellant. In absence thereof, there are no logic in the findings of Commissioner (Appeals) while confirming the recovery of Cenvat credit availed by the appellant on these two services as well. Extended period of limitation - HELD THAT:- There is no other evidence with respect to the alleged suppression of facts or willful mis-statement on the part of the appellant. Law has been settled that the allegations as that of fraud, collusion or willful mis-statement are grave allegations, mere recital thereof cannot be suffice - Apparently, there is no such evidence on record. The Department was not entitled to invoke the extended period for issue show cause notice. Credit allowed - appeal allowed - decided in favor of appellant. Issues:- Disallowance of Cenvat credit on certain services by the Adjudicating Authority- Modification of the order by Commissioner (Appeals) allowing credit for some services- Dispute over disallowance of credit on Membership of Club Service and Health Insurance Service- Arguments presented by the appellant and the Department- Interpretation of the definition of input services under Cenvat Credit Rules, 2004- Analysis of the exclusion clause of the input service definition- Precedents related to the exclusion clause for Club Membership Service and Insurance Service- Lack of evidence proving personal use of the services by the appellant- Determination that the show cause notice was barred by timeDetailed Analysis:The judgment involves a dispute regarding the disallowance of Cenvat credit on certain services by the Adjudicating Authority against M/s Rajratan Global Wire Ltd., a company engaged in the manufacture of wire products. The AGMP Audit party observed that the appellant had availed incorrect Cenvat credit on services like Customs House Agent Service, Rent a Cab Operator Service, Banking and Financial Services, Insurance Services, among others, which were deemed ineligible as input services. A show cause notice was issued proposing the disallowance of credit amounting to &8377;27,98,462/-, along with interest and penalty. The Commissioner (Appeals) modified the order, allowing credit for most services except Membership of Club Service and Health Insurance Service, citing their exclusion from the definition of input services effective from July 1, 2012.During the proceedings, the appellant argued that all services used in relation to the manufacture and clearance of final products should qualify as input services eligible for credit. They contended that the denial of credit for services not explicitly mentioned in the definition was improper, emphasizing that the excluded services were not for personal use or consumption by employees. The Department, on the other hand, supported the exclusion of services under the Rule 2 (i) of Cenvat Credit Rules, 2004, and opposed the appellant's appeal.The Tribunal analyzed the definition of input services under the Rules, highlighting that any service directly or indirectly related to the manufacturing process and product clearance up to the place of removal qualifies for credit. The inclusive part of the definition broadens the scope to include any service used in manufacturing. The exclusion clause applies only if services are primarily for personal use or employee consumption. In this context, the Tribunal examined the specific exclusion of Club Membership Service and Insurance Service.Citing precedents, the Tribunal noted that services like insurance and club membership were considered for the welfare of employees and not for personal use, making them eligible as input services. The lack of evidence proving personal use of these services by the appellant led to the conclusion that the denial of credit was unwarranted. Additionally, the Tribunal determined that the show cause notice was time-barred, further supporting the appellant's position.In conclusion, the Tribunal set aside the order, allowing credit for Club Membership Service and Insurance Service, and ruled in favor of the appellant, highlighting the lack of evidence supporting the denial of credit and the time-barred nature of the show cause notice.