AI Drafter 
TaxTMI 
TaxTMI 
2023 (3) TMI 1276
X X X X Extracts X X X X
X X X X Extracts X X X X
....tled to avail Central Value Added Tax (hereafter 'CENVAT') credit on re-insurance services (Indian as well as Foreign Insurance). 2. According to the Revenue (appellant), the learned CESTAT's conclusion is erroneous because by virtue of Rule 2(l) of the CENVAT Credit Rules, 2004 (hereafter 'CCR') as applicable during the period 01.04.2011 to 20.07.2012, CENVAT Credit was unavailable for insurance in respect of a motor vehicle. Demand cum Show Cause Notice dated 05.12.2014 3. OIC is engaged in the business of providing general insurance service and re-insurance service, being a registered insurer under the provisions of the Insurance Act, 1938 (hereafter 'the Insurance Act'). 4. The Commissioner, Central Excise Service Tax (hereafter 'the Commissioner') issued a Demand-cum-Show Cause Notice dated 05.12.2014. The show cause notice was issued on the basis of a Modus Operandi, Circular No. 29/2013-14 dated 18.03.2014 issued by the Additional Director General, Directorate of Service Tax Mumbai. The said Circular was in respect of wrongful availment of CENVAT Credit in respect of service tax paid on re-insurance premium. It was alleged that insurance companies were wrongfully....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urance services were not essential for providing the insurance service; third, that re-insurance services were not directly or indirectly used for providing output services; and fourth that the invoices issued by the insurance companies did not appear to be proper documents for availing CENVAT Credit. The relevant extract of the show cause notice is set out below: "10. From the foregoing it is cleared that reinsurance service in relation to a motor vehicle, which is not a capital goods has been included as an input service defined under Rule 2(l) of CCR, 2004 vice Notification No. 21/2012-CE (NT) dated 27.03.2012 as amended by Notification No.28/2012-CE (NT) dated 20.06 2012 from 01.04.2012 only and therefore the same cannot be treated as an input service for the period prior to 01.04.2012 for the following reasons:- (i) The reinsurance service is received by the service provider after rendering the output service namely insurance service to reduce risk /liabilities. (ii) Reinsurance service is not essential for providing of the insurance service which can be provided without receiving these services. (iii)The reinsurance services are not used di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of re-insurance services availed by OIC. 9. The Commissioner noted that Rule 2(l) of the CCR, as in force prior to 01.04.2011, defined 'input service' to mean any service used for providing an output service or used by the manufacturer in relation to the manufacture of the final product. The case set up in the show cause notice for denial of CENVAT Credit in respect of tax paid on re-insurance services was founded on, essentially, two propositions. First, that re-insurance services were obtained after OIC had performed the output services, that is, after it had issued the insurance policy; therefore, the same could not be considered as an input service, which was essential for providing output services. Second, that re-insurance services had no relationship with the output services provided by the service provider. 10. The Commissioner noted that the issue whether there was any nexus between re-insurance services and the insurance services provided by OIC was settled by the decision of the learned CESTAT in the case of PNB Metlife India Insurance Co. Limited v. Commissioner of Central Excise Service Tax and Customs, Bangalore 2014 (36) STR 891, which was upheld by the High ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. 14. The learned CESTAT confined its examination to the question whether OIC was dis-entitled to avail CENVAT Credit for re-insurance services by virtue of the exclusionary clause introduced in Rule 2(l) of the CCR. As stated above, the Commissioner had held that re-insurance services were not included in the definition of 'input service' under Rule 2(l) of the CCR with effect from 01.04.2011. The learned CESTAT found the said view to be erroneous. The CESTAT held that such insurance services, which were in relation to 'a motor vehicle', were the only services excluded from the definition of 'input services' and the same did not cover re-insurance services availed by OIC. The learned CESTAT referred to the decision in Shriram General Insurance Company Ltd. v. Commissioner of Central Excise, Jaipur-I Service Tax Appeal No. 54096 of 2014, decided on 04.03.2020., whereby the Tribunal had explained that motor vehicles had been excluded from the definition of 'capital goods' and therefore, general insurance services relating to such motor vehicles was also excluded from the definition of 'input service'. 