2019 (3) TMI 345 - AT - Service Tax

CENVAT Credit - input services - insurance services - period from April 2016 to June 2017 - denial on account of nexus - Held that - The first policy is in the nature of errors and omission insurance policy. It is a form of insurance policy which covers the risk on failure to perform on the part of financial loss caused or shortage in the service provided or the products sold - the disallowance of credit on errors and omission insurance policies is unjustified and requires to be set aside. The second type of insurance policy is the transit insurance policy. The appellant has explained that such insurance policy is taken to cover the risk of accident or damage of the goods such as computers, routers etc. which are transported to the premises of the customer - the appellant herein is not a manufacturer but an output service provider and the definition of input service would not be applicable to output service provider. Any input service used for providing output service is eligible for credit in the case of an output service provider. Hence disallowance of credit on this policy is unjustified. The third type of insurance policy is umbrella fixed asset policy. The appellant has taken this insurance policy to cover the risk such as fire, theft, weather damages of the fixed assets of the appellant as well as those goods that have been installed within the premises of the customer - These are assets of the company and are owned by the company and only for providing service, it is installed in the customers premises. This insurance policy is taken to cover the risk of fixed assets and is eligible for credit. Hence the disallowance is unjustified. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Disallowance of input service credit on insurance services.

Analysis:
1. Errors & Omission Insurance Policy:
The appellant availed input service credit on Errors & Omission Insurance Policy, a liability insurance covering financial loss due to errors or omissions in services or products. The appellant argued that this policy has a nexus with the output service, making it eligible for credit. The Tribunal, in a previous case, allowed credit for such policies. The judge found the disallowance unjustified and set it aside.

2. Transit Insurance Policy:
The appellant also availed input service credit on Transit Insurance Policy to cover goods' accidents or damages during transportation to customers' premises. The respondent contended that since the place of removal was the appellant's premises, the credit was not eligible. However, as an output service provider, the appellant was entitled to credit for any input service used in providing output service. The judge deemed the disallowance unjustified and set it aside.

3. Umbrella Fixed Asset Policy:
The appellant had an Umbrella Fixed Asset Policy to cover risks like fire, theft, and weather damages to fixed assets and goods installed at customers' premises. The appellant argued that this policy was essential for providing output services and thus eligible for credit. The judge noted that the earlier Commissioner (Appeals) had allowed credit for this policy in the appellant's case for a previous period. Consequently, the judge found the disallowance unjustified and set it aside.

In conclusion, the judge held that the disallowance of credit on the three insurance policies was unjustified. The impugned order was set aside, and the appeal was allowed with any consequential relief as per law.