2015 (9) TMI 1214 - AT - Service Tax

Denial of CENVAT Credit - input services - Credit of Service Tax paid on transit insurance payment in respect of insurance of goods during transit from the factory to customers premises - Place of removal - Held that - Sales are on FOR destination basis. Infact decision of this case support the case of the appellant. Further, I find that a similar issue came up before the Tribunal in the case of Suzuki Motorcycle (I) Pvt. Ltd. reported in 2015 (7) TMI 633 - CESTAT NEW DELHI wherein this Tribunal has observed that merely because the appellant stand reimbursed part of the advertisement expenses from their parent company, does not mean that appellant would become disentitled for the service tax actually paid by them and this Tribunal allowed the cenvat credit on advertisement expenses which has been reimbursed by the parent company. In this case, insurance expenses have been paid by the appellant for transportation of the goods upto the place of buyer and same has been reimbursed by the buyer of the goods. Therefore, the facts of the case in hand are similar to the facts of Suzuki Motorcycle (PI) Pvt. Ltd. (supra). In these circumstances, I hold that appellant is entitled to take cenvat credit of insurance premium charges paid by them when there is no dispute that the goods were delivered at the customers place. - Decided in favour of assessee.

Summary

Issues:
- Denial of Cenvat Credit on Service Tax paid on transit insurance premium.
- Interpretation of place of removal in the context of availing Cenvat Credit.
- Reimbursement of insurance charges and its impact on Cenvat Credit eligibility.

Analysis:

1. Denial of Cenvat Credit on Service Tax paid on transit insurance premium:
The appellant, a sugar manufacturer, appealed against the denial of Cenvat Credit on service tax paid on transit insurance for goods transported from the factory to customers' premises. The Revenue argued that since the place of removal was the factory gate, the appellant was not entitled to the credit. The impugned proceedings resulted in a demand for duty, interest, and penalty. The Commissioner (Appeals) partially reduced the demand and penalty. The appellant contended that as sales were on a FOR destination basis, the ownership of goods remained with them until delivery at the customers' premises, making them eligible for the credit.

2. Interpretation of place of removal in the context of availing Cenvat Credit:
The appellant's counsel argued that in FOR destination sales, the customers' premises constituted the place of removal, entitling the appellant to claim Cenvat Credit on transit insurance premium. Reference was made to a Tribunal decision supporting this view. The Revenue, however, contended that transit insurance premium, not being part of the assessable value, did not qualify for the credit. Legal precedents were cited, including a High Court decision and an Apex Court ruling, to oppose the appellant's claim. The Tribunal analyzed various judgments to determine the applicability of Cenvat Credit in cases of goods delivered to the customers' place.

3. Reimbursement of insurance charges and its impact on Cenvat Credit eligibility:
The Tribunal distinguished cases where reimbursement of charges affected Cenvat Credit eligibility. It noted that the appellant's situation, where insurance expenses were reimbursed by the buyer, aligned with a precedent allowing credit for expenses reimbursed by a parent company. Drawing parallels with similar cases, the Tribunal concluded that the appellant was entitled to Cenvat Credit on insurance premium charges due to the delivery of goods at the customers' place. The impugned order was set aside, and the appeal was allowed with consequential relief, emphasizing the factual similarity with relevant precedents and the entitlement to credit in the given circumstances.

This detailed analysis of the judgment highlights the key issues of denial of Cenvat Credit, interpretation of the place of removal, and the impact of reimbursement on credit eligibility, providing a comprehensive overview of the legal reasoning and conclusions drawn by the Tribunal in the case.