In Toyo Engineering India Ltd. vs. Commissioner of Service Tax, Mumbai, the Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the cenvat credit is available on health insurance policy up to March 2011.
The appellants were served with show cause notice proposing to disallow the cenvat credit availed by them on Mediclaim Insurance Policy taken by them and for their employees and their family members on the ground that it didn’t fall under the category of ‘input services’
From April 1st, 2011 onwards, the category of Health Insurance was excluded from the definition of input services. In its reply to the show cause notice, the appellant stated that they were entitled to the credit up to March 2011 and the credit post-March 2011 of Rs.2.7 Lakhs had been reversed.
The Adjudicating Officer held that the Health Insurance Policy for the employees was not an input service for the Appellant for providing their output services viz. Erection, Commissioning or Installation Service, Consulting Engineering Service, Commercial or Industrial Construction Services and Renting of immovable property service. Thus, he ordered the recovery of the credit by confirming the demand. A penalty under section 78 of the Finance Act and Rule 15(1) of Cenvat Credit Rules 2004 was imposed. Aggrieved, an appeal was preferred by the appellant before the CESTAT.
The Counsel for the appellant argued that the appellant was a service based company with its employees as its biggest resource and that the appellant had taken a Group medical & Accidental policy for its employees. He submitted that the terms “Input Service” included all services used in relation to business. He further filed written submission that even if the family members of the employees are covered under Mediclaim policy still it would be considered as input service and credit is available as held in case of BNY Mellon International Operations (I) (P) Ltd.
The bench comprising of Judicial Member Ramesh Nair and Technical Member Raju observed “The Appellant has already reversed the credit pertaining to the period after March’ 2011. In case of credit availed on impugned services prior to March’ 2011, we are of the view that credit is available on impugned services viz. Mediclaim and Health Insurance Services as held by the Hon’ble High Court in cases supra. Further we find that the Tribunal in case of BNY MELLON INTERNATIONAL OPERATIONS (I) P. LTD 2017 (47) S.T.R. 290 (Tri. – Mumbai) has allowed the credit Thus following the above ratio laid down by this Tribunal we hold that the Appellant is liable for credit on impugned service prior to March’ 2011 and the demand and penalty confirmed/ imposed upon them for said period is not sustainable. In case of the penalty imposed for the period after March’ 2011, we find as the credit has been reversed at the time of investigation and there is no reason to hold the Appellant guilty of any suppression or malafide intention, we set aside the penalty.”To Read the full text of the Order CLICK HERE