15. The learned CESTAT accepted that re-insurance services were not exclude....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Indian Motor Third Party Insurance Pool is essentially a mechanism of re-insurance. The premium paid to members of the pool is in the nature of premium for re-insurance. As stated above, the Commissioner had accepted that there was no qualitative difference between input tax credit in respect of service tax paid on re-insurance premium to Indian re-insurer; input credit in respect of re-insurance business paid under Reverse Charge Mechanism (to insurance companies located overseas); and input credit on service tax paid to the members of the Indian Motor Third Party Insurance Pool. 21. The Adjudicating Authority had also accepted that re-insurance services would be covered under the definition of input services under Rule 2(l) of the CCR for the period prior to 01.04.2011. There is also no cavil that re-insurance services would be covered under the definition of input services for the period after 30.06.2012. 22. The questions whether re-insurance services cannot be considered as input services for the reason that the same are rendered after the output services; whether the same are essential for rendering output services; and whether the same have a nexus with the output ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....12; and as in force thereafter. Rule 2(l) of the CCR, as applicable prior to 01.04.2011, reads as under: "2(l) input service means any service, - (i) used by a provider of taxable service for providing an output service, or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;" 28. The definition of 'input services' under Rule 2(l) of the CCR was amended vide Notification no. 3/2011 -CE (NT) dated 01.04.2011 to specifically exclude certain servi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal but excludes,- (A) .... (B) specified in sub-clauses (o) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle which is not a capital goods; or (BA) specified in sub-clause (d) and (zo) of Section 65 of the Finance Act, in so far as they relate to a motor vehicle which is not capital goods, except when used by (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufacture by him, or (b) a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sured by such person; or" 31. There is no dispute that the respondent was entitled to avail CENVAT Credit in respect of premium paid for re-insurance prior to April, 2011. There is also no dispute that re-insurance services were not excluded from input services after 30.06.2012. The Revenue contends that by virtue of the amendment in Rule 2(l) of the CCR, as introduced with effect from 01.04.2011, input service in relation to the services specified in Clause (d) of Sub-section (105) of Section 65 of the Act^1, insofar as it relates to motor vehicles, was excluded from the scope of input service. The only exception being when the services were used for provision of taxable services for which credit on motor vehicles was available as capital goods. 32. According to OIC, the re-insurance services availed by it could not be stated to be in relation to 'a motor vehicle'. The re-insurance premium was paid by the respondent for re-insurance to mitigate its risks. The quintessential difference being that whereas the respondent had issued policies relating to a motor vehicle, the re-insurance premium was paid for re-insurance to cover or mitigate its risks. 33. Section 2(16B) of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Division Bench of the Rajasthan High Court in Commissioner of Central Goods and Service Tax Commissionerate Jaipur v. Shriram General Insurance Company Limited (DB) Central Excise Appeal No. 4/2021, decided on 19.01.2022. 39. In view of the above, we find no infirmity with the decision of the learned CESTAT that re-insurance services were not excluded from the definition of 'input service' as defined under Section 2(l) of the CCR with effect from 01.04.2011. 40. As noted above, OIC had challenged the Order-in-Original dated 19.02.2016 before the CESTAT on other grounds as well. Prima facie, we find substance in the contention that the extended period of limitation under Section 73(1) of the Act was not available in this case. There was no concealment or suppression of any fact. It is OIC's assertion that re-insurance services were not excluded from the scope of input services and therefore, there is no reason for OIC to not avail CENVAT Credit in relation to re-insurance services. There is no allegation that OIC had not maintained records of such input services or had otherwise not disclosed it in its accounts. It is well settled that the proviso to Section 73(1) is attract....