CENVAT Credit of Service Tax on insurance premium for health insurance of factory employees is admissible even after amendment to Rule 2(l): CESTAT

CHENNAI: THE issue involved in the appeal is whether the appellant is eligible for CENVAT Credit of Service Tax paid on health insurance of the employees of the factory. It is the contention of the appellant that the insurance premium having been paid for the health insurance of the employees of

the factory, the service tax paid to avail such service is to be allowed to the appellant. The appellant also fairly stated that the recent amendment to law with effect from 01.04.2011 has prescribed disallowance of CENVAT credit availed on insurance service in certain circumstances.

Revenue on the other hand contended that the service tax paid on insurance service availed shall not entitle the appellant to CENVAT credit in view of the amendment to Rule 2 (l) of CENVAT Credit Rules, 2004 with effect from 01.04.2011 bringing certain contingencies to the fold of law. Therefore, no CENVAT credit of service tax paid thereon can be claimed.

After hearing both sides, the Tribunal held:

+ Exclusion of insurance service in certain events has been incorporated into the law with effect from 01.04.2011. That is only in respect of the insurance coverage given to employees during journey availing leave travel concession. But that had not taken away welfare of workers under the Factories Act, from its fold if insurance service is availed to overcome difficulties under Workmen Compensation Act, in case of hazard. Accordingly, appellant's claim of CENVAT credit on the service tax paid to avail insurance service for employees employed in factory is permissible.

Accordingly, the appeal was allowed.