2008 (5) TMI 603 - AT - Service Tax

CENVAT credit - insurance cover on aircrafts and vehicles - denial on the ground that they are not used in or relation to the manufacture of final product

Summary

Issues:
1. Denial of credit of service tax paid on insurance cover for aircrafts and vehicles.
2. Interpretation of the definition of 'input service' under the Cenvat Credit Rules, 2004.
3. Comparison of Tribunal decisions regarding the inclusion of insurance cover as an input service.

Analysis:

Issue 1: The judgment addresses the denial of credit of service tax paid on insurance cover for aircrafts and vehicles, amounting to Rs. 17,06,132, on the basis that they were not used in or related to the manufacture of the final product.

Issue 2: The definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004 is crucial in this case. The appellant argues that services used in relation to business activities should be considered as input services. Citing the Tribunal decision in Manikgarh Cement v. C.C.E. & Customs, Nagpur, it is contended that since the vehicles and aircrafts were used for business purposes, the insurance cover should be included in the definition of 'input service'.

Issue 3: The judgment contrasts the arguments by referring to another Tribunal decision in India Cements Ltd. v. C.C.E., Salem, where it was held that an insurance policy for a colony building of a factory cannot be deemed an input service. However, the Tribunal emphasizes that the definition of input service is broad enough to encompass activities related to business. The decision in Manikgarh Cement is favored as it was a final decision, unlike the interim decision relied upon by the respondent.

In conclusion, the Tribunal rules in favor of the appellant, allowing the stay petition unconditionally based on the interpretation of the definition of 'input service' and the precedent set by the decision in Manikgarh Cement. The judgment highlights the importance of considering business-related activities in determining what constitutes an input service under the Cenvat Credit Rules, 2004.