2012 (12) TMI 221 - AT - Central Excise

Cenvat credit - service tax paid on the insurance on vehicle, finished goods, cash in transit and insurance on cash box Held that - insurance service may be indirectly connected to the manufacturing or other activity but that may be in relation to manufacture or various other business activities enumerated in Rule 2(l) of Cenvat Credit Rules, 2004. This establishes the dependability of input to the output. Unless the vehicle is used otherwise than serving the purpose of manufacture or providing of service, the insurance paid to cover risk should not go out of consideration to grant Cenvat credit - considering inevitability of insurance to make the assessee risk free for carrying out its manufacturing operation and other activities related thereto or to the services relating to inclusive aspects under Rule 2(l) cenvat credit allowed

Summary

Issues:
1. Whether service tax paid on insurance for various services availed is eligible for Cenvat credit.

Analysis:
1. The appellant contended that service tax paid on insurance for company-owned vehicles, finished goods inventory, transit insurance, and personal insurance suffered service tax and should be eligible for credit. The Revenue failed to disintegrate these services to prove they were not related to manufacture or business activities. The Tribunal found no evidence to disprove the nexus of these services with manufacturing or business, hence waiving the pre-deposit and allowing the appeal.

2. The Revenue argued that the appellant did not establish how the vehicles were used or the nexus of input with output. However, the Tribunal noted the narrow dispute and proceeded with the appeal without pre-deposit. The appellate authority failed to interpret Rule 2(l) of the Cenvat Credit Rules, 2004, which defines input service, and did not consider the legislative intent behind the rule.

3. The Tribunal analyzed the legislative intent behind Rule 2(l) of the Cenvat Credit Rules, 2004, emphasizing the exhaustive and inclusive categories of services eligible for Cenvat credit. It concluded that insurance services, indirectly connected to manufacturing or business activities, are eligible for credit if they contribute to risk management for manufacturing operations or other related services under the rule. The Tribunal held that insurance covering risks essential for manufacturing operations should be considered for Cenvat credit, allowing the appeal and disposing of the stay application.