2018 (9) TMI 1449 - AT - Service Tax

CENVAT Credit - input services - general insurance services - appellant engaged in providing infrastructural support by ensuring the safe availability of Aviation Turbine Fuel at the Delhi Airport - whether the appellant is entitled to the cenvat credit on certain general insurance services? Held that - Such services have been used for insuring the building, plant, machinery, pipes, cables etc. which were used by the appellant in providing the service of making available ATF at the Delhi International Airport. Clearly such services are in the nature of general business activity to ensure the security of the plant and machinery used for providing the output service - In Rule 2(l) of the Cenvat Credit Rules, 2004 it is seen that such services are covered within the definition under the means as well as inclusive portion. Whether the adjudicating authority was right in denying such cenvat credit by applying the exclusion providing under sub clause (BA) ? - Held that - The exclusion clause is specifically applicable only in respect of general insurance service for motor vehicles which are not being used as capital goods - It cannot be said that the exclusion will be applicable to the insurance for the general plant, machinery which is used for providing the output service. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of cenvat credit on general insurance services used for business activities.

Analysis:
The appellant, a Special Purpose Vehicle Company, availed cenvat credit on various input services, including general insurance services for plant and machinery used in providing output service. The Revenue disallowed a portion of the credit, leading to the present appeal challenging the denial of cenvat credit. The key contention was whether the exclusion clause '(BA)' of the Cenvat Credit Rules applied to all insurance services or only to motor vehicles. The appellant argued that the insurance services used for plant and machinery were integral to their business activity and fell within the definition of input service. Reference was made to a Tribunal decision allowing cenvat credit for general insurance services related to business activities. The Revenue, however, supported the impugned order denying the credit.

Upon review, the Tribunal found that the exclusion clause '(BA)' specifically pertained to general insurance services for motor vehicles not used as capital goods and did not extend to insurance for plant and machinery used for providing output services. Citing a previous Tribunal decision, it emphasized that general insurance services for activities connected with the business, such as Marine Cargo and Fire insurance, were included in the definition of input service. Consequently, the Tribunal concluded that the denial of credit was not justified and set aside the impugned order, partially allowing the appeal.

Additionally, a small demand for service tax amounting to ?2400, which the appellant had already paid along with interest, was not pressed in the appeal. The Tribunal decided not to impose a penalty for this minor amount. Therefore, the impugned order was set aside, except for the admitted portion, and the appeal was partially allowed.