Is insurance of factory employees excluded in amended definition of input service?

PJ/Case Law /2016-17/3388

Case -FIEM INDUSTRIES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, CHENNAI-III
Citation- 2016 (43) S.T.R. 470
Brief Facts - The insurance premium having been paid for the health insurance of the employees of the factory, the Service Tax paid to avail such service is to be allowed to the appellant. Learned counsel also fairly states that the recent amendment to law with effect from 1-4-2011 has prescribed disallowance of Cenvat credit availed on insurance service in certain circumstances. Revenue on the other hand says that The Service Tax paid on insurance service availed shall not entitle the appellant to Cenvat credit in view of the amendment to Rule 2(l) of Cenvat Credit Rules, 2004 with effect from 1-4-2014 bringing certain contingencies to the fold of law. Therefore, no Cenvat credit of Service Tax paid thereon can be claimed.
Appellant’s Contention- - Learned counsel submits that the insurance premium having been paid for the health insurance of the employees of the factory, the Service Tax paid to avail such service is to be allowed to the appellant. Learned counsel also fairly states that the recent amendment to law with effect from 1-4-2011 has prescribed disallowance of Cenvat credit availed on insurance service in certain circumstances.
Respondent’s Contention- The Service Tax paid on insurance service availed shall not entitle the appellant to Cenvat credit in view of the amendment to Rule 2(l) of Cenvat Credit Rules, 2004 with effect from 1-4-2014 bringing certain contingencies to the fold of law. Therefore, no Cenvat credit of Service Tax paid thereon can be claimed.
Reasoning of Judgment – Exclusion of insurance service in certain events has been incorporated into the law with effect from 1-4-2011. That is only in respect of the insurance coverage given to employees during journey availing leave travel concession. But that had not taken away welfare of workers under the Factories Act, from its fold if insurance service is availed to overcome difficulties under Workmen Compensation Act, in case of hazard. Accordingly, appellant’s claim of Cenvat credit on the Service Tax paid to avail insurance service for employees employed in factory is permissible.

Decision - Appeal allowed.
Comment – The gist of the case is that the appellant was insurance premium for the health insurance of his employees & want to avail the credit of service tax paid contending it as a input service. The revenue quoting the amendment to Rule 2(l) of Cenvat Credit Rules, 2004 with effect from 1-4-2014 denied the credit. Following the law it was find that the credit is denied only in respect of the insurance coverage given to employees during journey availing leave travel concession. But that had not taken away welfare of workers under the Factories Act & thus the contentions of appellant are valid & the appeal is allowed.
Prepared by- Alakh Bhandari

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PJ/Case Law /2016-17/3388

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