2025 (7) TMI 479 - AT - Central Excise

CENVAT Credit - tax paid on insurance premium - tax paid on procurement of courier services - HELD THAT - Entitlement to tax paid on insurance premium as credit had been decided by the Tribunal in International Flavours Fragrance India Pvt Ltd v. Commissioner of GSG Central Tax Chenai South 2021 (8) TMI 1366 - CESTAT CHENNAI thus held that The policy covers the risk of goods under transit for a period of one year. Usually carrier may hold a transit policy which covers each consignment. The Marine Insurance Policy in the present case intends to indemnify the risk of the goods under transit belonging to the appellant. The discussion made by the Commissioner (Appeals) for denying the credit on this input service in my view is legally misplaced. After perusal of records and appreciating the submissions from both sides I am of the view that the credit on Marine Policy is eligible. In RNZ Infotech Pvt Ltd v. Commissioner of Central Tax Bangaluru East 2021 (11) TMI 1108 - CESTAT BANGALORE it has been held by the Tribunal that On careful examination of the case records we find that the list of disputed services itemized in the SCNs as well as in the impugned order are not conforming to the excluded category of services finding place in the definition clause. Thus denial of Cenvat benefit on the disputed services availed by the appellants after 1-4-2011 by the authorities below is not legal and proper and accordingly in our view the impugned orders are liable to be set aside. The reasons adduced in the impugned order for denial of CENVAT credit do not stand test of scrutiny in the light of the decisions of the Tribunal on entitlement of credit on tax paid on courier service as well as insurance premium the impugned order does not survive and consequently is set aside to allow the appeal. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this matter are:

• Whether the appellant is entitled to avail CENVAT credit on tax paid on insurance premium, specifically concerning marine insurance policies covering goods in transit.
• Whether CENVAT credit can be claimed on input services such as courier services and insurance premiums under the applicable CENVAT Credit Rules.
• The legality of denial or limitation of CENVAT credit by the original and appellate authorities, particularly in relation to nexus between input services and manufacturing or taxable activity.
• The interpretation and applicability of the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, including the scope of excluded services.

2. ISSUE-WISE DETAILED ANALYSIS

Entitlement to CENVAT Credit on Insurance Premium

The Tribunal examined the appellant's claim for CENVAT credit on tax paid on insurance premiums, focusing on marine insurance policies covering goods in transit. The relevant legal framework includes Rule 2(l) of the CENVAT Credit Rules, which defines "input service," and judicial precedents interpreting the nexus requirement between input services and manufacturing or taxable activities.

The Tribunal relied heavily on the decision in International Flavours & Fragrance India Pvt Ltd v. Commissioner, which clarified that denial of credit on marine insurance policies on the ground that the policy is availed beyond the "place of removal" is legally incorrect. The Tribunal noted that marine insurance policies are not consignment-specific and cover risks for goods under transit for a specified period, thereby serving as input services connected to the appellant's business operations. The Tribunal emphasized that refund claims under Rule 5 of the CENVAT Credit Rules are available for input services used for exports, but this does not negate the eligibility of credit on such insurance premiums.

The Court found the reasoning of the Commissioner (Appeals) in denying credit due to the policy's coverage beyond the place of removal to be misplaced. The nexus between the input service (marine insurance) and the manufacturing activity was established, and the credit was held to be eligible.

Entitlement to CENVAT Credit on Courier Services and Other Input Services

Regarding courier services and other input services, the Tribunal referred to the decision in RNZ Infotech Pvt Ltd v. Commissioner, which interpreted Rule 2(l) of the CENVAT Credit Rules post-1 April 2011. The definition of input service explicitly excludes certain categories, but the disputed services in the present case did not fall within these exclusions.

The Tribunal observed that denial of CENVAT credit on such input services by the authorities was not legally sustainable. The Tribunal set aside the impugned orders denying credit on these services, reinforcing that services used by a provider of taxable services for providing output services qualify as input services unless specifically excluded.

Interpretation of Definition of Input Service and Exclusions

The Tribunal further analyzed the definition of "input service" with reference to Anglo French Drugs & Industries Ltd v. Commissioner, which clarified that general insurance services, other than those related to motor vehicles, are not excluded from the ambit of input services under Rule 2(l). The exclusion clause applies only to motor vehicle insurance, and not to other forms such as marine cargo open policy, fire and burglary policies, which are directly connected with the business.

The Tribunal held that the Commissioner (Appeals) had misinterpreted the definition by excluding general insurance services unrelated to motor vehicles. The Tribunal reaffirmed that such insurance services are eligible for CENVAT credit, consistent with the amended definition under the CENVAT Credit Rules.

Application of Law to Facts and Treatment of Competing Arguments

The impugned order denied or limited CENVAT credit on the basis that the input services lacked nexus with the manufacturing activity or were availed beyond the place of removal. The Tribunal rejected these contentions, relying on precedents that emphasize a broader interpretation of input services and nexus requirements.

The Tribunal gave due consideration to the submissions of both parties and the material on record, concluding that the denial of credit was not supported by the legal framework or established case law. The Tribunal's reasoning was grounded in statutory interpretation and a purposive approach to the CENVAT Credit Rules, ensuring that eligible credits are not denied on technical or narrow grounds.

3. SIGNIFICANT HOLDINGS

The Tribunal's crucial legal reasoning includes the following verbatim excerpts:

'The discussion made by the Commissioner (Appeals) for denying the credit on this input service, in my view is legally misplaced. After perusal of records and appreciating the submissions from both sides, I am of the view that the credit on Marine Policy is eligible.'

'The definition clause provided under Rule 2(l) ibid clearly provided that any service used by a provider of taxable service for providing an output service should be considered as input service... denial of Cenvat benefit on the disputed services availed by the appellants after 1-4-2011 by the authorities below is not legal and proper and accordingly, in our view, the impugned orders are liable to be set aside.'

'Even after the amendment to the definition of 'input service' as per Rule 2(l) of Cenvat Credit Rules, the service of General Insurance was never excluded and the exclusion clause is only in respect of General Insurance pertaining to motor vehicle and not to other kinds of insurance such as Marine Cargo Open Policy, Standard Fire and Special Perils Policy, Burglary Floater Policy and other properties of the company.'

The core principles established include:

• Marine insurance premiums covering goods in transit qualify as input services eligible for CENVAT credit, notwithstanding the policy's coverage beyond the place of removal.
• Input services used by a provider of taxable services for providing output services are eligible for credit unless explicitly excluded under Rule 2(l) of the CENVAT Credit Rules.
• General insurance services, except those related to motor vehicles, are not excluded from the definition of input services and thus qualify for credit.
• Denial of CENVAT credit on technical grounds lacking nexus or based on misinterpretation of the definition of input service is unsustainable.

On the facts, the Tribunal set aside the impugned order of the Commissioner (Appeals) and allowed the appellant's appeal, restoring the entitlement to CENVAT credit on tax paid on insurance premium and courier services.