Custom, Excise & Service Tax Tribunal
Hindustan Petroleum Corporation Ltd vs Commissioner Of Central Excise ... on 7 April, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. I
Excise Miscellaneous Application No. 85405 of 2024
(on behalf of Respondent)
AND
Excise Miscellaneous Application No. 86528 of 2024
In
Excise Appeal No. 86381 of 2015
(Arising out of Order-in-Original No. 1/RN/COMMNR/M-II/2015-16 dated
30.04.2015 passed by the Commissioner of Central Excise, Mumbai-II)
Hindustan Petroleum Corporation Ltd. .... Appellants
Refinery Division, B.D. Patil Road,
Mahul, Mumbai - 400074.
Versus
Commissioner of Central Excise, Mumbai-II .... Respondent
9th Floor, Piramal Chambers
Lalbaug, Parel,
Mumbai - 400 012.
Appearance:
Shri Sachin Chitnis, Advocate for the Appellants
Shri C.S. Vinod, Authorized Representative for the Respondent
FINAL ORDER NO. A/85518/2025
Date of Hearing: 06.12.2024
Date of Decision: 07.04.2025
Per: M.M. Parthiban
This appeal has been filed by M/s Hindustan Petroleum Corporation
Limited (HPCL), Refinery Division, Mahul, Mumbai (herein after, referred to
as "the appellants", for short) assailing the Order-in-Original No.
1/RN/COMMNR/M-II/2015-16 dated 30.04.2015 (herein after, referred to
as "the impugned order") passed by the Commissioner of Central Excise,
Mumbai-II, Mumbai.
2. Revenue has filed this miscellaneous application bearing No.85405 of
2024, seeking change of name and address of the respondent arising on
account of change in jurisdiction of the Central Excise authorities. The
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appellants have also filed a similar request in the miscellaneous application
No.86528 of 2024. The prayer made by the Revenue as well as the
appellants are considered and accordingly, the Registry is directed to
incorporate the following changed name and address of the respondent in
the appeal records for the purpose of disposal of the appeal:-
"Commissioner of Central Goods Service Tax & Central Excise,
Navi Mumbai Commissionerate,
16th Floor, Satra Plaza, Sector -19D, Palm Beach Road,
Vashi, Navi Mumbai - 400 705".
3.1 Denial of CENVAT Credit of Service Tax paid on sixteen different items
of services viz., health, general insurance of CISF security services, medical
insurance of employees, outdoor catering, maintenance and repair services
etc. is the subject matter of present dispute. During the scrutiny of invoices
issued by the service providers to the appellants, on the basis of which
CENVAT credit of service tax has been taken by the appellants during the
period October, 2013 to March, 2014, the department had objected to
credit taken on certain services on the ground that these do not appear to
be covered by the definition of 'input service' under Rule 2(l) of the CENVAT
Credit Rules, 2004 (CCR of 2004). These ineligible services were grouped
by the department in the following five broad categories:
(i) CENVAT credit taken on renting of motor vehicle, which is excluded
from input service by clause (B) to Rule 2(l) of CCR of 2004;
(ii) Repair and maintenance services relating to motor vehicle, as it is
excluded from input service by clause (BA) to Rule 2(l) of CCR of 2004;
(iii) life/medical or health insurance services extended to staff and
personnel of CISF security being excluded from input service by clause
(C) to Rule 2(l) of CCR of 2004;
(iv) services of catering, health, travel, as these specifically excluded
from input service by clause (C) to Rule 2(l) of CCR of 2004;
(v) services of miscellaneous nature viz., removal of honey comb,
removal of debris, disposal of canteen waste/medical waste,
maintenance of garden & grass cutting etc., which are not related to
manufacturing activities.
3.2 The amount of CENVAT credit taken on such five categories were
identified for quantification of CENVAT demand as Annexures A-1 to A-5.
