Custom, Excise & Service Tax Tribunal
Bpl Telecom Ltd vs Commissioner Of Central Excise, ... on 3 January, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 20020 / 2014 Application(s) Involved: E/Stay/1862/2012 in E/2554/2012-SM Appeal(s) Involved: E/2554/2012-SM [Arising out of Order-in-Appeal No. 28/2012 dated 23/03/2012 passed by the Commissioner of Central Excise, Customs & Service Tax, Cochin] BPL Telecom Ltd. Palakkad - 678 007, Kerala Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax - Calicut Central Revenue Building, Mananchira, Calicut, Kozhikode, Kerala - 673 001 Respondent(s)
Appearance:
Mr. Sandeep Gopalkrishnan, Advocate Menon & Pai P.B. No.1911 IS Press Road, Cochin - 682 018 Kerala For the Appellant Mr. S. Teli, Deputy Commissioner (AR) For the Respondent CORAM:
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER Date of Hearing: 03/01/2014 Date of Decision: 03/01/2014 Since the issue involved falls within a narrow compass, with the consent of both the sides, the appeal itself is taken up for final decision after waiving the requirement of pre-deposit.
2. The issue involved in this case is whether the appellant is eligible for the benefit of credit of service tax paid on Group Health Insurance Policy obtained by them in respect of their employees and their family members. The learned counsel on behalf of the appellants submitted that the fact that family members are covered cannot prevent the appellants for being eligible for the credit. He relies on the provisions of Employees State Insurance Act for this purpose and submits that according to the Act, not only employees are eligible for getting treatment in the ESI hospital but also their family members. Therefore it is his contention that if the appellant obtained Group Health Insurance Policy for the family members of the employees also, credit cannot be denied. He also relies upon the decision of the Larger Bench in the case of CCE, Mumbai-V Vs. GTC Industries Ltd. [2008-TIOL-1634-CESTAT-MUM-LB] to submit that once the expenses incurred formed part of cost of production, credit has to be allowed.
3. On the other hand learned AR submits that the issue is covered by the precedent decisions of the Tribunal wherein a view has been taken that the benefit of credit of service tax in respect of Group Health Insurance would be available only in respect of the insurance cost attributable to employees and not to the family members. He relies on the decision of the Tribunal in the case of Semco Electric Pvt. Ltd. Vs. CCE, Pune-I [2012 (276) E.L.T. 94 (Tri.-Mum.)].
4. I have considered the submissions made by both the sides. As regards the submission relating to ESI Act, the fact that employees family are treated in the ESI hospital is not of relevance for the purpose of examination of admissibility of credit of service tax. Section 38 of the ESI Act requires all employees to be insured. This shows that it is not obligatory for an employer to insure that the employees family also are covered. When an employee is covered by ESI Act no doubt his family is also eligible. However it does not mean that there is a statutory obligation on an assessee to provide insurance coverage to the families of employees and Section 38 requires only employees to be covered. Therefore the submission relating to ESI Act cannot be accepted. As regards the decision in the case of GTC Industries Ltd., in my opinion, there was an observation with regard to the submission made regarding the cost of production. In my opinion the first requirement to be seen is whether the credit is admissible as per the definition. At the threshold if the credit is not admissible, the question of examination as to whether such expenditure forms cost of production does not arise. In this case after examining the definition and the relevant statutory provisions, what is seen is that the service tax paid on Group Health Insurance for the family of the employees can in no way be held to be relatable to the business of manufacture of an assessee. Therefore I am unable to consider the observations in the GTC Industries Ltd. However I find that decision cited by the learned AR is directly on the subject and covers the issue in favour of the Revenue. Therefore I do not find any merit as regards the claim of service tax credit in respect of insurance cost attributable to the family members.
5. The only issue left is whether extended period can be invoked. The learned counsel pointed out that the Commissioner (Appeals) himself has waived the penalty under Rule 15(2) of CENVAT Credit Rules read with Section 11AC of Central Excise Act 1944. When penalty under Section 11AC is waived, the question of invocation of extended period would not arise. I find myself in agreement with this submission. Accordingly the demand has to be limited to the normal period.
6. It was also submitted that entire credit has been disallowed whereas even according to the precedent decisions, the appellant would be eligible for the benefit of credit of service tax in respect of Group Health Insurance taken for the employees. If that is the case, there is a need to identify the cost of insurance and the tax attributable to such cost in respect of family members and limit the demand to that extent. In the absence of relevant data, the matter has to be sent back to the original adjudicating authority for fresh adjudication.
7. In view of the observations above, the matter is remanded to the original adjudicating authority with a request to re-quantify the demand attributable to the normal period. The appellant is liable to pay such quantified amount with interest till the date of payment in accordance with law. The appellant is directed to furnish the total number of employees and total number of dependents of employees in respect of whom insurance has been taken and actual cost of insurance attributable to the employees and the credit of service tax attributable to such costs within three months from the date of this order to facilitate preferred re-quantification by the original adjudicating authority. The adjudicating authority on receipt of such information shall proceed to take the matter afresh if necessary by giving reasonable opportunity to the appellants to present their case. It is made clear that if the appellants did not furnish such data within three months from today and report compliance to the original adjudicating authority on 02.04.2014, the original adjudicating authority shall be free to re-quantify the demand on the basis of available information with him and pass an order.
(Order dictated and pronounced in open court) (B.S.V. MURTHY) TECHNICAL MEMBER iss