2020 (10) TMI 1005 - AT - Central Excise

CENVAT Credit - input services - marine insurance services provided by the insurance companies - place of removal - HELD THAT - All services received by the manufacturer directly or indirectly in relation to the manufacture of final products upto the place of removal are admissible for availment of Cenvat Credit on the Service Tax paid for such services. The goods are being cleared by the appellants to their buyers on FOR basis and all liabilities in respect of transportation of goods or even damage to goods were on account of the appellants/manufacturer. It is the appellants who were liable for safe delivery of goods up to their customer‟s door steps. The impugned service of marine insurance was taken to cover the risk of transportation of goods. Thus, present becomes the case were the service of insurance of goods to be supplied to buyers at their door steps under FOR delivery system was taken. These admitted facts are sufficient to hold that the sale in the present case gets complete only at the door steps of buyers. It becomes clear that when the goods are cleared on FOR basis the freight paid on outward transportation would definitely qualify as input service, and thus shall be admissible for Cenvat. Thus, the marine insurance services were availed by the appellant-manufacturer when the property in goods was still retained with him, the delivery being on FOR basis. Hence, the opinion formed by the adjudicating authority below for the impugned marine services to not to be included under input services are absolutely wrong - the plea that general insurance services fall under the exclusion clause is also not appropriate to the given facts and circumstances for the reason that the general insurance services only with respect to motor vehicles are covered under the exclusion part of the definition of input services. The impugned goods are not being motor vehicles. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Admissibility of Cenvat Credit on marine insurance services under Rule 2(l) of Cenvat Credit Rules, 2004.
2. Definition and scope of "input services" and "place of removal".
3. Applicability of exclusions in the definition of input services, specifically regarding general insurance services.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat Credit on Marine Insurance Services:

The core issue was whether Cenvat Credit on marine insurance services received by the appellant during the impugned period is admissible under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellants argued that marine insurance services are covered under the definition of input services. They cited previous Tribunal decisions favoring the admissibility of such credits. The Tribunal noted that the definition of input services includes any service used by a manufacturer directly or indirectly in relation to the manufacture and clearance of final products up to the place of removal. The Tribunal emphasized that the goods were transported on a FOR (Free on Road) basis, meaning the risk and responsibility remained with the manufacturer until delivery to the buyer's doorsteps. Therefore, the marine insurance services were deemed necessary for the safe transportation of goods, qualifying them as input services.

2. Definition and Scope of "Input Services" and "Place of Removal":

The Tribunal analyzed Rule 2(l) of the Cenvat Credit Rules, which defines input services. It includes services used in various stages of production and delivery, extending up to the place of removal. The Tribunal referenced Section 4 of the Central Excise Act, 1944, which defines the place of removal as the factory, warehouse, or any other premises where excisable goods are stored or sold after clearance. The Tribunal also referred to the Supreme Court's interpretation in M/s. Escorts JCB Ltd. and CCE & CU Vs. Rooflt Industries Ltd., which emphasized that the place of removal is determined by the point of sale, considering the terms of the contract and the transfer of property in goods. In this case, since the goods were sold on a FOR basis, the place of removal extended to the buyer's premises, making the marine insurance services eligible for Cenvat Credit.

3. Applicability of Exclusions in the Definition of Input Services:

The respondent argued that the definition of input services explicitly excludes general insurance services, particularly after the amendment effective from April 1, 2008, which restricted credit availability up to the place of removal. The Tribunal clarified that the exclusions primarily pertain to services related to motor vehicles and certain personal services. Since the marine insurance services in question did not involve motor vehicles or personal use, they did not fall under the exclusion clause. The Tribunal also referred to Circular No. 1065/4/2018, which reiterated that the place of removal should be determined with reference to the manufacturer's premises and the point of sale.

Conclusion:

The Tribunal concluded that the marine insurance services were availed while the property in goods was still with the manufacturer, as the delivery was on a FOR basis. Therefore, these services qualified as input services under Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal set aside the Order-in-Appeal, allowing the appeals and granting consequential benefits to the appellants. The operative part of the judgment was pronounced in the open court.