Custom, Excise & Service Tax Tribunal
Sify Technologies Ltd vs Commissioner Of Gst&Amp;Cce (Chennai ... on 5 March, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. ST/42708/2018
(Arising out of Order-in-Appeal No. 472/2018 (CTA-II) dated
28.9.2018 passed by the Commissioner of GST & Central Excise
(Appeals - II), Chennai)
M/s. Sify Technologies Ltd. Appellant
Vs.
Commissioner of GST & Central Excise
Chennai South Respondent
Appearance Shri Nitin Chopra, Advocate for the Appellant Ms. T. Usha Devi, DC (AR) for the Respondent CORAM Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) Date of Hearing / Decision: 05.03.2019 Final Order No. 40403 / 2019 Brief facts are that the appellants are engaged in providing various taxable services in the nature of telecommunication service, franchise service, business auxiliary service etc. They were earlier functioning under Large Taxpayer Unit having centralized registration. On verification of records, it was noticed that they had availed input service credit on insurance services during the period from April 2016 to June 2017. According to department, general insurance / insurance auxiliary service are 2 not covered under the definition of input service used for providing output service as they had no nexus with the provision of output service and therefore became ineligible for input service credit. Show cause notices were issued proposing to demand an amount of Rs.1,74,869/- along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and also imposed penalty. In appeal, Commissioner (Appeals) upheld the same. Hence this appeal.
2. On behalf of the appellant, ld. counsel Shri Nitin Chopra appeared and argued the matter. He submitted that the appellant had availed input service credit in respect of three types of insurance policies. The first one is Errors & Omission Insurance Policy. The said policy is a form of liability insurance which mainly focuses on alleged failure to perform on the part of financial loss caused by error or omission in the service provided or product sold by the appellant, the financing loss would be taken care by such policy. The policy is intended to cover the risk in errors and omissions in the services provided as well as the product sold. That this has nexus with the output service and therefore is eligible for credit. 2.1 The second type of policy is transit insurance policy. Such policies are taken to cover the risk of accidents or damage during the shipment of the goods while they transit through the railways or trucks or by any other means of transportation. The 3 appellant is to transport the finished goods as well as input such as routers, computers etc. It is highly necessary to cover the risk of any accident or damage during the transit of these goods.
2.2 The third insurance policy is umbrella fixed asset policy. This insurance policy intends to cover the asset / property and to provide insurance against loss of the risk due to fire, theft and weather damages. These insurance policies are not in regard to the benefit of employees and are not covered under the exclusion definition of input services. It is also submitted by him that for the earlier period, in the appellant's own case, the Commissioner (Appeals) vide Order-in-Appeal No. 534/2017 dated 29.12.2017 had allowed the credit in respect of transit insurance as well as umbrella fixed asset policy. He also relied on the decision of the Tribunal rendered in their own case reported in 2018 (10) TMI 563 - CESTAT Chennai wherein the Tribunal has allowed the credit in respect of error and omission insurance policy.
3. The ld. AR Ms. T. Usha Devi supported the findings in the impugned order. She submitted that these type of insurance policies are only to cover risk which occur occasionally and not intended for use in the ordinary course of business. Therefore they have no nexus with the output service provided.
4. Heard both sides.
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5. The appellant is aggrieved by the disallowance of credit of service tax paid on the premium on various types of insurance policies. The first policy is in the nature of errors and omission insurance policy. It is a form of insurance policy which covers the risk on failure to perform on the part of financial loss caused or shortage in the service provided or the products sold. The Tribunal in the appellant's own case cited supra had analyzed this issue with regard to errors and omission policies and allowed credit. Following the same, I am of the opinion that the disallowance of credit on errors and omission insurance policies is unjustified and requires to be set aside, which I hereby do. 5.1 The second type of insurance policy is the transit insurance policy. The appellant has explained that such insurance policy is taken to cover the risk of accident or damage of the goods such as computers, routers etc. which are transported to the premises of the customer. The ld. AR has argued that place of removal being the appellant's premises, the said credit is not eligible. However, the appellant herein is not a manufacturer but an output service provider and the definition of input service would not be applicable to output service provider. Any input service used for providing output service is eligible for credit in the case of an output service provider. Hence disallowance of credit on this policy is unjustified and requires to be set aside, which I hereby do.
55.2 The third type of insurance policy is umbrella fixed asset policy. The appellant has taken this insurance policy to cover the risk such as fire, theft, weather damages of the fixed assets of the appellant as well as those goods that have been installed within the premises of the customer. The ld. counsel for appellant has explained that routers and such equipment are installed in the premises of the customers for providing output service. These are assets of the company and are owned by the company and only for providing service, it is installed in the customers' premises. This insurance policy is taken to cover the risk of fixed assets and is eligible for credit. Hence the disallowance is unjustified. Further, in the appellant's own case, the Commissioner (Appeals) for the earlier period has allowed the credit on this insurance policy.
6. From the foregoing discussions, I hold that the disallowance of credit on the above three insurance policies are unjustified. The impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.
(Dictated and pronounced in open court) (Sulekha Beevi C.S.) Member (Judicial) Rex