Custom, Excise & Service Tax Tribunal
M/S Anjani Portland Cements Ltd vs Cc, Ce & St, Hyderabad on 26 September, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No. E/20373/2015 (Arising out of Order-in-Appeal No. 37/2014-15 (H-III) CE dt. 02.12.2014 passed by CCE (Appeals) Hyderabad) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member (Judicial) 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 should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s Anjani Portland Cements Ltd., ..Appellant(s) Vs. CC, CE & ST, Hyderabad ..Respondent(s)
Appearance Sh. P. Dwarakanath, Consultant for the Appellant.
Sh. Arun Kumar, Deputy Commissioner (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of Hearing: 26.09.2016 Date of Decision: 26.09.2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The appellant is engaged in the manufacture of cement and clinker and they are availing CENVAT Credit on capital goods, inputs and input services. During the course of audit it was noticed by the department that appellant had irregularly availed credit to the tune of Rs. 1,01,200/- under the category of Insurance & Auxilliary Services during the month of February, 2012. A Show Cause Notice dated 04.03.2013 was issued to the appellant on the ground that the said service does not qualify as input service under Rule 2 (l) of the CENVAT Credit Rules, 2004. After due process of law the adjudicating authority disallowed the credit, confirmed the demand along with interest and imposed equal amount of penalty. Being aggrieved, the appellant filed appeal before the Commissioner (Appeals) who vide the order impugned herein upheld the disallowance of credit, confirmation of demand, interest and imposition of penalty. Hence this appeal.
2. On behalf of the appellant the Learned Consultant Sh. P. Dwarakanath submitted that the insurance under dispute is a key man insurance policy. The said insurance though a life insurance policy being a Keyman Insurance Policy (KIP) is taken in the name of Sh. Venkata Vishnu Raju Kalidindi, Managing Director of the company. He explained the nature of the KIP and the purpose for which the said policy was availed. He submitted that the Managing Director being a key employee of the organization the said policy is a special plan of insurance to meet the crisis in case the insured person/keyman meets any unforeseen incident like death. The policy, in such situation would help the company to meet the crisis of the loss of the keyman by getting a lumsum fund. He argued that the insurance policy though in the nature of a life insurance policy it is infact for the benefit of the company and therefore would not fall under the exclusion portion of the definition of input services.
3. The Learned AR, Sh. Arun Kumar defended the findings in the impugned order. He submitted that the KIP or by whatever name it may be called is only a life insurance policy. It cannot be said that such a policy is necessary for carrying out day-to-day manufacturing activity of the appellant. Further, he submitted that it is not mandatory for the appellant by way of any statutory obligation to avail such a policy. He vehemently contended that such service would fall within the exclusion portion of the definition as it is availed for the personal consumption of an employee / Managing Director of the company. That therefore the authorities below have rightly denied credit.
4. I have heard the rival submissions made before me. The definition of input service after 01.04.2011 has introduced certain exclusions. Sub Clause (c) of the exclusion portion of the definition states that the services of life insurance, health insurance, etc., which are used primarily for personal use or consumption of any employee is not covered within the definition of input service. The Ld. Consultant has drawn my attention to the KIP which is placed as part of the records. It is seen from the policy that the clause for nomination or appointment of guardian in the case of minor is not applicable to the said policy. It is evident that when nomination clause is not applicable the policy though in the nature of life insurance has an altogether different character. Thus in case of death of keyman, it is seen that sum assured is to be paid to company. The intention is to meet the crisis which the company may undergo due to the death/loss of key person. From the very object of keyman insurance it is evident that the service is availed for protecting the loss that may occur to the company in the event of death of the keyman. Needless to say that the Managing Director of the company falls within the category of keyman of the organization. In such circumstances the activity of insurance and auxiliary services availed for taking KIP cannot be said to fall within the exclusion portion of the definition. The KIP taken by the appellant is a pure financial step as per the requirement of various exigencies like repayment of loans, advances etc., which is intricately related to the financial aspect of manufacturing activity. On happening of contingency as the sum assured is paid to the company, it cannot be said that it is for personal consumption. Further, in the case of M/s Reliance Industries Ltd., Vs CCE & ST, LTU, Mumbai [2016-TIOL-2392-CESTAT-Mum] co-ordinate bench of the Tribunal had occasion to analyse the eligibility of credit of various input services. Based on the facts and evidence presented before me and following the decision laid by the co-ordinate bench, I am of the view that the appellants are eligible for credit. The impugned order disallowing the credit is unsustainable. The same is set aside. The appeal is allowed with consequential reliefs, if any.
(Pronounced & dictated in open court) (SULEKHA BEEVI C.S.) MEMBER(JUDICIAL) Jaya.
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