Accordingly, show cause proceedings were initiated for recovery of CENVAT
credit alleged to have been taken irregularly for an amount of
Rs.3,17,21,276/- along with interest under Rule 14 of CCR of 2004 read
with Section 11A(4) of the Central Excise Act, 1944 and for imposition of
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consequent penalty under Rule 15(1), 15(2) ibid vide Show Cause Notice
(SCN) dated 07.11.2014. In adjudication of the said SCN dated
07.11.2014, learned Commissioner of Central Excise, upon examination of
the various items for which CENVAT credit was demanded, had allowed
CENVAT credit for an amount of Rs.1,92,43,862/- being eligible credit to
the appellants; further, on the amount of Rs.65,33,827/- being CENVAT
credit voluntarily reversed by the appellants on service tax paid on
premium of health/medical insurance of dependent family members of
employees, he demanded the same and appropriated it; and furthermore
had also demanded CENVAT credit of Rs.59,43,587/- on ineligible services
besides imposition of penalties of Rs.59,43,587/- under Rule 15(2) ibid
read with Section 11AC ibid, and Rule 15(1) ibid for Rs.25,000/-. Feeling
not satisfied with the impugned order dated 30.04.2015, the appellants
had preferred this appeal before the Tribunal.
4.1 Learned Advocate appearing for the appellants had submitted that
the appellants are engaged in manufacture of petroleum and petroleum oil
products (POL) by processing it in their refinery at Mahul, Mumbai, where
crude petroleum is obtained through pipelines from the port jetties, off-
shore platforms are subjected to refining process. As the products are
hazardous in nature, the appellants are required to comply with safety,
security aspects and the entire refinery plant is required to be maintained
for compliance with environmental protection and regulatory requirements
of Petroleum & Natural Gas Regulatory Board. In the manufacture of such
final products, the appellants avail CENVAT credit of duties and tax paid on
input, input services and capital goods.
4.2 He further stated that CENVAT credit availed in respect of medical/
health insurance coverage of the family members of employees have
already been reversed in January/February 2014, prior to the issue of SCN
dated 07.11.2014 and sufficient balance of credit was available in their
CENVAT Credit account, details of which was informed to the department
and also verified by the Divisional Assistant Commissioner on 28.04.2015.
Hence, he pleaded that no penalty is imposable on such amount reversed
by the appellants on their own, and when sufficient balance of credit in
CENVAT account existed during the relevant period.
4.3. Learned Advocate submitted that CISF security for the refinery
campus are being employed as per the mandatory instructions of the
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Ministry of Home Affairs, and in as much as the definition of input service
include services used in relation to 'security', the service tax paid on health,
medical insurance services of security should be admissible to them as
eligible CENVAT credit. He further stated that group medical insurance of
employees are required to be taken as per the statutory requirement under
Section 38 of Employees' State Insurance Act, 1948. Similarly,
maintenance of gardens in 33% of the available open area of the refinery
are the mandatory requirement of Maharashtra Pollution Control Board in
setting up/running of the petroleum refinery. Thus, these statutory
requirements are essential services in manufacturing of petroleum
products. Hence, he pleaded that the service tax paid on such services
should also be available to them.
4.4 In respect of various other services which are used by the appellants,
he had justified the eligibility of such services as 'input service' on the
following grounds:
(i) Outdoor catering is utilized in business improvement/convention like
training, conferences, seminars etc.
(ii) Repair and maintenance of road from the main gate to refinery,
asphalt surface road repairing, removal of crushed stones are essential
maintenance services.
(iii) Dry grass has potential for fire hazard especially when petroleum
products manufactured in the refinery are highly inflammable, and
hence these need to be pruned/cut to maintain safety; similarly honey
comb is also a fire hazard, which need to be removed periodically.
(iv) records/documents are kept in safe custody for eight years through
professional storage of records, and when any agency require for the
purpose of 'auditing', search of documents services is utilized.
(v) transportation through bus service has been engaged for CISF
security personnel.
(vi) services for underwater diving has been used for removal of debris
from sea near the jetty pumps which are used within refinery; further,
during annual shutdown/maintenance, contractual employees are
taken for doing repairs and maintenance service, for whom shamiana
and erected for providing drinking water etc. and these are covered
under 'repairs and renovation'.
(vii) video imaging services, are used for visual inspection of
inaccessible location within the factory, during natural calamities.
(vii) program service are engaged as a part of CSR activity in the
refinery.
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Therefore, on the above basis, he justified that the appellants are eligible
for CENVAT credit and claimed that the impugned order is not sustainable
to the extent it has denied the credit on these input services.
