Cenvat credit on workmen compensation insurance remains admissible where the policy indemnifies the employer's statutory liability.

Cenvat credit was held admissible on service tax paid for a workmen compensation insurance policy because the policy indemnified the assessee against its statutory liability under the Workmen Compensation Act, 1923. As the insured was the employer and the cover was not a benefit primarily for employees' personal use or consumption, the exclusion in Rule 2(l) of the Cenvat Credit Rules, 2004 did not apply. Credit could not be denied merely because the policy related to employees, so the entitlement to credit was affirmed.

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Issues: Whether Cenvat credit of service tax paid on workmen compensation insurance policy is admissible under the exclusion clause in Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis: The disputed insurance policy was taken by the assessee to cover its statutory liability to pay compensation under the Workmen Compensation Act, 1923. The policy did not provide a benefit primarily for the personal use or consumption of employees. The insured was the assessee and not the individual workmen, and the policy operated as an indemnity against the assessee's potential liability under sections 3 and 4 of the Workmen Compensation Act, 1923. On that footing, the exclusion inserted in Rule 2(l) for services used primarily for personal use or consumption of employees did not apply. The view that credit must be denied merely because the policy relates to employees was rejected, and the view that the assessee remains entitled to credit was affirmed.

Conclusion: Cenvat credit on the service tax paid for the workmen compensation insurance policy is admissible, and the view supporting credit is correct.

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