2018 (10) TMI 626 - AT - Central Excise

CENVAT Credit - Product Liability & product Recall Insurance Policy in respect of goods manufacture and sold by appellant - whether the appellant eligible is for Cenvat credit in respect of Service Tax paid on Insurance services of Product Liability & product Recall Insurance Policy ? Held that - As per the facts of the case the Product Recall Insurance Policy is taken by the appellant, as per condition of sale of the goods, without the said condition the goods cannot be sold to customer, the Product Recall Policy is pre-decided before supply of the goods. Therefore, it cannot be said that the Product Recall Policy Expenses is a post removal expenses, once it is pre-determined the goods can be supplied only after the Product Recall Policy is taken then it becomes part of cost of the final product, during the manufacturing of the same. In the present case the Product Recall Policy expenses is born for the purpose of security of the goods. Therefore, for his reason also the service falls under the definition of input services. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Whether the appellant is eligible for Cenvat credit for Service Tax paid on Insurance services of "Product Liability & product Recall Insurance Policy."

Analysis:
The issue in this case revolves around the eligibility of the appellant for Cenvat credit concerning Service Tax paid on Insurance services for "Product Liability & product Recall Insurance Policy." The adjudicating authority denied the credit, stating that the Insurance is for post-removal activities, making the credit inadmissible. The Ld. Commissioner (Appeals) upheld this decision, leading to the present appeal.

The appellant argued that the Insurance for product recall is determined before the supply of goods, as a condition of sale, and not a post-removal activity. Reference was made to a similar case where the credit was allowed, and the Revenue accepted the decision. However, the Ld. Commissioner (Appeals) mentioned that the previous order was not binding on him. Legal judgments such as ROTORK CONTROL (INDIA) PVT.LTD. Vs. COMMR.OF c. EX., CHENNAI-2010 STR 684 (Tri. Chennai) were cited to support the argument.

The Revenue reiterated the findings of the impugned order, leading to a detailed consideration of submissions and records. The Tribunal found that the core issue was whether the appellant could claim Cenvat Credit for Service Tax paid by Product Recall Insurance Policy. It was established that the Product Recall Insurance Policy was a precondition for the sale of goods, making it part of the cost of the final product and not a post-removal expense. The Tribunal referred to a previous order involving a different assessee, where the credit was allowed based on the interpretation of input services.

The Tribunal emphasized the importance of judicial discipline and the need to consider previous orders on merit. It highlighted that the Product Recall Policy expenses were incurred for the security of goods, falling under the definition of input services. Consequently, the Tribunal concluded that the Service Tax paid for the product recall policy was eligible for Cenvat Credit, setting aside the impugned orders and allowing the appeals.