Mumbai CESTAT Allows CENVAT Credit To HDFC ERGO Against Duty Paid On Re-Insuring Motor Vehicle
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has allowed the CENVAT credit taken by the appellant, HDFC ERGO, against duty paid on re-insuring motor vehicles while providing general insurance service for the period from April 2011 to March 2012.The bench of Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that...
The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has allowed the CENVAT credit taken by the appellant, HDFC ERGO, against duty paid on re-insuring motor vehicles while providing general insurance service for the period from April 2011 to March 2012.
The bench of Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that the Commissioner committed a blunder in reproducing the section wrongly in his order and replacing “provider of output service” with “provider of input service” to reach his findings that credit is not admissible.
The appellant or assessee is in the business of providing insurance services for motor vehicles. There was no restriction on availing CENVAT Credit on input services prior to April 1, 2011 and after April 1, 2012, when an exception was carved out for general insurance services for availment. However, due to changes introduced in the definition of input service w.e.f. April 2011 with the introduction of an exclusion clause, certain inputs were kept outside the purview of CENVAT Credit. The appellant was asked to pay the amount for the period from April 2011 to March 2012 by issue of a show-cause-demand notice that was adjudicated by the Commissioner, which resulted in confirmation of duty, interest, and penalties.
The assessee contended that re-insurance of the insurance done to motor vehicles has become a statutory obligation in view of the express provisions contained in Sections 34 and 101 of the Insurance Act, 1938. Every general insurance company has been strictly adhering to it in compliance with Circular issued by the Insurance Regulatory and Development Authority of India (IRDA) on December 6, 2006. It is a settled principle of law that payments made in compliance with statutory obligations so as to make the output service feasible are admissible against the tax component of the payment.
The department contended that the exclusion clause under Rule 2A(BA) clearly excludes insurance or reinsurance taken from the purview of availment of credit, unless the motor vehicle is a capital good. Therefore, the appellant, being a general insurance company that insures vehicles of other people, cannot take CENVAT credit on reinsurance, for which interference by the Tribunal in the order passed by the Commissioner is uncalled for.
The tribunal, while allowing the appeal, held that by definition available in the CENVAT Credit Rules, 2004 under Rule 2(l), and to meet the statutory requirement of making itself eligible to provide insurance service as a general insurance company, the appellant is entitled to avail CENVAT Credit on reinsurance of motor vehicles and the credit availed by it during the relevant period from April 2011 to March 2012.
Counsel For Appellant: Thirumalai Sompath
Counsel For Respondent: Pramod Kumar Maurya
Case Title: HDFC ERGO General Insurance Co. Ltd. Versus Commissioner
Case No.: Service Tax Appeal No. 87091 of 2016