1. The Revenue is in appeal against the order of the Commissioner (Appeals) wherein the Ld. Commissioner (Appeals) has allowed the refund of Service Tax of Rs. 9,64,126/- paid on input service of professional indemnity insurance service by the respondent namely Ernst And Young Associates LLP. The period involved in this case is from April, 2014 to June, 2015. The refund was rejected by the adjudicating authority on the ground that it had not direct nexus with output service. The Ld. Commissioner (Appeals) allowed the refund on the ground that the professional indemnity insurance policy is for insuring the business risks and has nexus with output service. Aggrieved from the same, the Revenue has filed this appeal.
2. Ld. AR submits that the period involved is after 01.04.2011 and the words activity relating to business have been omitted from the definition of input service and hence in order to qualify as input service, the same should be used for providing output service and the impugned service cannot be said to have been used for providing output service. He also contended that the impugned service is used after the provision of output service by the assessee.
3. Ld. CA for the respondent relies upon the following case law in which the issue has been decided in their favour:
1. CST, Delhi-IV Vs. Ernst and Young Associates LLP vide Final Order No. 61916/2017 dt. 06.10.2017 (2017-VIL-863-CESTAT-CHD-ST).
She also relied upon the following decisions:-
1. M/s Stock Holding Corporation of India Ltd. Vs. Commissioner of Service Tax, Mumbai-II -.
2. Satyam Computer Services Ltd. Vs. Commissioner of Service Tax : 2011 (22) STR 73 (Tri. Bang.).
4. Heard the parties and perused the record.
5. The short issue involved in this appeal is whether the professional indemnity service used by the assessee, who are providing consultancy in taxation and audit service can be considered as input service in terms of definition of input service in the Cenvat Credit Rules.
6. I find that the issue is no longer res integra and has been decided in the favour of respondent in their own case in CST, Delhi-IV Vs. Ernst and Young Associates LLP (supra) wherein this Tribunal held as below:-
"5. I find that the main contention of the Revenue is that after amendment of the definition of input service from 1.4.2011, the word the activity relating to business has been deleted from the definition of input service and the impugned service cannot be said to be directly used for providing any output service. It is also argued that the impugned service is not covered by the inclusive part of the definition and it is used only when output service is complete and delivered.
6. On the question as to whether the professional indemnity insurance service has nexus with output service, I completely agree with the analysis of the Commissioner (Appeals) in the following paragraphs extracted from the Order-in-Appeal:
"The Definition of Input Service Rule 2 (I) of Cenvat Credit Rules, 2004 defines the Input Servicew.e.f.01.07.2012.
"(I) Input service means any service,
(i) used by a provided of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transpiration of inputs or capital goods and outward transportation upto the place of removal but excludes services, -
(A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of Section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-
(a) construction of a building or a civil structure or part thereof; or
(b) laying of founding or making of structures for support of capital goods, except for the provision of one or more of the specified services; or
(B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable series for which the credit on motor vehicle is available as capital goods; or
(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits excluded to employees on vacation such as leave or home travel concession, when such services are used primarily for personal use or consumption of any employee",
Definition of Input service for different relevant period makes it amply clear that in order to quality as Input service, any service used by a provider of output service should satisfy the following conditions: It should fall under main part or inclusive part of the definition of input service. It should not be covered in the exclusion part of the definition.
Further, professional indemnity insurance is form of liability insurance that helps in safeguarding the professional advisor and service providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such civil lawsuit. The coverage focuses on alleged failure to perform, on the part of financial loss caused by error or omissions in the service or product sold by the policy holder & is in force during the period specified in policy, for the coverage of output service.
The appellant is engaged in providing consultancy services to its clientele by way of reliable deliverables. Thus, I find that professional indemnity insurance service have nexus with the output service and is covered under definition of input service.
7. I find that the adjudicating authority has allowed refund for general insurance service for employees, equipments and property, for insuring the company against unforeseen circumstance. On the same analogy, the professio
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nal indemnity insurance service has to be viewed in the context of providing the consultancy or other professional services, where the assessee has to safeguard itself against unforeseen legal damages/costs due to negligence or other bonafide mistakes of the employees/partners. Hence, the professional indemnity insurance service is an essential ingredient for providing the output service and has direct nexus with the providing of output service." Following the above judgment of the Tribunal in the appellants' own case, I find that there is no infirmity in the order of the Ld. Commissioner (Appeals) and the appeal filed by the Revenue is not sustainable. In the result, the appeal filed by the Revenue is dismissed.