Whether Cenvat credit can be availed by insurance company on tables and chairs procured by them for clients?

PJ/CASE LAW/2016-17/3197

Case:-ICICI LOMBARD GENERAL INSURANCE CO.LTD. VERSUS COMMR. OF S.T.,MUMBAI-I

Citation:- 2016(42) S.T.R.938(Tri.-Mumbai)

Brief facts:- This appeal is directed against Order-in-Original No. 38/STV-I/SKS/11-12, dated 13-11-2011.
The relevant facts that arise for consideration are the appellant being in the business of general insurance were paying Service Tax on the services rendered by them and were availing benefit of Cenvat credit of service tax paid on the various input services as also on capital goods and inputs. Appellant availed the Cenvat credit of Central Excise duty paid on Furniture and Fittings during the period 2006-07, 2008-09 and also on the Service Tax paid by the canteen contractor. Revenue is of the view that they could not have availed Cenvat credit on Furniture and Fittings as they were not capital goods and on the “Outdoor Catering Services” it was not related to the services rendered by them which are taxable. Show cause notice was issued which was contested on merits as well as on limitation; after due process of law, the adjudicating authority confirmed the demands raised on the ineligibility of Cenvat credit on Furniture and Fittings and canteen services, along with interest and imposed penalties under various sections and rules.

Appellant’s contention:- Learned Chartered Accountant appearing on behalf of the appellant draws our attention to the facts of the case and the impugned order. It is his submission that Furniture and Fittings are required by the appellant for rendering the services of general insurance. It is his submission that the said Furniture and Fittings may not classify as capital goods but are definitely inputs. He would draw our attention to definition of inputs in Rule 2(k) of Cenvat Credit Rules, 2004, (hereinafter referred to as rules). He would submit that the Cenvat credit on the canteen services as availed by the appellant is now confirmed by the Hon’ble High Court of Bombay in the case of Ultratech Cement - 2010-TIOL-745-HC-Mum = 2010 (20)S.T.R.577 (Bom.) = 2010 (260)E.L.T.369 (Bom.), holding that such credit is available. He would submit that as regards the Furniture and Fittings, the Tribunal in the case of Agarwal Foundries – 2015 (321)E.L.T.267 has held Cenvat as they are used for “any other purposes”. He would also draw our attention to C.B.E. & C. Circular No. 943/04/2011-CX, dated 29-4-2011 and specifically to point no. 3 in the said Circular.

Respondent’s contention:- Learned Departmental Representative on the other hand would emphasize that the appellant had availed the Cenvat credit on Furniture and Fittings holding them to be capital goods. He would submit that the said Furniture and Fittings do not classify as capital goods as per the definition in the rules, as they fall under different chapter and not those chapters which are treated as capital goods by the rules. He would submit that the ratio of judgment to the Tribunal in the case of Bharti Airtel Ltd. - 2012-TIOL-209-CESTAT-Mum = 2013 (29)S.T.R.401 (Tribunal) will apply which according to him is there has to be sufficient nexus between the inputs and input service, while in the case in hand is not forthcoming and the appellant had not evidenced that the Furniture and Fittings which have used for providing services. He would submit that the said Furniture and Fittings would become non-excisable goods accordingly, the Cenvat credit is not applicable.
On the Cenvat credit availed on catering services, he reiterates the findings of the adjudicating authority.

Reasoning of judgement:-The issue that needs to be decided in the case in hand is whether during the material period, appellant is eligible to avail Cenvat credit of the Excise Duty paid on Furniture and Fittings and the Service Tax paid on “outdoor catering services” or otherwise.
As regards the Cenvat credit of the Service Tax paid on catering services, the law is fairly settled by a judgment of Hon’ble High Court of Bombay in the case of Ultratech Cement (supra). The Hon’ble High Court has categorically stated that Cenvat credit can be availed on the Service Tax paid on the portion which is being paid by the canteen contractor. The Hon’ble High Court has also held that Service Tax paid on contribution or value of the canteen services enjoyed by the employees will not be available as Cenvat credit. In view of this, we hold that appellant is eligible to avail Cenvat credit to the extent of Service Tax paid by the canteen contractor and is not eligible to avail Cenvat credit of the Service Tax paid on the value of the services utilized by the employees of the appellant. Lower authorities are directed to reworkout the demand as per the judgment of Hon’ble High Court of Bombay and also recover interest at appropriate rate from the appellant.
As regards the Cenvat credit availed on the Furniture and Fittings, we find that the said furniture and fittings are nothing but tables and chairs which were procured by appellant during the relevant period. It is a common knowledge that any insurance company is required to have chairs and tables to render services to their clients. In our considered view, the said tables and chairs are used for rendering services of general insurance, accordingly, the appeal filed by the appellant on this issue needs to be allowed and we do so.
The reliance placed by the learned Departmental Representative on the judgment of Bharti Airtel (supra) will not carry their case any further, as we find in that case the Tribunal has recorded a clear findings that the appellant therein had not established that products were used for purpose of providing mobile telephone services, on the other hand, in the case before us, we find that the appellant has been taking a consistent plea that these tables and chairs are utilized for rendering the services as the employees need to sit and work on these tables and chairs.
In view of the foregoing, in the facts and circumstances of this case, we hold that the appellant is eligible to avail the Cenvat credit of Excise duty paid on Furniture and Fittings and also the Service Tax paid on canteen services as indicated herein above.
The impugned order to that extent which is contested before us is disposed of as indicated herein above.

Decision:-Appeal disposed of

Comment:-The analogy of the case is that CENVAT credit can be availed on tables and chairs procured by insurance company as they may not be capital goods but they are definitely inputs, as they are used to provide services to clients.

Prepared By:-Rakshay

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PJ/CASE LAW/2016-17/3197

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