Whether the health cover to family members can be covered under statutory liability envisaged by Employees State Insurance Act, 1948?

PJ/Case Laws/2012-13/1136

Case: COMMISSIONER OF C. EX., TIRUPATI V/S NUTRINE CONFECTIONERY CO. LTD.

Citation: 2012(280) S.T.R. 516(Tri.-Bang.)

Issue:- Whether the health cover to family members can be covered under statutory liability envisaged by Employees State Insurance Act, 1948?

Brief Facts: - The original authority disallowed CENVAT credit on service tax paid on insurance services relating to Group Medical Claim and Group Personal Accident Policies and consequently demanded a sum of Rs. 1,18,885/- along with interest and also imposed penalty of Rs. 2,000/- under Rule 15(3) of CENVAT Credit Rules, 2004. On appeal by the assessee, the Commissioner (Appeals) has held that the said services should be treated as 'Input services' and set aside the order and allowed the appeal. Hence the department is in appeal.

Appellant’s Contention: - The appellants contended that the activity of providing insurance to the workers especially their family members can only be treated as a welfare measure and cannot be treated as having a nexus with the manufacture of excisable goods and therefore, the credit has been rightly denied by the original authority. Further he submits that the decision of the Tribunal and the Hon'ble High Court relate to only Group Insurance Health Policy for employees and there is no indication that the said policy was covering the family members of employees. In the present case, the health insurance policy undisputedly covers not only the employees but also the family members.

Respondent’s Contention: - The respondents relying on the decision of the Tribunal in the case of Stanzen Toyotetsu India Pvt. Ltd. v. C.C.E., Bangalore-III reported as 2009 (14) S.T.R. 316 submits that Group Insurance Health Policy is to be specifically treated as an 'input services' and credit allowed. He also referred to the judgment dated 8-4-2011 of the Hon'ble High Court of Karnataka in the case of Stanzen Toyotetsu India Pvt. Ltd. and others [2011 (23) S.T.R. 444 (Kar.)and submitted that insurance coverage to the employees in area of health and granting cover for risks are statutory requirements under the Employees State Insurance Act, 1948 and the same should be treated as 'input services'.

Reasoning of Judgment: - The Hon’ble Tribunal held that in respect of accident group insurance policy the same has to be clearly treated as part of business activities of a factory especially in the light of decision of the Hon'ble High Court of Karnataka cited supra. As regards Group Insurance Health Policy, the decision of the Tribunal and the decision of the High Court referred to such policy only to employees. In the present case, undisputedly the coverage is for both the employees and the family members. The insurance health cover given to the family members prima facie, may not come under the statutory liability envisaged by Employees State Insurance Act, 1948. However, this issue has not been focused by the authorities below and therefore the same requires to be reconsidered afresh in the light of relevant facts regarding the nature of policy and their terms relating to payment of premium. It is not clear whether the benefit of cover given to the family members involved any additional premium in which case the services relating to said coverage cannot be treated as 'input services'.
In view of the above, the appeal is disposed of as follows:
(a) The order of Commissioner (Appeals) holding that services relating to payment of premium on Group Accident Policies as 'input services' calls for no interference.
(b) The Commissioner's finding relating to Group Health Policy is set aside.

Decision: - The appeal was disposed off.

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PJ/Case Laws/2012-13/1136

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