5. Learned Advocate relied upon the following judgments in support of
their stand :-
(i) Dharti Dredging & Infrastructure Ltd. Vs. Commissioner of Central
Tax, Secunderabad GST - 2022 (59) G.S.T.L. 171 (Tri. - Hyd.);
(ii) Ganesan Builders Ltd. Commissioner of Service Tax, Chennai -
2019 (20) G.S.T.L. 39 (Mad.);
(iii) Hindustan Petroleum Corporation Ltd. Vs. C.C.E., Visakhapatnam-
I - 2017 (47) S.T.R. 33 (Tri.- Hyd.);
(iv) Hindustan Petroleum Corporation Ltd. Vs. Commissioner of C. Ex.,
Mumbai-II - 2018 (12) G.S.T.L. 305 (Tri.- Mumbai)
6. Learned Authorised Representative (AR) appearing for the
department, on the other hand, submitted that the definition of 'input
services' under Rule 2(l) ibid has undergone a change, which exclude
various input services which are used for personal consumption and
employees' consumption and such services which are excluded are, outdoor
catering, health services, life insurance, health insurance and travel
benefits extended to employees. Therefore, he reiterated the findings in
the impugned order and claimed that the impugned order is sustainable
and appeal filed by the appellants cannot be entertained.
7. Heard both sides and perused the records of the case. We have
examined the submissions advanced by learned Advocate appearing for the
appellant and the learned Authorized Representative of the Department.
Further, we have also perused the additional written submissions in the
form of paper books submitted by both sides along with citation of case
laws which both sides have mentioned in support of their case.
8.1 The issue involved in this appeal is the eligibility to avail CENVAT
credit on various input services which were utilized by the appellants during
the course of manufacture of petroleum products in their petroleum
refinery at Mahul, Mumbai. For the above purpose, the appellants used
many input services. It is an undisputed fact of the case that service tax
has been paid on all the input services which are in dispute. The only
dispute is whether such services can be treated as eligible 'input service'
as defined under Rule 2(l) of the CCR of 2004, for the purpose of taking
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CENVAT Credit by the appellants. There is no dispute that the appellants
are eligible to avail Cenvat credit. It can be seen from the factual matrix of
the case that all the said services were utilized by the appellants during the
course of manufacture of petroleum products.
8.2 In order to address the above issue of eligibility to avail the Cenvat
credit on various input services, we would like to refer the relevant legal
provisions contained in Cenvat Credit Rules, 2004 as it existed during the
disputed period in respect of the taxable service under dispute.
"Definitions.
2. In these rules, unless the context otherwise requires,--
(l) 'input service' means any service,--
(i) used by a provider of output service for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation
to the manufacture of final products and clearance of final products up to
the place of removal,
and includes services used in relation to modernisation, renovation or
repairs of a factory, premises of provider of output service or an office
relating to such factory or premises, advertisement or sales promotion,
market research, storage upto the place of removal, procurement of
inputs, accounting, auditing, financing, recruitment and quality control,
coaching and training, computer networking, credit rating, share registry,
security, business exhibition, legal services, inward transportation of
inputs or capital goods and outward transportation up to the place of
removal;
but excludes--
(A) service portion in the execution of a works contract and
construction services including service listed under clause (b) of section
66E of the Finance Act (hereinafter referred as specified services) in so far
as they are used for-
(a) construction or execution of works contract of a building or a civil
structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital
goods,
except for the provision of one or more of the specified services; or
(B) services provided by way of renting of a motor vehicle, in so far as
they relate to a motor vehicle which is not a capital goods; or
(BA) service of general insurance business, servicing, repair and
maintenance , in so far as they relate to a motor vehicle which is not a
capital goods, except when used by--
(a) a manufacturer of a motor vehicle in respect of a motor vehicle
manufactured by such person; or
(b) an insurance company in respect of a motor vehicle insured or
reinsured by such person; or
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(C) such as those provided in relation to outdoor catering, beauty
treatment, health services, cosmetic and plastic surgery, membership of a
club, health and fitness centre, life insurance, health insurance and travel
benefits extended to employees on vacation such as Leave or Home Travel
Concession, when such services are used primarily for personal use or
consumption of any employee.
Explanation.--For the purpose of this clause, sales promotion includes
services by way of sale of dutiable goods on commission basis."
