In a major relief to Reliance Industries Ltd, the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), allowed Cenvat Credit on premium paid for group insurance under Voluntary Separation Scheme (VSS).
The appellant, M/s Reliance Industries Ltd, manufacturer of excisable goods at their facility in Vadodara, had been issued with show cause notice for denying CENVAT credit which ultimately was limited to Rs 13 lakhs held as ineligible for being premium paid for group insurance to cover employees opting for VSS in March 2010. The order was upheld by Commissioner (Appeals) leading to the present appeal.
In the case of Reliance Industries Ltd v. Commissioner of Central Excise & Service Tax (LTU), Mumbai, it was held by a larger Bench of the Tribunal that credit can be availed on the amount of insurance premium paid by the appellant to the insurance company for availing mediclaim of employees who had opted for the VSS announced by the appellant as the service that was rendered would amount to ‘input service’ in terms of Rule 2(l) of the 2004 Rules, as it stood at the relevant time; it being in relation to activities relating to business.
Since CAS-7 defines the expression ‘employee cost’, in general, all references to employee costs in the Cost Accounting Standards, including in CAS-4, will have to take the same meaning as provided in CAS-7. It is clear from CAS7, that employee costs include payments made in cash or kind and refers to not only the present costs by way of salaries, wages and employee welfare benefits, but also future benefits such as gratuity, leave encashment, VRS and other employee benefits. It also includes benefits to family members and dependents.
It is thus clear from CAS-7 that medical benefits pertaining to employees and dependents, even if they are in terms of VRS/retirement/separation schemes, are an integral part of the ‘employee cost’.’
A Coram consisting of C J Mathew, Technical Member and Ajay Sharma, Judicial Member observed that “In view of the precedent decision in an identical dispute of the very same appellant, we set aside the impugned order and allow the appeal.”
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