The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT), Delhi Bench deleted the demand of CENVAT Credit of Rs.196.46 Crores against Oriental Insurance Company.
The Appellant, M/s Oriental Insurance Company Ltd. is a registered insurer under the provisions of Insurance Act 1938 and is engaged in providing general insurance services. It issues various kinds of insurance policies like motor vehicle insurance, fire insurance and marine insurance. The insurance business in India is regulated by the Insurance Act.
The Appellant claimed that because of the requirement set out under section 101A of the Insurance Act and as a prudent business practice it has been availing re-insurance services from Indian as well as foreign reinsurance companies in respect of the insurance policies.
In respect of re-insurance services rendered by Indian Companies, service tax is charged from the Appellant and then deposited in the Government account. In respect of re-insurance services rendered by foreign companies, the Appellant is discharging service tax under the reverse charge mechanism. The Appellant has been availing CENVAT credit of service tax paid on such re-insurance services.
The Commissioner of Central Excise & Service Tax has confirmed the demand of CENVAT credit of Rs. 196,46,97,360 with interest and penalty.
Mr. R.K. Majhi, Authorised Representative of the Department, however supported the impugned order and emphasized that since re-insurance services pertaining to a motor vehicle has been excluded in the definition of „input service‟ by way of an amendment made in Rule 2(l) of the CENVAT Rules w.e.f. April 01, 2011, it will not qualify to be ‘input service’ w.e.f. the said date.
Mr. Majhi also submitted that the extended period of limitation was correctly invoked in facts and circumstances of the case.
The coram headed by the President, Justice Dilip Gupta clarified that even after the amendment of the definition of input service in rule 2(l) of the CENVAT Rule w.e.f. April 01, 2011, the appellant would be eligible to avail CENVAT credit on both the aforesaid reinsurance services.
Therefore, the Tribunal while allowing the appeal held that it is not possible to sustain the order of the Commissioner that confirms the demand of CENVAT Credit of Rs. 196,46,97,360 with interest and penalty.
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