Custom, Excise & Service Tax Tribunal
M/S Samruddhi Cement Ltd vs Cce, Jaipur Ii on 23 August, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. IV Excise Appeal No. 2305 of 2010 (SM) [Arising out of the Order-in-Appeal No. 218 (KKG) CE/JPR-II/2010 dated 28/04/2010 passed by The Commissioner of Central Excise (Appeals-II), Jaipur.] For Approval and signature : Honble Shri Rakesh Kumar, 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? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Samruddhi Cement Ltd. Appellant Versus CCE, Jaipur II Respondent
Appearance Shri Hemant Bajaj, Advocate for the appellant.
Shri A.K. Jain, Authorized Representative (Jt. CDR) - for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) DATE OF HEARING : 23/08/2013.
Final Order No. 57454/2013 Dated : 23/08/2013 Per. Rakesh Kumar :-
The appellant are manufacturers of cement chargeable to Central Excise duty. They during the period from March 2007 to May 2007 took Cenvat credit of Rs. 3,65,758/- in respect of service tax paid on the premium for group insurance/mediclaim policy in respect of employees. The department being of the view that this insurance service for providing group insurance/mediclaim/life insurance to the employees is not covered by the definition of input service, issued a show cause notice dated 08/01/2008 for recovery of Cenvat credit alongwith interest and imposition of penalty imposed upon them. Para 2 of the show cause notice clearly mentions that the appellant have wrongly availed Cenvat credit of Rs. 3,65,758/- on the premium paid by the company for the group insurance/mediclaim /life insurance in respect of employees as per Annexure A. Annexure A to the show cause notice also gives details only of the service tax credit taken on insurance services for employees. The show cause notice was adjudicated by the Assistant Commissioner who vide order-in-original dated 30th December 2008 confirmed the above-mentioned Cenvat credit demand alongwith interest and imposed penalty of equal amount on the ground that the judgment of the Tribunal in the case of Stanzen Toyotetsu India Pvt. Ltd. vs. Commissioner reported in 2009 (14) S.T.R. 316 (Tribunal) is not applicable to the facts of this case, as while the Tribunals judgment is in respect of group insurance/health policy for the employees of a manufacturer, in this case the insurance cover is for the workers alongwith their family members. On appeal being filed by the appellant to Commissioner (Appeals), the Commissioner (Appeals) vide order-in-appeal dated 29/3/10 upheld the Assistant Commissioners order on the same ground. Against this order of the Commissioner (Appeals), this appeal has been filed.
2. Heard both the sides.
3. Shri Hemant Bajaj, Advocate, the learned Counsel for the appellant, pleaded that the show cause notice alleges that the insurance premium, in question, in respect of which the service tax credit has been taken, had been paid by the company for group insurance/mediclaim/life insurance in respect of employees as per Annexure A to the show cause notice, that Annexure A to the show cause notice only gives details of the Cenvat credit taken on insurance services for employees, that the insurance for the employees is required to be provided in terms of the provisions of Section 38 of the Employees State Insurance Act, 1948, according to which the 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 in this set, that this provision is applicable to the appellant, that in view of this, the group insurance/mediclaim/life insurance provided by the appellant to their employees is an activity in relation to their manufacturing activity, as without providing the group insurance/life insurance/ mediclaim to the employees, they would not be allowed to carry on manufacturing operations, that for this reason only, the Honble Karnataka High Court in the case of CCE, Bangalore III vs. Stanzen Toyotetsu India (P) Ltd. reported in 2011 (23) S.T.R. 444 (Kar.) has in para 14 of the judgment held that insurance/health policy provided by the manufacturer to the employees is an input service eligible for Cenvat credit, that same view has been taken by Honble Karnataka High Court in the case of CCE & ST, LTU, Bangalore vs. Micro Labs Ltd. reported in 2011 (24) S.T.R. 272 (Kar.), that both Assistant Commissioner as well as Commissioner (Appeals) taking note of the judgment of the Tribunal/High Courts in the case of Stanzen Toyotetsu India Pvt. Ltd. vs. Commissioner (supra) have denied the Cenvat credit on the ground that the insurance/mediclaim/life insurance policies provided by the appellant cover the family members of the employees also, that in this regard there is no such allegation made in the show cause notice, that it is settled law by the judgment of Apex Court in the case of CCE, Nagpur vs. Ballarpur Industries Ltd. reported in 2007 (215) E.L.T. 489 (S.C.) and CCE, Bangalore vs. Brindavan Beverages (P) Ltd. reported in 2007 (213) E.L.T. 487 (S.C.), that show cause notice is the foundation of a case and the Adjudicating Authority cannot travel beyond the allegations made in the show cause notice, that both the original Adjudicating Authority and the 1st Appellate Authority have travelled beyond the show cause notice and, hence, the impugned order is not sustainable.