8.3 On careful reading of the definition of 'input service' under Rule 2 (l) of
CCR, 2004 as above, We find that it provides for three categories of services,
out of which the first category viz., (i) 'means' part of the definition, generally
cover services which are used directly or indirectly, in or in relation to
manufacture of final goods or for providing of output services; the second
category viz., (ii) 'inclusion' part of the definition, specifically state certain
services used in relation to various activities, which is used in relation to the
manufacture of final products or provision of output services, both of which
are covered under the scope of 'input services'. Further, the third category,
viz., (iii) 'exclusion' part of the definition provided under Clauses (A), (B),
(BA) and (C), specifically provide for certain services or portion of such
services, which are not included in the above definition of 'input service'.
However, there are certain exceptions to this exclusion which are also given
in the form of 'except for provision of certain services', 'except when used by
certain category of persons', 'when such services are not primarily used for
specified use' etc. Therefore, we are of the considered view that in order to
come to the conclusion that a particular service is covered as 'input service',
either it could be covered under category (i) or (ii) of the definition of input
service as explained above, and such input service should not fall under the
exclusion clauses mentioned in the third category (iii) above.
9.1 In respect of group medical/health insurance policy taken for their
employees, we find that the technicians of prescribed threshold limit of
wages/salary, who are required to work in the refinery, were required to
be insured in terms of Section 38 of Employees' State Insurance Act, 1948,
for ensuring the compensatory benefits to employees in case of sickness,
maternity and employment injury. The relevant provision reads as follows:
"38. All employees to be insured:
Subject to the provisions of this Act, all employees in factories or
establishments to which this Act applies shall be insured in the manner
provided by this Act."
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Therefore, the appellants are mandatorily required to take
medical/health insurance for their employees in compliance with the above
statutory requirement. However, for those employees who are not covered
by the ESI scheme, general medical/health insurance has been taken by
the appellants. We have perused the insurance coverage under a sample
copy of the insurance policy produced by the appellants dated 01.04.2012
given by the insurer M/s New India Assurance Company Limited, wherein
it is seen that the insured is the appellants company M/s Hindustan
Petroleum Company Limited itself. Therefore, it is evident that the
beneficiary of such services is the appellants and not the individual
employees. Therefore, the embargo put on the input services used
primarily for personal use or consumption of any employee for exclusion
from the scope of coverage of 'input service' under Clause (C) of Rule 2(l)
of CCR of 2004, does not apply to the present case.
9.2 We find that the dispute in respect of availment of Cenvat credit on
medical insurance service is no more open to debate, as in a number of
cases the Tribunal has held the same as admissible. The relevant
paragraphs of order of the Tribunal in the case of Honda Motorcycle &
Scooter (I) Pvt. Ltd. Vs. Commissioner of C. Ex. Delhi-III - 2016 (45) S.T.R.
397 (Tri. -Chan.) is extracted and given below:
"(iii) The medical insurance and life insurance service :
4.1 The credit on the medical insurance and life insurance service was
denied to the appellants relying on the Circular No. 843/4/2011-CX., dated
29-4-2011 wherein, it has been held that the credit is not allowed on the
services used primarily for welfare of the employees.
4.2 Learned Counsel argued that the insurance is for the employees'
welfare and is required in terms of Section 38 of Employees State
Insurance Act. She argued that the scope of insurance taken is same as
required under ESI Act. She also relied on the decision of Hon'ble
Karnataka High Court in the case of Stanzen Toyotetsu India (P)
Ltd. - 2011 (23) S.T.R. 444 (Kar.) wherein the Hon'ble High Court has
observed as follows : -
14. In so far as Insurance coverage to the employees is concerned in the
course of employment if the employees suffer injury or dies, there is a vicarious
liability imposed on the employer to compensate the employee. If the employer
employs its own transportation facility in order to cover the risk which also
includes the risk of workers who are covered in that statutory establishment.
He has to take the insurance policy without which the vehicle cannot go on the
road. Under the Workmen's Compensation Act he has to obtain the Insurance
Policy covering the risk of the employees. The Employees' State Insurance Act
takes care of the health of the employees also and casts an obligation on the
employer to provide insurance services. Under these circumstances, this Group
Insurance Health Policy though is also a welfare measure is an obligation which
is cast under the Statute that the employer has to obey. Section 38 of the
Employees' State Insurance Act, 1948, mandates that subject to the provisions
of the Act, all employees in factories or establishments to which this Act applies
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shall be insured in the manner provided by this Act. May be the employees also
have to contribute but the employer is under an obligation to take an insurance
policy and contribute his share. Therefore, the said Group Insurance Health
Policy taken by the assessee is a service which would constitute an activity
relating to business which is specifically included in the input service definition.
