2026 (2) TMI 124 - AT - Service Tax

CENVAT credit refund on insurance premiums: health premiums disallowed; life insurance and other claims remanded for verification and recomputation.

Entitlement to refund of CENVAT credit on insurance premiums was contested: health/general insurance falls within the exclusion from 'input service' for ... Entitlement to refund of CENVAT credit on general/health insurance premiums - nexus between input services and output services - exclusion from definition of 'input service' (Clause C of Rule 2(1)) - computation of refund under Rule 5 of the CENVAT Credit Rules, 2004 - Notification No.27/2012 CE(NT) formula for refund - HELD THAT:- In the present case, the absence of any such statutory provisions mandates medical insurance of employees and also considering the facts that health insurance is specifically excluded from the definition of input services during the relevant period, appellant is not entitled for refund as claimed and hence the impugned order to this extent is upheld. As regarding claim related to Life Insurance Service - HELD THAT:- To ascertain the fact, the details of the payment collected from the employees and details of the discharge of appropriate service tax on such recoveries are not available on record. If the appellant had made such claim on the amount collected from the employees towards transportation, as rental cab services or against the life insurance and if appellant had discharged appropriate service tax on such recoveries, appellant is eligible for availing credit to that extent and for limited purpose of verifying the records, the same is remanded. Since, the appeals are being remanded to ascertain the eligible of the cenvat credit on input services, the said issue is also remanded and the Original Authority shall assess the net cenvat credit as per Rule 5 after deducting ineligible cenvat credit if any, from the cenvat credit availed during the quarter without deducting the cenvat credit utilized towards domestic liability reversal as done in the impugned order. As regarding claim rejected due to lack of documentation also stands remanded for verification of the documents placed by the appellant before us. The appellant is directed to produce documents in support of claim to the satisfaction of the Adjudicating Authority for appropriate finding. As regarding denial on the ground that the invoices addressed to SEZ, we find that cenvat credit has been denied on the ground that no documents were produced that these services were wholly consumed in their STPI Unit because similar services were rendered in their SEZ unit at Coimbatore. The same is remanded for verification as the appellant claims that these are exclusively used in their STPI Unit, hence the same is remanded for necessary verification. The Tribunal partially allowed the appeals: it upheld the disallowance of the refund claim relating to general/health insurance and sustained amounts not appealed, but set aside other rejections and remanded those claims to the Adjudicating Authority for de novo adjudication (including documentary verification, application of prior final orders where applicable, and recomputation of refund under Rule 5 consistent with the Tribunal's direction). The Adjudicating Authority was directed to conclude the remand adjudications within four months. Issues: (i) Whether the appellant is entitled to refund of unutilized CENVAT credit claimed on various input services for the disputed periods (nexus and eligibility of specific services); (ii) Whether refund claimed on general health insurance for employees is admissible; (iii) Whether the method of computation of eligible refund under Notification No.27/2012 (gross CENVAT credit versus net after domestic utilization and reversals) is correct; (iv) Whether certain claims rejected for lack of documents or because invoices addressed to SEZ/STPI require fresh verification.Issue (i): Entitlement to refund of unutilized CENVAT credit on various input services (Business Support Services, visa fees, personnel baggage, translation, clearing & forwarding, management consultancy, training, cleaning, maintenance, sponsorship, accommodation, GTA, manpower recruitment, etc.).Analysis: The Tribunal examined prior adjudications and Tribunal orders in the appellant's earlier periods and relevant decisions on the scope of 'input service' under Rule 2(1) of the CENVAT Credit Rules, 2004 and related authorities relied upon by the appellant. The record showed that for previous periods similar services had been admitted by authorities or covered by Tribunal orders; however, detailed invoices and correlative documentary evidence for the disputed periods were bulky and required scrutiny by the Adjudicating Authority. The Tribunal found that where identical activities were accepted in prior periods and settled by decisions, there was no prima facie reason to deny the benefit for the impugned periods but factual verification remained necessary.Conclusion: The claims relating to these input services are not finally disallowed by the Tribunal; they are remanded to the Adjudicating Authority for de novo adjudication with directions to verify documents and consider earlier accepted claims/decisions. (Outcome: remand in favour of further consideration for the appellant.)Issue (ii): Eligibility of refund claimed on general health/medical insurance for employees.Analysis: The Tribunal considered that medical/health insurance is specifically excluded from the definition of 'input service' for the relevant period and distinguished prior decisions where statutory requirements (e.g., ESI) justified allowance. In absence of a statutory mandate in the appellant's case and given the exclusion in Rule 2(1) for the relevant period, the Tribunal found no basis to allow the claimed refund on general health insurance.Conclusion: Claim for refund of Rs.2,48,27,198 relating to general health insurance is rejected and the impugned order is upheld in this respect (Outcome: against the appellant / in favour of Revenue).Issue (iii): Correct method of computing eligible refund under Notification No.27/2012 whether refund is to be calculated on gross CENVAT credit availed during the quarter or on net after deducting amounts utilized towards domestic liability and reversals.Analysis: The Tribunal noted this question had been considered in the appellant's own earlier matters (Final Order No.23114-23130/2017) and that the proper approach is to compute the maximum refund by deducting only ineligible CENVAT credit (if any) from the gross CENVAT credit availed during the quarter, rather than first netting off amounts utilized for domestic liability and reversals as done by the adjudicating authority. Given factual interdependence with documentary verification and overall remand for eligibility of credits, the Tribunal directed reassessment of computation by the Adjudicating Authority in conformity with Tribunal precedent and the prescribed formula under Rule 5/Notification No.27/2012.Conclusion: The computation issue is remanded for redetermination by the Adjudicating Authority applying the correct method (deduct only ineligible credit from gross CENVAT credit) and reworking the refund as per Rule 5/Notification No.27/2012 (Outcome: remand in favour of appellant's computation principle to be reconsidered).Issue (iv): Claims denied for lack of documentary support or because invoices were addressed to SEZ/STPI whether these require fresh consideration.Analysis: The Tribunal found that several claims were rejected for want of documents or because invoices were addressed to SEZ units; the appellant offered to produce or assert exclusive consumption in STPI units. Documentary verification and correlation (including FIRCs / bank realization certificates) are factual matters suitable for the Adjudicating Authority to examine. The Tribunal directed that the appellant be given opportunity to produce documents and that such claims be verified afresh.Conclusion: These claims are remanded to the Adjudicating Authority for verification of documents, correlation of invoices/FIRCs and reconsideration (Outcome: remand to permit appellant to substantiate claims).Final Conclusion: The appeals are disposed of partly in favour of the appellant by setting aside the impugned orders except as to Rs.2,48,27,198 (general health insurance) and Rs.7,33,415 (amount not appealed), which are upheld; remaining disputed claims and the computation issue are remanded to the Adjudicating Authority for de novo adjudication with opportunity for document production and personal hearing; the Adjudicating Authority is directed to complete the de novo adjudication within four months from receipt of this order.Ratio Decidendi: For refund of unutilized CENVAT credit under the CENVAT Credit Rules and Notification No.27/2012, eligibility requires (a) that the service qualify as an 'input service' under Rule 2(1), (b) a demonstrable nexus between the input and output services, and (c) computation of refund under Rule 5/Notification No.27/2012 must be done by deducting only ineligible credit from gross CENVAT credit availed during the quarter (not by first netting off amounts utilized for domestic liability/reversals); factual documentary verification is decisive and may warrant remand for de novo adjudication.