2025 (8) TMI 803 - AT - Service Tax

CENVAT Credit Allowed on Employee Insurance Premiums Under Rule 2(l); Recovery Demand Set Aside

Tata Teleservices (Maharashtra) Ltd Versus Commissioner of Service Tax, Mumbai-II

Tata Teleservices (Maharashtra) Ltd Versus Commissioner of Service Tax, Mumbai-II - TMI 1. ISSUES PRESENTED and CONSIDERED Whether CENVAT credit is admissible on service tax paid on insurance premiums for group mediclaim policies extended to employees and their families. Whether CENVAT credit is admissible on service tax paid on personal accident insurance policies taken for employees. Whether CENVAT credit is admissible on service tax paid on insurance of vehicles used in the business. Whether the absence of a statutory obligation to procure insurance for employees affects the entitlement to CENVAT credit. Whether the insurance services procured for employees and their families qualify as 'input service' under rule 2(l) of the CENVAT Credit Rules, 2004. Whether the denial of CENVAT credit on vehicle insurance is justified in the absence of specific findings regarding the use of vehicles. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Admissibility of CENVAT credit on group mediclaim policies for employees and their families - Relevant legal framework and precedents: Rule 2(l) of the CENVAT Credit Rules, 2004 defines 'input service' and governs eligibility for credit. The Tribunal's earlier decisions, including Fiamm Minda Automotive Ltd and Stanzen Toyotetsu India Pvt. Ltd, have recognized insurance services for employees as input services eligible for credit. The Supreme Court's decisions referenced do not negate this position. - Court's interpretation and reasoning: The Tribunal held that service tax paid on group mediclaim policies for employees and their families qualifies as input service under rule 2(l). It emphasized that the insurance service is procured in connection with business activities and is not merely a welfare measure. The Tribunal noted that the appellant is not required to establish an integral connection between the insurance service and manufacturing business for periods prior to 01.04.2011. - Key evidence and findings: The appellant procured group mediclaim policies covering employees and their families. The Tribunal found no statutory prohibition or limitation on credit for such services. An interim Larger Bench order confirmed entitlement to credit for insurance services extended to family members. - Application of law to facts: Applying the definition of input service and relevant precedents, the Tribunal concluded that the insurance premiums paid for employees and their families constitute eligible input services, and the corresponding CENVAT credit is admissible. - Treatment of competing arguments: The Revenue argued that insurance for employees and families is a welfare measure and not mandatory, hence not eligible. The Tribunal rejected this, relying on binding precedents and the inclusive definition of input service. - Conclusions: CENVAT credit on service tax paid on group mediclaim policies for employees and their families is admissible and cannot be disallowed. Issue 2: Admissibility of CENVAT credit on personal accident insurance policies for employees - Relevant legal framework and precedents: Similar principles under rule 2(l) apply. The Tribunal's decision in Fiamm Minda Automotive Ltd supports credit for insurance services related to employee welfare when connected with business risks. - Court's interpretation and reasoning: The Tribunal found no evidence that accident coverage extended beyond workplace-related risks. Given the nexus with business risk management, the personal accident insurance qualifies as input service. - Key evidence and findings: The amount of Rs. 46,262 claimed as credit related to personal accident insurance policies was considered to be for workplace coverage. - Application of law to facts: Since the insurance is procured to cover risks inherent in business operations, the service tax paid is eligible for credit. - Treatment of competing arguments: The Revenue contended that such insurance is not mandatory and thus not eligible. The Tribunal rejected this argument, emphasizing the business nexus and risk mitigation aspect. - Conclusions: CENVAT credit on service tax paid on personal accident insurance policies for employees is admissible. Issue 3: Admissibility of CENVAT credit on vehicle insurance - Relevant legal framework and precedents: Rule 2(l) of the CENVAT Credit Rules, 2004 includes services used in relation to business activities as input services. Statutory mandates require vehicles to be insured. - Court's interpretation and reasoning: The adjudicating authority did not provide specific findings on vehicle insurance eligibility. The Tribunal noted that vehicles are used in business activities and are statutorily required to be insured, supporting credit eligibility. - Key evidence and findings: There was no record indicating that vehicles were used for non-business purposes. - Application of law to facts: Given the statutory requirement and business use, the service tax paid on vehicle insurance qualifies as input service. - Treatment of competing arguments: The Revenue denied credit without specific findings. The Tribunal found this denial inconsistent with the intent of the CENVAT Credit Rules. - Conclusions: CENVAT credit on service tax paid on vehicle insurance is admissible. Issue 4: Effect of absence of statutory obligation to procure insurance on credit entitlement - Relevant legal framework and precedents: The Tribunal in Fiamm Minda Automotive Ltd and other decisions clarified that entitlement to credit does not depend on mandatory procurement but on the service qualifying as input service connected to business. - Court's interpretation and reasoning: The Tribunal held that lack of statutory obligation to procure insurance does not preclude credit entitlement if the service is used in relation to business activities. - Key evidence and findings: The appellant voluntarily procured insurance services as a prudent business measure to manage risks. - Application of law to facts: The voluntary nature of insurance procurement does not affect the nexus with business activities or the eligibility for credit. - Treatment of competing arguments: The Revenue argued that non-mandatory insurance cannot be input service. The Tribunal rejected this, relying on established precedents. - Conclusions: Entitlement to CENVAT credit is not negated by the absence of statutory obligation to procure insurance.