2018 (10) TMI 563 - AT - Service Tax

CENVAT Credit - input services - insurance services (errors and omission policy taken by the appellant for indemnifying the errors / omissions or defects in the software products supplied by them) - It appeared to the department that general insurance / insurance auxiliary services are not covered within the definition of input service and therefore the appellants are not eligible for the credit - Held that - In the case of M/s. Rane brake Lining Ltd. Vs. Commissioner of Central Excise 2018 (7) TMI 611 - CESTAT CHENNAI , the Tribunal has allowed credit on product liability insurance - The very same analogy can be applied for the software products which are supplied by the appellant. Further on analyzing the definition of input services, it can be seen that only those type of insurance services which fall under the category of life insurance, health insurance etc. which are availed for personal consumption are excluded from the ambit of the definition - These policies which are for covering the product liability in case of defect to the products supplied would definitely come within the inclusive part of the definition - credit allowed. CENVAT Credit - transit insurance policy - Held that - The storage services are eligible only upto place of removal. So also outward transportation service is eligible only upto the place of removal. The inclusive part of the definition does not qualify the list of services mentioned therein except storage and outward transportation with the words upto the place of removal - the transit insurance policy which is availed by the appellant for moving the goods to the site where the output services are to be provided are also eligible for credit - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of input service credit on insurance services for errors and omission policy.
2. Disallowance of credit on transit insurance policy for moving goods for installation.

Analysis:

Issue 1:
The appellant claimed input service credit on insurance services for an errors and omission policy covering defects in software products supplied by them. The original authority disallowed the credit, but the appellant argued that such insurance services have a direct nexus with the output service provided and are thus eligible for credit. The appellant relied on precedents like M/s. Rane brake Lining Ltd. and Granules India Ltd. The Tribunal analyzed the definition of input services and held that insurance services covering product liability in case of defects fall within the inclusive part of the definition. The Tribunal disagreed with the authorities' view that these were post-manufacturing activities, as the definition includes services availed up to the place of removal, such as storage and outward transportation services. Consequently, the errors and omission policy availed by the appellant was deemed eligible for credit.

Issue 2:
The second issue pertained to the disallowance of credit on a transit insurance policy amounting to a specific sum. The appellant contended that the insurance was necessary for moving goods for providing output services, specifically for installation activities related to telecommunication services. The department argued that such insurance services were post-manufacturing activities and thus ineligible for credit. However, the Tribunal held that the transit insurance policy, essential for moving goods to the site where output services were to be provided, was indeed eligible for credit. The impugned order disallowing credit was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, allowing input service credit on insurance services for errors and omission policy and transit insurance policy for moving goods for installation activities related to telecommunication services.