Re-insurance services were held outside the motor-vehicle exclusion, preserving CENVAT credit for insurers under input service rules.

Re-insurance services availed by an insurer were held not to fall within the Rule 2(l) exclusion for insurance services relating to a motor vehicle. The phrase "insofar as they relate to a motor vehicle" was construed narrowly, because re-insurance covers the insurer's business risk and not the vehicle itself or the policyholder's risk. The 01.04.2012 amendment did not change that position. Accordingly, re-insurance remained within the scope of "input service" for the relevant period, and CENVAT credit on such services was admissible.

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Issues: Whether re-insurance services availed by an insurance company were excluded from the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 for the period 01.04.2011 to 30.06.2012, and consequently whether CENVAT credit on such services was admissible.

Analysis: The exclusion introduced into Rule 2(l) from 01.04.2011 applied to specified insurance services in so far as they related to a motor vehicle. Re-insurance, by its nature, is insurance of part of the insurer's risk by another insurer and is qualitatively distinct from insurance of the motor vehicle itself or the policy-holder's risk. The Court held that the phrase "insofar as they relate to a motor vehicle" could not be stretched to cover re-insurance services, because such services relate to the insurer's business risk and not to the motor vehicle as such. The amendment made from 01.04.2012 also did not alter this position, as the re-insurance activity remained outside the mischief of the exclusion.

Conclusion: Re-insurance services were not excluded from the scope of "input service" during the relevant period, and the respondent was entitled to CENVAT credit on such services.

Ratio Decidendi: An exclusion in the definition of input service referring to insurance services "insofar as they relate to a motor vehicle" does not apply to re-insurance, because re-insurance covers the insurer's assumed risk and not the motor vehicle itself.

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