CESTAT Allows Cenvat credit To Satyam Computer For Service Tax Paid On Medical Insurance Premium Of Employees And Their Family

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprised of two members Anil Choudhary (Judicial Member) and P. Venkata Subba Rao (Technical Member), has granted Satyam Computer a cenvat credit for service tax paid on insurance premiums for employees and their families.

The appellant/assessee assailed the order passed by the Commissioner of Central Excise & Service Tax. As per the order, the CENVAT credit taken by the appellant on the service tax paid on insurance services under group Medishield policies and personal accident policies provided to its employees and their families was denied. A penalty was also imposed upon the appellant under section 78 of the Finance Act, 1994.

The assessee provides information technology services such as e-business solutions, engineering services, enterprise solutions, customised software development services, and ERP implementation services and is registered with the department and has been paying service tax.

The assessee availed Cenvat credit on various input services used for providing output services as per the Cenvat Credit Rules, 2004. During an audit conducted in 2006, the appellant was advised by the department that the service tax paid in respect of insurance premiums towards Medishield policies and personal accident policies would not be eligible for the Cenvat credit. The appellant reversed the entire amount of Cenvat credit and reflected the reversal in its service tax return for the month of August, 2007 and also intimated the department about the reversal by letter.

The assessee felt that it was eligible for the Cenvat credit and took the credit back, informing the department that it had taken the credit back by a letter. The appellant was then served a show cause notice seeking to recover the Cenvat credit which was wrongly availed by the appellant during the period of January, 2006 to July, 2007.

The department contended that the premium paid for medical insurance of employees and their families does not qualify as an input service under the Cenvat Credit Rules, 2004 (CCR). He submitted that the "activities relating to business" occurring in Rule 2(l) of CCR were followed by the words such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods, and outward transportation up to the place of removal.

The assessee contended that activities relating to business have a very broad amplitude and as long as the expenditure is related to business activities, Cenvat credit cannot be denied.

The Tribunal has set aside the order passed by the Commissioner of Central Excise & Service Tax.

Case Title: Satyam Computer Ltd. Versus Commissioner of Central Tax

Citation: Service Tax Appeal No. 1036 of 2009

Date: 07.09.2022

Counsel For Appellant: Advocate Satya Sai

Counsel For Respondent: Authorized Representative A. Rangadham

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