INFOSYS LTD. Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) THE appellant has obtained centralized service tax registration under various service categories viz., Transport of Goods by Road, Maintenance or Repair Service, Commercial Training or Coaching, Scientific and Technical Consultancy, management Consultancy Service, Test Inspection and Certification, Manpower Recruitment Agency, Online Information and Data, Consulting Engineer, Erection, Commissioning or Installation, Public Relation Service, Advertising Space or Time, Sponsorship Service, Business Support Service, Renting of Immovable Property, Development and Supply of Content Services, Legal Consultancy, Business Auxiliary Service and Information Technology and Software Service. The appellant availed Cenvat credit on various input services including tax paid on group health insurance of employees and construction services availed at Mysore campus. Further the overseas branches of the appellant undertook several projects relating to software development etc., which were entrusted to overseas sub -contractors. The appellant received certain services outside the territory of India relating to data link and communication charges from foreign service providers, who were not licensed in terms of the provisions of section 4 of the Indian Telegraph Act, 1885. The department issued a show -cause notice dated 09.4.2010 proposing to deny Cenvat credit of Rs. 1,67,10,577/ - on Employee Group Health Insurance and Cenvat credit of Rs. 9,47,02,918/ - as pointed out in the audit enquiry dated 31.8.2009 for the period from April 2006 to March 2009. The issues relating to demand of tax under reverse charge mechanism on services received by overseas branches and data link charges etc. was not raised by the department in the said show -cause notice. The appellant contested the matter before the Commissioner of Service Tax, Bangalore, who passed an adverse order -in -original No. 85/2011 dated 27.4.2011 which is now in appeal before the Tribunal in ST/2045/2011.

(2.) THERE are three proceedings which have culminated into three impugned orders which are being considered together since some of the issues are common to all the three appeals. All the cases have been taken up for final hearing in view of the early hearing application filed by Revenue. The issues involved are briefly as under:

(3.) 1. The first issue that we would like to take up is the admissibility of credit of service tax paid on Insurance Premium in respect of Group Health Insurance Scheme for the employees of the appellant. This issue has been considered by the Hon'ble High Court of Karnataka in the case of Commissioner of Central Excise vs. Micro Labs Ltd. [ : 2011(270) ELT 156 (Kar.)] and in the case of Commissioner of Central Excise vs. Stanzen Toyotetsu India (P) Ltd. [ : 2011(23) S.T.R. 444 (Kar.)]. On a specific query from the Bench as to whether Heath Insurance Policy covered the employees alone or the parents and others also, there was no categorical submission that it covers only employees. In our opinion, if the insurance policy covers persons other than employees and no contribution is required from the employees towards such coverage, the service tax paid on insurance premium to that extent on a proportionate basis will have to be reversed. It cannot be said that the insurance provided to the parents or family towards all the employees is relatable to output services provided by the appellant. Therefore, while we follow the decision of the Hon'ble High Court of Karnataka, we consider that this matter is required to be reconsidered in view of the fact that investigating officers/adjudicating authority would not have considered this aspect since the entire credit was proposed to be denied. Therefore we consider it appropriate that the matter should be remanded to limit the demand to the extent admissible.