4.3 Learned AR argued that apart from insurance the employees are also
availing the medical allowances and therefore medical insurance risk
coverage is nothing but welfare of the employees.
4.4 We have considered the rival submissions. Learned Counsel has
argued that the insurance is strictly in terms of Section 38 of ESI Act. In
terms of the decision of Hon'ble Karnataka High Court (supra), so long as
the insurance is in terms of Section 38 of ESI Act the credit of the service
tax paid is allowed. The appeal on this count is allowed."
9.3 We further find that the Hon'ble High Court of Karnataka has held the
medical insurance service as admissible for availing the Cenvat credit as
input services. The relevant paragraphs of judgement in the case of
Commissioner of C. Ex. & Service Tax, LTU, Bangalore Vs. Micro Labs Ltd.
- 2011 (270) E.L.T. 156 (Kar.) is extracted and given below:
"This appeal is by the Revenue being aggrieved by the order of the
Tribunal which held that the assessees are liable to avail Cenvat credit
towards service tax paid on Group Mediclaim Policy premium.
2. The assessees are engaged in the manufacture of medicaments and
are holders of Central Excise Registration. On scrutiny of the records by
the authority it was seen that they had availed Cenvat credit for
payment made towards Group Mediclaim Policy premium. Accordingly,
a show cause notice was issued as to why the Cenvat credit availed by
the assessees towards payment of Group Mediclaim Policy premium
should not be demanded and recovered since it was irregularly availed
by them and also as to why the penalty and interest should not be
imposed. After submitting the reply the assessing authority confirmed
the demand, penalty and interest. Aggrieved by the same, an appeal
was preferred to the Commissioner who confirmed the order of the
assessing authority and dismissed the appeal. Aggrieved by the same
the assessees preferred an appeal before the Tribunal. The Tribunal by
placing reliance in the case of Stanzen Toyotetsu India Pvt. Ltd. v. CCE,
Bangalore-III reported in 2009 (14) S.T.R. 316 (Tri.-Bang.) held that
the assessees are entitled to avail Cenvat credit of the service tax paid
on Group Mediclaim Policy premium. Hence, the present appeal by the
Revenue.
3. The question for consideration therefore is as to whether the
assessees are liable to avail Cenvat credit towards payment of service
tax on the Group Insurance Health policy. An identical question came
up for consideration before the Division Bench in CEA 96/2009 and
connected matters which were disposed off on 8-4-2011. The question
considered therein was as to whether the assessees are entitled to claim
Cenvat credit for the service tax paid on Insurance/Health Insurance
policy. The Division Bench held that in so far as Insurance coverage to
the employees is concerned in the course of employment if the
employees suffer injury or dies, there is a vicarious liability imposed on
the employer to compensate the employee. If the employer employs its
own transportation facility in order to cover the risk which also includes
the risk of workers who are covered in that statutory establishment, he
has to take the insurance policy with which the vehicle cannot go on the
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road. Even for entering into the premises to meet the obligations under
the workmen's compensation Act he has to obtain the Insurance Policy
covering the risk of the employees. The employee State Insurance Act
takes care of the health of the employees also and casts an obligation
on the employer to provide insurance services. Under these
circumstances, this Group Insurance Health Policy though is also a
welfare measure is an obligation which is cast under the Statute that
the employer has to obey. Section 38 of the Employees State Insurance
Act, 1948, mandates that subject to the provisions of the Act, all
employees in factories or establishments to which this Act applies shall
be insured in the manner provided by this Act. May be the employees
also have to contribute but the employer is under an obligation to take
an Insurance policy and contribute his share. Therefore, the said Group
Insurance Health Policy taken by the assessee is a service which would
constitute an activity relating to business which is specifically included
in the input service definition.
