2017 (3) TMI 60 - AT - Central Excise

CENVAT credit - denial on account of nexus - credit availed on the basis of duty paying invoices issued by Input Service Distributor for various insurances services - Held that - the issue is squarely covered by the ratio of judgment in assessee-Appellants own case M/s HINDUSTAN ZINC LTD Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR 2014 (7) TMI 485 - CESTAT NEW DELHI , where it was held that Insurance of plant and machinery, goods in transit, cash in transit and insurance of vehicles and laptop, is an integral part of manufacturing business, as no manufacturer would carry on manufacturing operations without insurance of plant & machinery, cash in transit, goods in transit, vehicles & computers, etc. against any loss due to accident, natural calamities, etc - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues Involved:
Cenvat credit eligibility for insurance services used in manufacturing process.

Detailed Analysis:

Issue 1: Cenvat Credit Eligibility for Insurance Services
The assessee-Appellants availed Cenvat credit on various insurances, including plant & machinery, marine, employees group, and other insurances. The Commissioner alleged wrongful credit claiming these services were not used directly or indirectly in manufacturing the final product. The Tribunal referred to a judgment stating that the definition of "input service" is broad and covers services used in relation to the business of manufacturing final products. The Tribunal highlighted that insurance of plant and machinery, transit of goods, cash, laptops, and vehicles is essential for manufacturing operations and thus eligible for Cenvat credit. The Group Insurance for employees was also deemed eligible as it is a statutory requirement under the Employees State Insurance Act, 1948, integral to manufacturing operations. The Tribunal overturned the Commissioner's decision, emphasizing the importance of insurance services in the manufacturing business.

Issue 2: Clarificatory Amendment to Cenvat Credit Rules
The Commissioner argued that the amendment to Rule 2(l) of Cenvat Credit Rules, 2004, was clarificatory and had retrospective application. However, the Tribunal disagreed, stating that the Commissioner failed to provide substantial reasoning for treating the amendment as clarificatory. The Tribunal criticized the Commissioner's decision as lacking proper application of mind and noted that the Commissioner disregarded relevant judgments and based the decision on personal interpretation rather than legal precedent. The Tribunal criticized the Commissioner's approach as judicial indiscipline and irresponsible adjudication, emphasizing the need for adherence to legal principles and precedents. The Tribunal set aside the impugned order and allowed the appeals, censuring the Commissioner's conduct.

In conclusion, the Tribunal ruled in favor of the assessee-Appellants, allowing the appeals and emphasizing the importance of following legal precedents and principles in determining Cenvat credit eligibility for insurance services used in manufacturing processes.