2017 (5) TMI 806 - AT - Central Excise

CENVAT credit - eligible input services - credit availed on the basis of duty paying invoices issued by Input Service Distributor for various insurances services - Held that - the issue is squarely covered under the ratio laid down in the judgment in the assesee s own case M/s Hindustan Zinc Ltd. Versus CCE, Jaipur 2017 (3) TMI 60 - CESTAT NEW DELHI , where it was held that the issue is squarely covered by the ratio of judgment in assessee-Appellants own case 2014 (7) TMI 485 - CESTAT NEW DELHI , where it was held that Insurance of plant and machinery, goods in transit, cash in transit and insurance of vehicles and laptop, is an integral part of manufacturing business, as no manufacturer would carry on manufacturing operations without insurance of plant & machinery, cash in transit, goods in transit, vehicles & computers, etc. against any loss due to accident, natural calamities, etc - credit allowed - decided in favor of assessee.

Summary

Issues:
- Disallowance of Cenvat Credit on insurance services availed by the appellant.
- Interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004.
- Application of retrospective validity to the amendment of Rule 2(l) w.e.f. 1-4-2011.

Analysis:
1. Disallowance of Cenvat Credit on Insurance Services:
The appellant, engaged in manufacturing lead and zinc, availed Cenvat Credit on insurance services like Plant and Machinery Insurance, Marine Insurance, and Cash-in-transit/Safe Insurance. The Department disallowed these credits, leading to the appeal. The Tribunal noted a similar issue previously decided in the appellant's favor. Referring to the law laid down by the Hon'ble Bombay High Court, the Tribunal observed that insurance services are integral to the manufacturing business. Citing judgments, including the one in the case of CCE v. Ultra Tech Cement, the Tribunal held that services used in the business of manufacturing final products qualify as input services, irrespective of direct relation to the final product's manufacture. Consequently, the Tribunal allowed the appeal, emphasizing the eligibility of insurance services for Cenvat credit.

2. Interpretation of Rule 2(l) of Cenvat Credit Rules, 2004:
The Commissioner's disallowance of Cenvat credit on insurance services was based on an interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004. The Commissioner viewed the amendment to Rule 2(l) w.e.f. 1-4-2004 as clarificatory and hence, applied it retrospectively. However, the Tribunal found the Commissioner's reasoning lacking, especially in justifying the retrospective application of the amendment. Comparing the Commissioner's approach to previous Tribunal judgments, the Tribunal criticized the lack of proper reasoning and application of mind in the Commissioner's decision. Ultimately, the Tribunal held the impugned order unsustainable and passed without due consideration, thereby setting it aside and allowing the appeals.

3. Application of Retrospective Validity to Rule 2(l) Amendment:
The Commissioner's stance on the retrospective application of the amendment to Rule 2(l) was a key point of contention. While citing precedents like the Vandana Global Ltd. case, the Commissioner failed to provide sufficient reasoning for treating the amendment as clarificatory and having retrospective validity. The Tribunal highlighted the importance of reasoned decision-making and criticized the Commissioner's failure to justify the retrospective application. By overturning the Commissioner's decision, the Tribunal emphasized the need for a thorough and reasoned approach in interpreting legal provisions, especially concerning retrospective amendments.

In conclusion, the Tribunal's judgment in this case revolved around the eligibility of insurance services for Cenvat credit, the interpretation of Rule 2(l) of the Cenvat Credit Rules, and the application of retrospective validity to legal amendments. The Tribunal's decision, based on legal precedents and reasoned analysis, favored the appellant, highlighting the importance of a thorough and consistent application of legal principles in tax matters.