Cenvat credit on employee compensation insurance upheld where coverage was statutory and not for employees' personal consumption.

Cenvat credit on employee compensation insurance service was held admissible because the policy was taken for employees under a statutory insurance regime, not for their personal use or consumption. Rule 2(l) of the Cenvat Credit Rules, 2004 excludes life or health insurance only when provided for an employee's personal use, and that exclusion was not attracted here. Binding precedents were followed to treat such employee-protection insurance as an input service. The denial of credit was therefore unsustainable.

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Issues: Whether Cenvat credit was admissible on service tax paid for employee compensation insurance service taken in respect of employees under the statutory insurance regime.

Analysis: Rule 2(l) of the Cenvat Credit Rules, 2004 excludes life or health insurance taken by an employer for the personal use or consumption of an employee. The insurance in question was not shown to be for any employee's personal use; it was taken in respect of employees pursuant to statutory obligations and for coverage of all employees. The issue had already been settled by binding precedents holding that such insurance, intended to protect employees and not primarily for personal consumption, qualifies as input service for Cenvat credit purposes.

Conclusion: Cenvat credit on the employee compensation insurance service was admissible and the denial of credit was unsustainable.

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