Relief to Kalyan Jewellers: CESTAT allows Cenvat Credit on Gold Insurance Services Provided by Insurance Company [Read Order]

In a major relief to Kalyan Jewellers, the Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) allowed cenvat credit on gold insurance services provided by insurance company.

M/s Kalyan Jewellers, appellant herein, is engaged in retail business of gold jewellery. The issue involved in the appeals are eligibility of CENVAT credit of service tax paid on the services provided by M/s Oriental Insurance Co., Ltd., to the appellant.

The appellant had taken CENVAT credit of the service tax paid by the insurance company on the premium for the master insurance policy issued to the appellant, which is the subject matter of dispute as to its eligibility. As per the impugned order, it was held that said service is not eligible as input service and not eligible for CENVAT credit.

The Counsel for the appellant submitted that as per the impugned order, adjudicating authority held that appellant is providing service under the category of Business Auxiliary Service by implementing the GKL warrant scheme. However, while doing so, it cannot be alleged that insurance service, which is an inevitable part of providing gold care warranty scheme is not an input service of the appellant. It was also contended that the Commissioner has not given any cogent reason as to how the insurance service received by the appellant would not qualify as input service.

The Authorised Representative (AR) for Revenue reiterated the finding in the impugned order and further submits that the input service means any service used by the provider of the output service for providing an output service. In appellant’s case, main insurance company M/s Oriental Insurance Co., Ltd., issued Master insurance policy to the appellant. Further, the appellant issued subsidiary polices to the customers, who had purchased gold.

Thus, appellant was not receiving any service from Insurance Company and in fact, Insurance Company was rendering service only to the purchasers of gold and not to the appellant. Further, submits that the Statement issued by the Insurance Company cannot be considered as a document as prescribed under Rule 9 of the Cenvat Credit Rules, 2004 for taking credit. Regarding the Larger bench decision in the matter of M/s South Indian Bank (supra), Learned AR submits that in appellant’s case, the insurance service received by the Appellant from the Insurance Company is not mandatory and without this service the Appellant can function.

A Two-Member Bench of P.A. Augustian, Member (Judicial) and Pullela Nageswara Rao, Member (Technical) observed that “The issue in present appeals is similar to the issue considered by the Larger bench in the matter of M/s South Indian Bank and held that insurance service provided by the Deposit Insurance Corporation to the banks is an “input service” and Cenvat credit of service tax paid for this service received by the banks from the Deposit Insurance Corporation can be availed by the banks for rendering ‘output services’.”

“In view of above discussion and the decisions of the High Court of Karnataka in M/s PNB Metlife India Insurance, the cenvat credit on the service tax paid by the Insurance Company on the premium paid by the appellant cannot be denied and has to be considered as input service received from the Insurance Company” the Bench concluded.

To Read the full text of the Order CLICK HERE

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