servivce
taxReliance Industries Ltd. Vs. Commissioner, Central Excise &
Service Tax (LTU), Mumbai [2015 (11) TMI 969 - CESTAT MUMBAI]
Facts:
The
Department denied the Cenvat credit to Reliance Industries Ltd. (“the
Appellant”) on the ground that the Service tax paid on the life
insurance/ medi-claim policy for the existing employees and
retired
employees is ineligible as they are not covered under the definition of
Rule 2(l) of the Credit Rules.
Held:
The
Hon’ble CESTAT, Mumbai, held that the Appellant is eligible to avail
Cenvat credit of the Service tax paid on insurance premium to the
Insurance Company for Group Insurance and medi-claim policies taken for
existing employees as well as for the retired employees as the same
Bench has decided in the Appellant's own case in RELIANCE INDUSTRIES
LTD. Versus COMMR. OF C. EX. & S.T. (LTU) , MUMBAI Appeal No.
E/1283/2012-Mum [2015 (7) TMI 231 - CESTAT MUMBAI] wherein it was held
that such credit is available relying on the judgement of the Hon'ble
High Court of Karnataka in the case of Commissioner of Central Excise,
Bangalore Versus Millipore India (P.) Ltd. [2011 (4) TMI 1122 -
KARNATAKA HIGH COURT].
Our Comments:
Here,
we would like to draw your attention towards the definition of the term
‘Input services’ as was prevalent prior to April 1, 2011, which
specifically mentioned activities relating to business under
‘includes-clause’. However, post facto April 1, 2011, definition of the
term ‘Input service’ given under Rule 2(l) of the Credit Rules was
substituted vide Notification No. 3/2011-CE(NT) dated March 1, 2011,
inter alia, deleting the phrase ‘activities relating to business’. Thus,
limiting the wide scope of the term ‘Input services’. In other words,
effective from April 1, 2011, one has to be very careful while
determining eligibility of any Input service under Rule 2(l) of the
Credit Rules.
Further, effective from April 1, 2011,
scope of wide interpretation of the term ‘Input service’ has been
further curtailed/ limited by inserting exclusion-clause in the stated
definition, which, inter alia, excludes employee related services under
Clause (C):
“(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”
However,
in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. Commr. of C.
Ex., Nashik [2014 (12) TMI 596 - CESTAT MUMBAI], the Hon’ble CESTAT,
Mumbai has held that what is not eligible is that service which is meant
for personal use or consumption by an employee or the cost of which is
included as part of salary of the employee as a cost to company basis.
When, the outdoor catering service is used in relation to business
activities of the appellant and the cost of such services are admittedly
borne by the company and not by the employee, the appellant has
correctly claimed the Cenvat credit on outdoor catering services even
after April 1, 2012. Relevant extract of the judgment is reproduced
hereunder for the ease of reference:
“…4.1 I find
considerable force in the submissions made by the ld. Counsel for the
appellant, that what is excluded is only the services ‘primarily for
personal use or consumption of any employee’ under clause (C) of Rule
2(l) of the definition of input service. When the Government has
specifically used the words such as “used primarily for personal use or
consumption of any employee”, the same has to be given due effect to. In
the present case the outdoor catering service is used in relation to
business activities of the appellant and the service is used by all
employees in general. Also, the Revenue has not rebutted the contention
of the appellant, that the costs of these input services form part of
the cost of final product….
4.2
I further find that even the Government while issuing the budget
clarification or subsequent circular has clarified that what is not
eligible is that service which is meant for personal use or consumption
by an employee or the cost of which is included as part of salary of the
employee as a cost to company basis. In the present case, the cost of
such services are admittedly borne by the company and not by the
employee. Therefore, I hold that the appellant has correctly claimed the
Cenvat credit on outdoor catering services….”