4. Shri A.K. Jain, the learned Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pointed out to the findings, pleaded that the appellant themselves have admitted that the insurance policies provided by them also covered the family members of the assessees and hence the judgments of the High Courts cited by the appellant are not applicable.
5. I have carefully considered the submissions from both the sides and perused the records.
6. The allegation against the appellant is contained in para 2 of the show cause notice dated 18/01/2008, the relevant portion of which is reproduced below :-
Whereas, during the course of audit conducted by the Head Quarter Audit wing Jaipur, it has been observed that the assessee has taken and availed wrongly Cenvat credit of Rs. 3,65,758/- (Rs. 3,58,503/- + Rs. 7,255/- Edu. Cess) on the premium paid by the company for group Insurance/ Mediclaim/Life Insurance in respect of the employees as per Annexure A. The availment of Cenvat credit on Service tax paid on Insurance of the employees is not covered under the definition of input services as defined under the Rule 2 (1) of Cenvat Credit Rules 2004 as it is not used in or in relation to manufacture of the Final Product or for providing of output service as there is no nexus with manufacture of Final Product and clearance of final product from the place of removal and for providing of output services.
From the show cause notice, it is clear that the departments allegation is that the appellant have taken Cenvat credit of service tax paid on the premium paid for group insurance/mediclaim/life insurance policies in respect of employees as per Annexure A to the show cause notice. Annexure A to the show cause notice also gives the details of the credit taken on the insurance services availed for the employees. In the show cause notice there is absolutely no allegation that the insurance cover provided by the appellant also covered the family members of the employees. In view of this, the original Adjudicating Authority and the 1st Appellate Authority, have gone totally wrong in travelling beyond the show cause notice as it is settled law in view of the judgments of Apex Court in the case of CCE, Nagpur vs. Ballarpur Industries Ltd. (supra) and CCE, Bangalore vs. Brindavan Beverages (P) Ltd. (supra), that the show cause notice is the foundation of a case and the Adjudicating Authority or Appellate Authority cannot travel beyond the allegation made in the show cause notice. If in this case, the allegation made in the show cause notice is taken as the basis, the issue stands decided in the appellants favour by the judgment of Honble Karnataka High Court in the case of CCE, Bangalore III vs. Stanzen Toyotetsu India (P) Ltd. (supra) and CCE & ST, Bangalore vs. Micro Labs Ltd. (supra). Moreover, when the group insurance/mediclaim/life insurance cover to the employees of manufacturer is a requirement of Section 38 of the Employees State Insurance Act, 1948 and in this case it is not disputed that the provisions of this Act are applicable to the appellant, the appellant have to provide insurance cover as per the provisions of this Act to their employees failing which, they would face penal action. Therefore, the availment of the insurance services for providing insurance/mediclaim/life insurance has to be treated as an activity in or in relation to manufacture and would be covered by the definition of input service. In view of this, the impugned order is not sustainable. The same is set aside. The appeal is allowed.
(Pronounced in the open court.) (Rakesh Kumar) Member (Technical) PK ??
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