12 Feb 2024 7:15 AM GMT
The Bangalore Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has allowed the cenvat credit of service tax paid on the services provided by M/s Oriental Insurance Co., Ltd., to the appellant, Kalyan Jewellers.The bench of P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) has observed that the denial of benefit of cenvat credit by the...
The Bangalore Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has allowed the cenvat credit of service tax paid on the services provided by M/s Oriental Insurance Co., Ltd., to the appellant, Kalyan Jewellers.
The bench of P.A. Augustian (Judicial Member) and Pullela Nageswara Rao (Technical Member) has observed that the denial of benefit of cenvat credit by the adjudicating authority on the ground that the document produced by the appellant is without proper serial number, considering the provisions of the Reserve Bank of India Act, 1934 on Financial Institutions, and also considering the proviso of Rule 4(a)(1) Service Tax Rules, 1994, any document by whatever name called would be used in place of an invoice, bill, or challan was illegal and unsustainable.
The appellant/assessee is in the retail business of gold jewelry. The issue involved in the appeals is the eligibility of the CENVAT credit of service tax paid on the services provided by M/s Oriental Insurance Co., Ltd., to the appellant.
The assessee is an interface between M/s Oriental Insurance Co. Ltd. and customers purchasing jewelry. As per the tripartite agreement with the insurance company and M/s ALEgION Insurance Broking Ltd, the insurance company shall arrange for the issue of a master insurance policy to the assessee, and the assessee in turn shall issue a subsidiary policy to the customers.
The assessee had collected a certain amount from its customers towards the issue of subsidiary policies, which include premium amounts and administration charges, and had paid service tax on the amount. The assessee had paid a premium along with service tax to the insurance company on receipt of invoices and documents from the said insurance company.
The assessee had taken CENVAT credit of the service tax paid by the insurance company on the premium for the master insurance policy issued to the assssee, which is the subject matter of dispute as to its eligibility.
The department held that the service is not eligible as an input service and is not eligible for CENVAT credit. The adjudicating authority held that the insurance company was providing service in relation to the insurance of the gold belonging to the customers of the appellant and which was purchased from the appellant. Thus, adjudicating authority confirmed demand with interest and penalty.
The assessee contended that, as per the order, the adjudicating authority held that the appellant is providing service under the category of business auxiliary service by implementing the GKL warrant scheme. However, while doing so, it cannot be alleged that insurance service, which is an inevitable part of providing a gold car warranty scheme, is not an input service of the appellant. The Commissioner has not given any cogent reason as to how the insurance service received by the appellant would not qualify as input service. The assessee had availed of the CENVAT credit on the bona fide belief that insurance service is an inevitable part of the Gold Care warranty scheme and that insurance service utilized for said scheme would be an eligible input. Therefore, the provisions of Section 11(AC), which are conditional proceedings for imposing penalties under Section 15(1) of the CENVAT Credit Rules, are unsustainable. Moreover, there is no evidence to allege that the appellant suppressed the details of the transactions so as to attract the provisions of Section 11(AC) of the Central Excise Act, 1944. Thus, the penalty imposed on the appellant is also unsustainable.
The department contended that the assessee was not receiving any service from Insurance Company, and in fact, Insurance Company was rendering service only to the purchasers of gold and not to the appellant. The insurance service received by the appellant from the insurance company is not mandatory, and without this service, the appellant cannot function.
The tribunal held that the cenvat credit on the service tax paid by the insurance company on the premium paid by the appellant cannot be denied and has to be considered as input service received from the insurance company.
Counsel For Appellant: M.S. Nagaraja
Counsel For Respondent: Dyamappa Airani
Case Title: M/s. Kalyan Jewellers India Limited Versus Commissioner of Central Tax & Central Excise, Cochin
Case No.: Service Tax Appeal No. 20406 of 2020
Click Here To Read The Order