CESTAT Allows Cenvat Credit On Insurance Services

The appellant/assessee has raised the issue of whether the appellant is entitled to Cenvat credit in respect of input services. Construction services; fee for architectural and structural works for factory plant building; group Medi-claim Insurance; group personal accident insurance; insurance; motor car or vehicle insurance; labour charges for installation, testing, and commissioning of VRV System (Centrally AC system) components in the office building, and so on are examples of input services.

The Cenvat credit was denied by the department on the ground that construction services are excluded. The exclusion clause was brought into the statute vide Notification No. 3/2011-CE (NT) dated 01.03.2011. On this basis, the credit for construction and architectural services was denied. The credit in respect of group Medi-claim Insurance, group personal accident insurance, insurance, motor car/vehicle insurance, etc., was denied on the ground that these services have no nexus with the manufacturing of excisable goods.

The department has contended that the construction and architectural services are related to construction, which is excluded in the definition of input services. Therefore, the cenvat credit is not admissible.

The CESTAT observed that, as per the inclusion clause of the definition of input services, repair and renovation/modernization are specifically included in the inclusion clause. Therefore, construction or architectural services used for the initial set up of a plant will only be ineligible for Cenvat credit. The services were used for repair and renovation; hence, the credit in terms of the inclusion clause of input service is admissible.

The tribunal held that the services such as group Medi-claim insurance, group personal accident insurance, vehicle/vehicle insurance, etc. are mandatory as per the factory Act for the safety of employees.

"Every industry is required to take group Medi-claim insurance, group personal accident insurance, insurance, motor car/vehicle insurance, etc. from the insurance companies for which the payment of premium is paid by the assessee and the same is accounted in their books of accounts as expenditure. Therefore, all these services are in or in relation to the manufacture of final products and fall under the business activities of the assessee," the CESTAT observed.

Case Title: Milestone Preservatives Pvt. Limited

Citation: Excise Appeal No. 11905 of 2019-SM

Dated: 20.05.2022

Counsel For Appellant: None

Counsel For Respondent: Superintendent (AR) G. Kirupanandan

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