Group Health Insurance & Guest House Services are 'Input Services': CESTAT Overrules Department's Denial of Cenvat Credit [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has allowed CENVAT credit on Group Health Insurance and guest house services, overturning the Department’s denial of these benefits.

The Tribunal ruled that Group Health Insurance and Personal Accident policies for employees are "input services" as they support the business and fulfil statutory employer obligations. Similarly, it held that services provided at a guest house used for visiting professionals and employees were for official purposes and not primarily for personal use, making them eligible for credit.

M/s. Delhi Cargo Service Centre Private Limited against an order confirming a demand of Rs. 2,70,80,797, along with interest and penalty. The Department had alleged various irregularities, including the non-reversal of credit on exempt supplies, non-payment of tax on advances, and inadmissible CENVAT credit on items like rent-a-cab services, security, and health insurance. They also argued that credit taken on debit notes was invalid as they were not prescribed documents.

While the Tribunal upheld the demand for non-reversal of credit on exempt supplies and confirmed interest on delayed tax payments for advances, it ruled largely in favour of the appellant on key input service issues.

Following various judicial precedents, CESTAT allowed CENVAT credit on rent-a-cab services and works contracts related to the repair and renovation of the cargo terminal. The Tribunal also held that credit could not be denied solely on the ground that debit notes were used, provided they contained all requisite particulars.

Furthermore, the Tribunal comprising Dr.Rachna Gupta, Member (Judicial) and Hemambika R. Priya, Member (Technical) set aside the substantial demand regarding the remission of license fees.

It held that the refund of license fees received from Delhi International Airport Private Limited (DIAL) due to delays in handing over land was a "deficient service" renegotiation and not income taxable under Section 66E for "tolerating an act."

The appeal was allowed to the extent that the demands on health insurance, guest house services, debit notes, and license fee refunds were set aside, though the demands on exempt supplies and advances were upheld.

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