Whether tax paid on mediclaim insurance and group insurance policy taken for employees or staffs deniable as cenvat credit or not?

PJ/Case Laws/2011-12/1004

Prepared By:
CA. Rajani Thanvi &
Bharat Rathore

Case: - M/s Fiamm Minda Automotive Ltd. Vs CCE, Delhi-IIII

Citation: - 2011-TIOL-394-CESTAT-DEL.

Issue:-

Whether tax paid on mediclaim insurance and group insurance policy taken for employees or staffs deniable as cenvat credit or not?
Whether credit deniable on CHA service where the goods are exported on FOB basis and ownership retailed till delivery of goods on board the vessel?
Whether Rent a cab service use for transport of vendors and clients from guest house to factory, credit of service tax paid deniable or not??
Whether insuring export of goods relates to business activity, tax paid on insurance of export goods deniable or not??

Brief Facts:- Appellant had taken credit on various services

Tax paid on mediclaim insurance and group insurance policy taken for employees/ Staff,
CHA services when goods are exported on FOB basis and ownership retailed till delivery of goods on board the vessel,
Rent a cab service utilized for transport of vendors and clients from guest house to factory, and
Tax paid on insurance of export goods.

Assessee filed an appeal against commissioner (Appeals) order and department also filed appeal against the same order in respect of certain aspects, which has been decided against the department.

Department’s Contention: - Department contention on each of the dispute are as follows:-

Group Insurance/ mediclaim Policy:- The department aggrieved that the credit of the service tax paid on mediclaim insurance and group insurance policy taken for their employees/ staff who are not covered by the ESI has been disallowed on the ground that the same cannot be considered as input service in terms of the activities relating to business. The department also said that it is not mandatory for the appellants to take mediclaim policy and accident policy for their employees it is only a welfare measure and therefore it is not treated as business activities.
CHA Service:- The Department challenging the allowing of credit on service tax paid on CHA services.
Rent a Cab service: The Department aggrieved that the credit of the service of rent a cab on the ground that part of service has been utilised for transporting vendors and clients from the guest house to factory and vice versa.
General Insurance for exporting the goods: The department challenging the allowing of credit on service tax paid on General insurance for exporting the goods on the ground that such activities should be treated only as additional business activities. The department pursue that this activity

Assessee’s Contention: Assessee contention on each of the dispute are as follows:-

Group Insurance/ mediclaim Policy:- The assessee submit that in respect of category of employees and officials who are not covered by the ESI, they are required to make compensation in the event of illness/ accident. As a prudent business proposition, they incurred expenses by taking mediclaim insurance and personal accident insurance and these expenditures are clearly in the course of business activities and should be treated as input service.
CHA Service:- The assessee submit that as per Para 8.2 of the Boards Circular No. 97/8/2007 dated 23.08.07 the supply of goods for export was on FOB basis and there fore, ownership, possession associated with obligation relating to loss or damage of the goods till they are delivered on board the ship rest with the party and therefore CHA services should be treated as input service.
Rent a Cab Service: The assessee submit that vendors and clients have been transported from the guest hous to factory and vice versa these activities should be treated as business activities in relation to the clearance of final products from the assessee’s factory and the clients are to enable to sell their products and naturally part of the business activities.
General Insurance for exporting the goods:- The assessee submit that insurance for exporting goods is business activity and service tax credit on the same should not be denied to us.

Reasoning of Judgment: - The Hon’ble Tribunal heard the submissions of both side and the findings are as under on each of dispute:-

Group Insurance/ mediclaim Policy:- The Tribunal held that the issue stands settled against the department by the decision given in Stanzen Toyotetsu India Pvt. Ltd. Vs. CCE, Bangalore [2009 TIOL-697-CESTAT-Bang]. There is a merit in the appeal filed by the assessee.
CHA Service:- The Tribunal held that the assessee has shown that the goods have been exported on FOB basis and that the ownership is retained till the delivery of the goos on board the vessel until receipt of bill of lading.
Rent a Cab Service: The Tribunal do not find any valid reason for interfere with the order of the Commissioner (Appeals) in so far as the same relates to the extending the benefit of credit on the service tax involved in the rent – a – cab even when the cars used for transporting vendors and client.
General Insurance for exporting the goods:- The Tribunal held that service tax paid on insurance relating the insurance of export goods treating the same as part of business activity. And do not find any valid reason for interfere with the order of the Commissioner (Appeals)

Decision: - Appeal of the department is rejected and the appeal of the assessee allowed.

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PJ/Case Laws/2011-12/1004

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