2021 (9) TMI 1382 - AT - Central Excise

CENVAT Credit - input services or not - Insurance on Business Credit Shield Policy - insurance policy taken by the appellant was related to the manufacturing activity or not - post sale activities - time limitation - HELD THAT - Rule 2(l) ibid has defined the term input service to mean any service used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal. The said definition clause also provides the inclusive category of services, which can be considered as input services - The disputed service availed by the appellant is in relation to post sale activities, in the sense that if the buyer of goods manufactured by the appellant defaulted in making payment, then the insurance company as per the policy requirement, should compensate the appellant for realization of the sale proceeds. The policy note issue by the insurance company as indicated above clearly specifies that the policy offered by them to the appellant is towards realization of the insured debt in respect of the goods delivered to the buyers. Since, the disputed service availed by the appellant was not in relation to manufacture of the final products and does not fall under the inclusive part of definition of input service, such service cannot be considered as input service and cenvat credit of service tax paid on such service should not be available to the appellant. Time Limitation - HELD THAT - SCN was issued by the department within the normal period of limitation from the audit of records by the department. Since, the irregularities in availment of cenvat credit was detected by the department upon auditing the books of accounts maintained by the appellant, initiation of present proceedings are in conformity with the cenvat statute and the same cannot be held to be time barred. There are no infirmity in the impugned order passed by the learned Commissioner (Appeals) - appeal dismissed - decided against appellant.

Summary

Issues:
Cenvat credit eligibility on insurance service related to post-sale activities.

Analysis:
The appellant, engaged in manufacturing Lithographics Plates and PVC Compound, availed cenvat credit on "Insurance on Business Credit Shield Policy" for securing credit facility extended to buyers. The department disputed the credit, contending it did not qualify as an 'input service' under Rule 2(l) of the Cenvat Credit Rules, as it was not directly related to manufacturing. The original authority disallowed the credit, imposing penalties and interest. The Commissioner (Appeals) upheld this decision, leading to the appellant's appeal.

The appellant argued that the disputed service had a direct nexus with manufacturing and should be considered an 'input service' as per the Cenvat statute. They contended that since the cost of the service was included in the final product's value, credit should be allowed. Additionally, they refuted allegations of suppression, stating the show cause notice was based on audit objections, not fraudulent intent.

On the contrary, the Revenue argued that the insurance service was post-sale and not linked to manufacturing or clearance of final products, thus not qualifying as an input service under statutory provisions.

The Tribunal examined the policy document and noted that the insurance was for realizing debts from buyers who defaulted on payment, not directly related to manufacturing. As per Rule 2(l), an 'input service' must be used in or in relation to manufacturing, which the disputed service did not fulfill. The audit-based show cause notice was within the limitation period, validating the proceedings.

Therefore, the Tribunal upheld the Commissioner's decision, dismissing the appellant's appeal due to the lack of infirmity in the impugned order.

This detailed analysis highlights the key arguments, statutory provisions, and the Tribunal's reasoning in determining the eligibility of cenvat credit on the insurance service related to post-sale activities.