CESTAT Mumbai allows CENVAT credit for insurance services but denies credit for rent-a-cab services

CESTAT Mumbai-AT partially allowed an appeal regarding CENVAT credit on input services. The tribunal denied credit for rent-a-cab services worth Rs.1,97,848, ruling that motor vehicles used (Volkswagen Vento, Toyota Altis, Corolla Altis) fall under tariff headings 8702/8703 and are specifically excluded from capital goods definition under Rule 2(a), thus disqualifying them under clause (B) of Rule 2(l). However, the tribunal allowed CENVAT credit of Rs.13,38,885 for insurance services, holding that corporate fire insurance, group protection plans, and workmen compensation policies were not for personal employee use but for business operations, making them eligible input services despite the 2011 amendment to Rule 2(l).

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Issues Involved:

1. Eligibility to avail Cenvat credit on Rent-a-Cab services.
2. Eligibility to avail Cenvat credit on insurance services.
3. Imposition of penalty for availing Cenvat credit.

Summary:

1. Eligibility to Avail Cenvat Credit on Rent-a-Cab Services:

The appellant, a provider of various output services, availed Cenvat credit on Rent-a-Cab services. The learned consultant argued that Rent-a-Cab services are not excluded under clause B of Rule 2(l) of the Cenvat Credit Rules, 2004 (CCR) as these services are essential for providing output services like maintenance of telecom towers. However, the adjudicating authority and the impugned order denied the Cenvat credit on the ground that the motor vehicles used were not capital goods u/s 2(a) of CCR. The Tribunal upheld the denial of Cenvat credit amounting to Rs. 1,97,848/- for Rent-a-Cab services, as the vehicles used were not classified under capital goods.

2. Eligibility to Avail Cenvat Credit on Insurance Services:

The appellant also availed Cenvat credit on insurance services, which was contested by the department. The learned consultant contended that these services are mandatory under the Employees State Insurance Act and are essential for ensuring uninterrupted provision of output services. The Tribunal referred to various judgments, including Reliance Industries Ltd. and Micro Labs Ltd., which supported the admissibility of Cenvat credit on insurance services. The Tribunal concluded that insurance services are not used primarily for personal use or consumption of employees and allowed Cenvat credit amounting to Rs. 13,38,885/-.

3. Imposition of Penalty:

The learned consultant argued that the Cenvat credit was availed on a bona fide belief and its recovery due to technical objections should not result in a penalty. The Tribunal did not explicitly address the penalty issue in the final judgment, focusing instead on the eligibility of Cenvat credit for the disputed services.

Conclusion:

The Tribunal partially modified the impugned order dated 14.05.2019, allowing Cenvat credit for insurance services amounting to Rs. 13,38,885/- and upholding the denial of Cenvat credit for Rent-a-Cab services amounting to Rs. 1,97,848/-. The appeal was disposed of in these terms.

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