JUDGMENT :

1. This appeal is filed by the revenue to challenge the judgment of Customs, Excise and Service Tax Appellate Tribunal, New Delhi dated 04.03.2020. The questions of law suggested by the revenue would show that the department objects to the respondent-assessee claiming benefit of the service tax paid on re-insurance as allowable input service. We may record that the issue pertains to the period prior to 1.4.2012.

2. We have heard learned counsel for the parties. From the order passed by the Commissioner as the adjudicating authority, we gather that the respondent who is an insurance company, had been depositing its service tax on the amount of insurance premium. In the process the assessee had availed amount of input service credit on the basis of invoices issued by other insurance companies with whom the assessee had a pooling agreement. The Commissioner was of the opinion that the assessee was not entitled to claim such credit. The Commissioner referred to the definition of term input service as contained in Rule 2(1) of the CENVAT Credit Rules, 2004 as it was prevailing at the relevant time and came to the conclusion that the assessee was not entitled to claim such credit on input service.

3. The assessee carried the matter in appeal. The tribunal allowed the appeal mainly proceeding on the basis of the judgment of the Division Bench of the Karnataka High Court in case of Commissioner of Central Excise, Bangalore v. PNB Metlife India Insurance Co. Ltd. reported in (2015) 51 GST 504 (Karnataka). The Tribunal noted that the decision of the PNB Metlife (supra) had been accepted by the revenue. In the said case, the Court was concerned with the allowability of the service tax paid on re-insurance premium as input service. The Division Bench referred to the provisions contained in rule 2(1) of the CENVAT Credit Rules, 2004 and observed that such reinsurance was required in terms of Section 101A of the Insurance Act, 1938. The High Court had held and observed as under:-

"6. Having heard the learned counsel for the parties and in the fact of this case, we are of the opinion that the order of the Tribunal does not require any interference. Rule 2(1) of the CENVAT Credit Rules 2004 provides that Input Service means service used by a provider of taxable service for providing an Output Service. The submission of the learned counsel for the appellant that once the Insurance Policy is issued by the Insurer, the transaction comes to an end (and would not depend on the re-insurance policy) and as such the service provided would not come within the ambit of input service, is not worthy of acceptance. The process of issuance of an Insurance Policy by the Insurer and subsequent procurement of re-insurance policy from another company (which is a statutory requirement) is an integral part of the total process. The process of insurance does not come to an end merely on the issuance of the Insurance Policy by the Insurer. In fact, it continues till the existence of the term of the policy. The re-insurance is taken by the Insurer immediately after the insurance policy is issued, as is required under Section 101A of the Insurance Act, 1938. Since re-insurance is a statutory obligation, and the same is co-terminus with the Insurance policy issued by the respondent, we are of the opinion that the stand taken by the Tribunal is correct that the transfer of a portion of the risk of the re-insurance has to be considered as having nexus with the output service, since the re-insurance is a statutory obligation and the same is co-terminus with the Insurance Policy. We only re-iterate that the issuance of insurance policy by insurer, and then taking of re-insurance by it, is a continuous process, and in the facts of the present case, it cannot be said that the same would not be an input service eligible for CENVAT credit within the meaning of Rule 2(1) of the CENVAT Credit Rules 2004.

7. We may further add that the Service Tax is levied for certain se