Insurance Policies for Employees, being Statutory Mandate, eligible for Credit: CESTAT [Read Order]

insurance - Credit

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai bench has held that the insurance policies taken in the name of employees are eligible for cenvat credit since the same is a statutory mandate.

The appellants, engaged in providing Erection and Commissioning or Installation Services [ECIS] in India as well as abroad, sent their skilled persons for attending the works outside India for the projects carried outside India. The Appellants took Overseas Mediclaim Insurance Policy for employees who were sent for undertaking works in their project abroad. The department issued show-cause notice proposing to disallow the credit on such insurance services alleging that these are excluded from the definition of “Input Services”.

The Company contended that the insurance policies are taken in the name of the employees who are deputed to undertake the works in the projects abroad. These are not for personal use or for the consumption of employees. The policies have been taken as per the mandate of labor legislation. It is incumbent upon the appellants to provide insurance to such employees to meet the risk of injuries/untoward incidents at the place of employment, the Company argued.

Allowing the above contentions, the Tribunal noted that the definition of “input service” with effect from 01.04.2011 excludes life and health insurance services availed for personal use or for personal consumption of employees.

“The appellants have explained that these insurance policies were availed for covering the risk of employees, who undertake works in their projects abroad. The labor legislation in India mandate that the employer covers the risk of such untoward incidents or injuries that may happen to the employees at work site. The Hon’ble jurisdictional High Court in the case of M/s. Ganesan Builders Ltd., (supra) has analyzed the very same issue with regard to the definition of “input service”, after 01.04.2011 and held that credit on such insurance services is eligible. After appreciating the facts of the case as well as following the decision of the jurisdictional High Court, I am of the view that credit is eligible. The impugned order is set aside,” the tribunal said.

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