2025 (10) TMI 1267 - AT - Service Tax

Group mediclaim qualifies as input service under Rule 2(l); CENVAT credit allowed, demand time-barred on merits

CESTAT (Chandigarh - AT) allowed the appeal, setting aside the order denying CENVAT credit for group mediclaim insurance. Relying on a Larger Bench ruling ... Denial of CENVAT Credit - mediclaim insurance service - extended period of limitation - suppression of facts or not - HELD THAT:- This issue is no more res integra and has been settled by the Larger Bench in the case of CCE & ST, Noida vs. HCL Technologies Ltd [2025 (10) TMI 1192 - CESTAT ALLAHABAD (LB)], wherein the Larger Bench has held that group insurance service (medical) qualifies as input service under Rule 2(l) of the Cenvat Credit Rules and therefore the credit for the same is admissible to the appellant. Further, since the issue was referred to the Larger Bench and it involves interpretation of complex provisions, hence, the allegation of suppression of the facts from the department with intent to evade service tax is not sustainable and the entire demand is also barred by limitation. The impugned order is set aside on merits as well as on limitation - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether Cenvat credit of service tax paid on group mediclaim/group insurance for employees qualifies as admissible input service under Rule 2(l) of the Cenvat Credit Rules. 2. Whether the demand premised on denial of credit and raised by invoking the extended period of limitation is sustainable where the appellant contested interpretation of complex provisions and the issue was referred to a Larger Bench (i.e., whether suppression with intent to evade tax is established). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility of Cenvat credit on group mediclaim/group insurance under Rule 2(l) Legal framework: Cenvat Credit Rules - definition and scope of 'input service' under Rule 2(l) and the conditions for availing credit of service tax on services used in relation to taxable output services. Precedent treatment: The issue has been considered and finally addressed by a Larger Bench which held that group insurance service (medical) qualifies as an input service under Rule 2(l) of the Cenvat Credit Rules. Multiple Tribunal and High Court decisions on the admissibility of credit for group insurance/mediclaim services were relied upon in support of the contention that such credit is admissible. Interpretation and reasoning: The Court accepts the Larger Bench's interpretation that group mediclaim/group insurance provided for employees constitutes an 'input service' as defined in the Rules and thereby falls within the ambit of services for which Cenvat credit can be availed by a provider of taxable services. The Tribunal treats the Larger Bench determination as dispositive on the legal question presented, finding the statutory language of Rule 2(l) and the Larger Bench's construction sufficient to classify group medical insurance as an input service. Ratio vs. Obiter: The Larger Bench's holding that group insurance (medical) is an input service is treated as ratio decidendi for the present issue and is followed by the Tribunal. References to other decisions are used as supporting authorities but the Larger Bench ruling is the controlling precedent applied. Conclusions: Cenvat credit on group mediclaim/group insurance for employees is admissible under Rule 2(l) of the Cenvat Credit Rules. The impugned denial of credit on merits is set aside and credit is allowed. Issue 2 - Limitation and invocation of extended period based on alleged suppression with intent to evade tax Legal framework: Provisions permitting invocation of extended period of limitation require establishment of suppression of facts or intention to evade tax; ordinary limitation rules bar recovery where such suppressive conduct is not proved. Principles governing limitation defenses apply where interpretation of statutory provisions is genuinely in dispute. Precedent treatment: Authorities recognizing that invocation of extended limitation is inappropriate where the question involves complex interpretation and has been referred to a Larger Bench or where there is no clear proof of deliberate suppression were relied upon to support the contention that the demand was time-barred. Interpretation and reasoning: The Tribunal reasons that where the legal question is complex and has been the subject of reference to a Larger Bench, the necessary inference of deliberate suppression with intent to evade tax cannot be sustained. The fact that the issue required and received scrutiny by a Larger Bench demonstrates that the claim of suppression is insufficiently supported. Consequently, the foundational factual and legal basis for invoking the extended period is lacking. Ratio vs. Obiter: The conclusion that the extended period cannot be invoked in the absence of proven suppression where the issue is a complex point of law referred to a Larger Bench is treated as a ratio applied to the facts of this appeal. Observations about the interplay between legal complexity and limitation are integral to the decision rather than obiter. Conclusions: The demand raised by invoking the extended period is unsustainable. The allegation of suppression with intent to evade service tax is not established; therefore the entire demand is barred by limitation and must be set aside. Cross-References and Operative Conclusion The Tribunal applies the Larger Bench determination on admissibility of credit and concurrently holds that, because the issue involved complex legal interpretation and was referred to a Larger Bench, the extended period of limitation could not be invoked for alleged suppression. On both merits and limitation grounds the impugned denial of credit and resultant demand are set aside and the appeal is allowed.