2018 (7) TMI 611 - AT - Central Excise

CENVAT Credit - input services - Director Sitting Fees - premium for product liability insurance - Revenue claims that the insurance is post manufacturing activity - Held that - The risk covers the defects with the product. In such cases, when there are defects to the product, the appellant / manufacturer will have to recall the product and thereby incur huge financial loss. The insurance is for covering the financial loss of the appellant / manufacturer and it cannot be considered as a post-manufacturing activity - This cannot be said to be a post-manufacturing activity for the reason that such insurance policies addresses the financial risks of the manufacturer - denial of credit unjustified. Director Sitting Fees - Held that - It is the duty of the director to attend the meetings and therefore the service tax paid on such fees is eligible for credit - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of CENVAT credit on product liability insurance.
2. Eligibility of CENVAT credit on service tax paid on Director Sitting Fees.

Analysis:
1. The appellant, a manufacturer of various products, faced a denial of CENVAT credit on service tax paid for product liability insurance. The appellant argued that the insurance covered risks related to product defects, which directly impacted their manufacturing activities. The Tribunal noted that the insurance aimed to mitigate financial losses due to defects in products, aligning with the inclusive definition of input services. Citing a precedent where credit on directors' liability insurance was allowed, the Tribunal found the denial of credit on product liability insurance unjustified and set it aside.

2. The second issue revolved around the eligibility of CENVAT credit on service tax paid for Director Sitting Fees. The appellant contended that such fees were essential for directors to fulfill their duties, directly linked to manufacturing activities. Referring to a previous case, the Tribunal affirmed that the service tax on director fees was eligible for credit. It was established that directors' attendance at meetings was crucial for business operations, justifying the credit eligibility. Consequently, the Tribunal deemed the disallowance of credit on both services incorrect and set aside the impugned order, allowing the appeal with any consequential relief.