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2021 (9) TMI 1089 - AT - Central ExciseCENVAT Credit - input services - Product Liability - Product recall insurance policy - HELD THAT - The issue that whether the appellant is entitle for the Cenvat Credit in respect of product liability and product recall insurance policy has already been decided by this tribunal, in the case of M/S BHAVANI INDUSTRIES VERSUS C.C.E. S.T. - RAJKOT 2018 (10) TMI 626 - CESTAT AHMEDABAD where it was 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, and the credit is allowed. Credit allowed - appeal allowed - decided in favor of appellant.
Issues:
1. Eligibility for Cenvat Credit in respect of Product Liability and Product recall insurance policy. Analysis: The issue at hand in this case pertains to the eligibility of the appellant for Cenvat Credit concerning Service Tax paid on Insurance services of "Product Liability & Product Recall Insurance Policy." The appellant had been denied the credit by the adjudicating authority on the grounds that the insurance was for post-removal activities, thus making the credit inadmissible. The Ld. Commissioner (Appeals) upheld this disallowance, leading to the current appeal. The appellant argued that the insurance for product recall was determined before the supply of goods, as a condition of the sale, and therefore should not be considered a post-removal activity. Reference was made to a similar case where the authority allowed credit for Product Recall Insurance Policy, and the revenue had accepted the order. The Ld. Commissioner (Appeals) in the present case, however, stated that the previous order was not binding on him. Various judgments were cited in support of the appellant's argument. Moving on to the analysis, it was noted that the Product Recall Insurance Policy was taken by the appellant as a condition of sale of goods, and without it, the goods could not be sold to customers. The policy was pre-decided before the supply of goods, making it an integral part of the cost of the final product during manufacturing. The Commissioner (Appeals) in a different assessee case had concluded that credit cannot be denied for Product Recall Policy after interpreting the definition of input services. Despite referring to this order, the Ld. Commissioner (Appeals) in the current case dismissed it as non-binding without considering the merits. The tribunal highlighted the importance of judicial discipline, suggesting that the Ld. Commissioner (Appeals) should have given regard to the previous order as it involved a detailed interpretation of input services, including the aspect of security, which the Product Recall Policy expenses served. Consequently, the tribunal concluded that the Service Tax paid for the product recall policy concerning the sale of finished goods was indeed eligible for Cenvat Credit. The impugned orders were set aside, and the appeals were allowed. The tribunal emphasized that the issue was no longer res-integra based on a previous order concerning the same appellant for an earlier period. Therefore, following the tribunal's decision, the impugned order was deemed unsustainable and set aside, ultimately allowing the appeal.
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