4. Therefore, merely because these services are not expressly
mentioned in the definition of input service it cannot be said that they
do not constitute input service and the assessees are not entitled to the
benefit of CENVAT credit. Infact, Rule 3 of the Cenvat Rules, 2004,
specifically provides that the manufacturer of final products shall be
allowed to take credit. The service tax is leviable under Section 66 of
the Finance Act and paid on any input service received by the
manufacturer of a final product. Therefore under the scheme of the
Cenvat Credit Rules, 2004, the service tax paid on all those services
which the assessee has utilized directly or indirectly in or in relation to
the final product is entitled to claim the credit. Therefore, the Judgment
of the Tribunal is legal and valid and is in accordance with law and does
not suffer from any legal infirmity which calls for any interference.
5. Therefore it is evident that the assessees are entitled to avail Cenvat
credit of the service tax on Group Medical Policy and Group Insurance
Health Policy. Under these circumstances, the question of law that arises
for consideration in this appeal having since been answered by the
Division Bench as mentioned hereinabove, this appeal is dismissed in
view of the aforesaid reasons."
Accordingly, we hold that Service Tax paid on medical/health
insurance services for an amount of Rs.35,42,452/- as discussed above are
eligible to be availed of Cenvat credit as per statutory provisions discussed
under paragraphs 8.2, 8.3 & 9.1 above and as per the decision above
Hon'ble High Court and the Tribunal discussed in paragraphs 9.2 and 9.3
above.
9.4 In respect of security services provided by CISF, we find that the
CISF has been tasked with providing security to all petroleum & oil
refineries, recognizing their strategic importance and the need for robust
security measures including fire safety, counter terrorist attack etc., As
such security services have become mandatory, the health/medical
insurance incurred in connection with such security staff shall also be
considered as integral part of the security services which are essential
'input service' required to be used in manufacture of petroleum products.
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Further, 'security' services have also been specifically provided in the
inclusive part of the definition of 'input service' under Rule 2(l) ibid.
Therefore, we find that Service Tax paid on medical/health insurance
services for CISF Security for an amount of Rs.10,06,493/- as discussed
above are eligible to be availed of as CENVAT credit.
9.5 As regards the service tax paid on maintenance of gardens, the
learned Advocate for the appellants had submitted that it is a mandatory
requirement under the State Pollution Control Board to maintain gardens
and provide green space for 33% of their refinery plant area. In this regard,
we find that Maharashtra Pollution Control Board vide Circular dated
30.06.2016 had instructed all industries to have tree planation on 33% of
open area, the extract of which is as below:
In view of the mandatory nature of services that is required to be
engaged by industry in carrying out their manufacturing activity, we find
that the services engaged by the appellants in respect of maintenance of
gardens, dry grass cutting in order to avoid fire hazard is found to be
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eligible input services. Therefore, Service Tax paid on such services for an
amount of Rs.4,88,735/- are eligible to be availed of as CENVAT credit.
9.6 In respect of service tax paid on the services of search of documents
which are stored in safe custody for eight years, which are required for
auditing, accounting purposes or by any agency involved in verification of
compliance, these would be covered under the inclusive part of the
definition of 'input service' under Rule 2(l) ibid since 'auditing, accounting,
quality control' services are specifically covered therein. Further, services
of underwater diving services used in the appellants refinery is also found
to be an essential services inasmuch as these services are used for
removing the debris from the sea, near the jetty pumps maintained for
receipt of crude petroleum or other petroleum products, which are used in
processing at their refinery plant. As these services are in the nature of
routine repair and maintenance of operational equipment involved in the
manufacturing process, these are covered as eligible input under Rule 2(l)
ibid. Therefore, Service Tax paid on the above two services for an amount
of Rs.2,842/- as discussed above are eligible to be availed of as CENVAT
credit.
9.7 In respect of (i) Outdoor catering, which is specifically excluded under
clause (C) of Rule 2(l) ibid, it cannot be included in the eligible input
services. For the rest of the services viz., (ii) maintenance and repair of
asphalt road, removal of crushed stones etc., for which the learned
adjudicating authority has recorded in the impugned order that such work
was carried out in the area which is outside the factory; (iii) bus service for
travel of CISF security from Vashi to Bandra Station, in the city which is
outside the refinery plant; (iv) maintenance of honeycomb, (v) supply and
erection of shamiana which is used for resting of contract workers during
shutdown maintenance period; (vi) video imaging work, programme
services in respect of various programs conducted for vendors and for
discussion point with employees, we do not find any proper justification
have been provided by the appellants for treating these services as input
services, having direct or indirect connection with the manufacturing
operations of the appellants. Hence, we do not find any reason to differ
with the findings of the learned adjudicating authority, in rejecting the
CENVAT credit taken as ineligible input service to the extent of an amount
of Rs.9,03,065/- on the above services.
