CENVAT credit allowed on insurance services procured for employees under Rule 2(1)(ii) of CCR 2004

CESTAT Mumbai allowed appeal regarding CENVAT credit on insurance services. Appellants provided Mediclaim insurance to employees, recovering premiums from them, and claimed CENVAT credit on input services from insurance company. Revenue denied credit and imposed penalty under Rule 15(1) of CENVAT Credit Rules, 2004. CESTAT held that since appellants provided output service to employees for consideration, insurance services procured constituted admissible input services under Rule 2(1)(ii) of CCR, 2004. Tribunal relied on precedents including Ultra Tech Cement Ltd. and South Indian Bank cases. The impugned order dated 12.11.2021 was set aside and appeal allowed in favor of appellants.

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Issues:
1. Whether the utilization of CENVAT credit on insurance services for a Mediclaim policy for employees' parents is admissible under CENVAT Credit Rules, 2004.
2. Whether penalty under Rule 15(1) of CENVAT Credit Rules, 2004 is applicable.

Analysis:
Issue 1:
The appeal by M/s Siemens Limited challenged the Order-in-Appeal passed by the Commissioner (Appeals) regarding the denial of CENVAT credit on insurance services for a Mediclaim policy for employees' parents. The department objected to the credit claimed on premium charged for the policy. The appellants argued that they provided the insurance service to employees' parents, recovered the premium from employees, paid service tax as a service provider, and reflected this in their returns. The Tribunal analyzed Rule 2(1)(ii) of CCR, 2004, which defines input service as any service used for providing an output service. It concluded that since the appellants provided the insurance service to employees, the services availed from the insurance company should be treated as input services, making them eligible for CENVAT credit.

Issue 2:
The Tribunal referred to a previous decision by a Coordinate Bench in the case of Ultra Tech Cement Limited, which held that a taxpayer is required to pay service tax as per legal provisions and is entitled to avail credit on input services for relevant output services. The Tribunal quoted a paragraph from the decision, emphasizing that employees are considered service recipients when services are sold to them, entitling the taxpayer to avail credit on input services. Further, the Tribunal cited cases like South Indian Bank and Commissioner of Service Tax, which supported the liability to service tax and eligibility of service tax paid on input services. Consequently, the Tribunal held that the impugned order denying CENVAT credit was not open for debate, setting it aside and allowing the appeal in favor of the appellants.

This judgment clarifies the admissibility of CENVAT credit on insurance services provided for employees' parents and highlights the importance of following legal provisions and established case law in determining eligibility for such credits.

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