Delhi High Court on CENVAT Credit

Commissioner Of Central Excise And Service Tax (CCEST) v. Oriental Insurance Company Ltd. (OIC) [Delhi High Court] (DHC) 2023:DHC:2205-DB

• Section 35G of the Central Excise Act, 1944.

• Section 83 of the Finance Act, 1994.

---

ISSUE

Whether CESTAT erred in holding that OIC was entitled to avail Central Value Added Tax (CENVAT) credit on reinsurance services?

FACTS

• The CCEST issued a demand-cum-show cause notice for allegedly availing CENVAT Credit for service tax paid on reinsurance premium.

• OIC availed input credit in respect of reinsurance premiums as well as on payments made to pool members of the Indian Motor Third Party Insurance Pool.

• The CESTAT passed an order that OIC was entitled to avail CENVAT credit on reinsurance services. Hence, the appeal.

CONTENTIONS OF CESTAT

OIC was wrongfully availing credit in respect of service tax paid on reinsurance premiums for discharge of service tax payable on insurance services on the ground that it was related to insurance on motor vehicles, which was specifically excluded in the CENVAT Credit Rules (CCR). Service tax on re-insurance premium was not covered within the definition of “input services”.

CONTENTIONS OF OIC

The reinsurance premium was paid for reinsurance to mitigate its risks. Re-insurance services were not excluded from the ambit of input services by virtue of the amendment to Rule 2(l) of the CCR, which came into effect from 1st April, 2011.

DHC RULING

DHC ruled by order dated 28.03.2023 that OIC’s appeal solely on the conclusion that re-insurance services were not excluded from the definition of ‘input services’ under Rule 2(l) of the CCR.