Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs M/S. Nutrine Confectionery Co. Ltd on 2 December, 2011
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench - Single Member Bench
Court - II
Date of Hearing: 02.12.2011
Date of decision: 02.12.2011
Appeal No. ST/244/2010
(Arising out of Order-in-Appeal No. 29/2009 (T) ST dated 28.10.2009 passed by the Commissioner of Central Excise and Customs, Guntur)
For approval and signature:
Honble Mr. M. Veeraiyan, Member (Technical)
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3. Whether their Lordship wish to see the fair copy of the Order?
Seen
4. Whether Order is to be circulated to the Departmental authorities?
Yes
The Commissioner of Central Excise
Tirupati ..Appellant(s)
Vs.
M/s. Nutrine Confectionery Co. Ltd. Respondent(s)
Appearance Mr. M. Ravichander, JDR, for the Revenue Mr. Jai Kumar, Advocate, for the respondent Coram:
Honble Mr. M. Veeraiyan, Member (Technical) FINAL ORDER No._______________________2011 This is an appeal by the department against the order of the Commissioner (Appeals) No. 29/2009 (T) ST dated 28.10.2009.
2. Heard both sides.
3. The original authority disallowed CENVAT credit on service tax paid on insurance services relating to Group Medical Claim and Group Personal Accident Policies and consequently demanded a sum of Rs. 1,18,885/- along with interest and also imposed penalty of Rs. 2,000/- under Rule 15 (3) of CENVAT Credit Rules, 2004. On appeal by the assessee, the Commissioner (Appeals) has held that the said services should be treated as input services and set aside the order and allowed the appeal. Hence the department is in appeal.
4. Learned DR, reiterating the grounds of appeal, submits that the activity of providing insurance to the workers especially their family members can only be treated as a welfare measure and cannot be treated as having a nexus with the manufacture of excisable goods and therefore, the credit has been rightly denied by the original authority.
5. Learned advocate for the respondent relying on the decision of the Tribunal in the case of Stanzen Toyotetu India Pvt. Ltd. Vs. CCE, Bangalore-III reported as 2009 (14) S.T.R. 316 submits that Group Insurance Health Policy is to be specifically treated as an input services and credit allowed. He also referred to the judgment dated 08.04.2011 of the Honble High Court of Karnataka in the case of Stanzen Toyotetsu India Pvt. Ltd. and others and submitted that insurance coverage to the employees in area of health and granting cover for risks are statutory requirements under the Employees State Insurance Act, 1948 and the same should be treated as input services.
6. Learned DR, in rejoinder, submits that the decision of the Tribunal and the Honble High Court relate to only Group Insurance Health Policy for employees and there is no indication that the said policy was covering the family members of employees. In the present case, the health insurance policy undisputedly covers not only the employees but also the family members.
7.1. I have carefully considered the submissions from both sides and perused the records. In respect of accident group insurance policy the same has to be clearly treated as part of business activities of a factory especially in the light of decision of the Honble High Court of Karnataka cited supra. The relevant portion reads 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 workmens 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. 7.2. As regards Group Insurance Health Policy, the decision of the Tribunal and the decision of the High Court referred to such policy only to employees. In the present case, undisputedly the coverage is for both the employees and the family members. The insurance health cover given to the family members prima facie, may not come under the statutory liability envisaged by Employees State Insurance Act, 1948. However, this issue has not been focused by the authorities below and therefore, the same requires to be reconsidered afresh in the light of relevant facts regarding the nature of policy and their terms relating to payment of premium. It is not clear whether the benefit of cover given to the family members involved any additional premium in which case the services relating to said coverage cannot be treated as input services.
7.3. In view of the above, the appeal is disposed of as follows:
a) The order of Commissioner (Appeals) holding that services relating to payment of premium on Group Accident Policies as input services calls for no interference.
b) The Commissioners finding relating to Group Health Policy is set aside. The matter is remanded for fresh consideration in the light of observations made above after granting reasonable opportunity of hearing to both sides.
(Pronounced & dictated in open Court) (M. VEERAIYAN) MEMBER (TECHNICAL) iss