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10. As regards the service tax paid on insurance premium in respect of
health/medical insurance of family members/dependents of the employees,
the appellants have already reversed the ineligible CENVAT credit prior to
the issue of SCN, on their own. These have been specifically recorded in
the impugned order as follows:
"16.3....
(i) The Noticee submitted that Rs.11,36,248/- included in the Annexure, has
been considered twice in the Annexure A-3 for the month of October 2013,
which had already been reversed in Jan 2014 vide Entry No.4011. This fact
has been verified and confirmed by Division vide F. No. V. Adj. (SCN
issued)3-25/Ch-II/2013-14/126 dated 20.01.2015 from Assistant
Commissioner, Chembur-II Division and therefore the same has to be
appropriated in the total demand raised under this Annexure...
(iv) In respect of Rs.53,97,579/- the assessee mentions that it is for medical
cover for the family of the employees. The assessee submitted that the
same has already been reversed vide Entry No:4310/ Feb.2014, 4010 & 4012
of January 2014 being portion of the medical insurance for the family of their
employees. The medical insurance for the family members is not covered by
the definition of input service in Rule 2(l) of the Cenvat Credit Rules, 2004
and it is not used in or in relation to manufacture of final products.....The
amount of Rs.11,36,248 + Rs. 53,97,579/- = Rs. 65,33,827/-. I also find
that the assessee has reversed above amount on their own volition before
issuance of the Show Cause Notice under reference. It has been verified by
the jurisdictional Division that the assessee has reversed the amount of
Rs.65,33,827/- as detailed above and that they have maintained month wise
Cenvat Credit balance in RG 23 Pt-II A/c, which is more than the amount of
Cenvat Credit of Rs.65,33,827/- reversed on the premium of Health
Insurance
......
19.... However, in case of the amount of Rs.65,33,827/- reversed by the assessee, as detailed in Para 16,3 above I find that they have maintained month wise Cenvat Credit balance in RG 23 Pt-II A/c, which is more than the amount of Cenvat Credit of Rs.65,33,827/- reversed on the premium of Health Insurance and reversed the entire amount before issuance of the Show Cause Notice. Hence, it is evident that they have not utilized the said amount of credit erroneously availed by them earlier, therefore the question of levying penalty under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 and interest on the same do not arise in the instant case..."
In view of the specific findings given by the learned Commissioner in the impugned order, we do not find that there exists any ground for imposition of penalty on the appellants and for levy of any interest on the above disputed amount, which have been confirmed as part of the adjudged demands in the impugned order. In view of our detailed discussions on individual input services as referred in paragraphs 8.2, 8.3, 14 E/86381/2015 9.1 to 9.6 above, we are of the considered view that for total amount of Rs. 50,40,522/- such services are found to be eligible for availing the service tax paid as CENVAT credit. Therefore, we find that to this extent the impugned order is not legally sustainable.
11. In view of the foregoing, we are of the considered view that the impugned order is liable to be set aside partly, to the extent it had denied CENVAT credit in respect of input services which were found to be eligible as 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004 for a total amount of Rs. 50,40,522/- as elaborated in paragraph 10 above and had imposed penalties on the appellants. Accordingly, in partial modification of impugned order dated 30.04.2015 to the above extent, we allow Cenvat Credit for an amount of Rs. 50,40,522/-. Further, we partially uphold the impugned order dated 30.04.2015 to the extent that it had denied Cenvat credit in respect of specified services as discussed in paragraph 9.7 above for an amount of Rs.9,03,065/-
12. In the result, the appeal filed by the appellants is disposed of in the above terms. Miscellaneous applications filed by both appellants and respondent-Revenue are also disposed of.
(Order pronounced in open court on 07.04.2025) (S.K. MOHANTY) MEMBER (JUDICIAL) (M.M. PARTHIBAN) MEMBER (TECHNICAL) Sinha