By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether accidental and medical insurance obtained
by the Manufacturer for employees and their family members are eligible
input services for claiming CENVAT Credit?
Facts:
The
appellants, being manufacturer of excisable goods, availed CENVAT Credit
on accidental and medical insurance premium paid for the employees and
their family members. The appellants relied on the decisions of the
Karnataka High Court in case of CCE vs. Micro labs Ltd.- 2012 (26) STR
383 (Kar.) and CCE vs. Stanzen Toyotetsu India (P) Ltd.-2011 (23) STR 44
(Kar.) wherein group insurance and health insurance policy of employees
was held to be qualified “input service.”
Revenue relied on the
decision of the Gujarat High Court in case of CCE vs. Cadila healthcare
Ltd. – 2013 (30) STR 3 (Guj) wherein it was concluded that all services,
the cost of which became part of the cost of the business, cannot be,
prima facie considered as an input service.
Held:
The
Tribunal observed that the employer took accidental insurance policy for
the workers of the company to cover its business risk and similarly,
health insurance for providing proper treatment to the employees falling
sick. Insurance bring employees back to work without loss of man-hours
and disruption of manufacturing lines of the company. Thus, such
insurance cannot be considered as having no relation with the
manufacturing activity. However, insurance premium attributable to the
families of employees had no direct nexus with the manufacturing
activity and will not be qualified as input service. Following the
decision of the Karnataka High Court in Micro labs Ltd. (supra), the
order was set aside and matter was remanded back to the adjudicating
authority to quantify the insurance premium attributable to family
members which was held ineligible as CENVAT credit.
