Whether credit admissible of service tax paid by insurance company on repair charges of vehicle under cashless scheme?

PJ/Case Law/2013-14/1668

Case:-CHOLAMANDALAM MS GENERAL INSURANCE CO. LTD. VS.C.C.E., LTU, CHENNAI

Citation:-2013 (31) S.T.R. 206 (Tri. - Chennai)

Brief facts:-The facts of the case are that the applicant are Insurance Company who provides insurance on motor vehicles. The applicants are paying Service Tax on insurance premium. As per insurance policy cover, they provide Cashless Scheme. In that scheme, if the vehicle is damaged in accident or otherwise, then the vehicle is to be sent to the authorized service station where it has to be got repaired without any payment by the owner of the vehicle. All the repair services are paid by the applicant which includes Service Tax. Revenue is of the view that the Service Tax component on account of repair charges/services is not entitled to them for input service credit as the repair service of the vehicle was availed by the vehicle owners as the invoices are in the name of the vehicle owners. Input service credit has been denied to the applicant to the tune of Rs. 1,96,64,604/- on account of that the applicant are not actually service receiver and therefore they are not entitled to take input service credit.

Reasoning of Judgment:-Considering the submissions made by both sides, it is no doubt the repair service of vehicles is done by the authorized service station on behalf of the applicant as per the cover of insurance company provided under the Cashless Scheme. For that situation as clarified by C.B.E. & C., in their Circular F. No. 334/1/2010-TRU, dated 26-2-2010 wherein it is clarified the insurance company is the service receiver. Therefore, on the basis of the above cited Circular, prima facie, the applicant are entitled to take input service credit on the impugned services which services were paid by them. Accordingly, the applicant has made out a case for 100% waiver of pre-deposit. Hence, we waive the requirement of pre- deposit of the entire Service Tax, interest and penalties and stay the recovery thereof during the pendency of the appeal.

Decision:-Stay granted.

Comment:-The analogy that is drawn from this case is that there is no requirement to actually avail the benefit of services to be able to take credit of input services and in circumstances that of insurance company paying service tax on the repair charges of vehicle under cashless scheme is also eligible to avail cenvat credit of the service tax paid on such repair charges irrespective of the fact that the actual beneficiary of the service is the policy holder.

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PJ/Case Law/2013-14/1668

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