Cenvat credit admissibility on insurance services taken for risk coverage of plant and machineries and inventories.

PJ/Case Law/2013-14/1960

Case:-GRASIM INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE

Citation:- 2013(32) S.T.R. 256 (Tri.-Del.)

Brief Facts:- Although this appeal was listed for stay hearing, the dispute involved does not require the appeal to roll-on in pendency before Tribunal. Therefore, both stay application and appeal are taken up for disposal.
There is disallowance of Cenvat credit of Rs. 18,813/- followed by penalty of Rs. 10,000/- and interest on the demand. The demand arose disallowing Cenvat credit availed by appellant in respect of the insurance service availed. Adjudication order makes clear how the insurance service was related to insurance covering issue of plant and machinery and inventories. Such coverage cannot be said to be not in relation to manufacture. The appellants have filed this appeal.

Appellant Contentions:-The appellant submitted that Insurance service availed for covering risk of plant and machinery and inventories and the credit on the same was availed according to Rule 2 of Cenvat Credit Rules, 2004. Hence, such insurance coverage has to be considered as related to manufacture according to Cenvat Credit Rules, 2004. Therefore, disallowable of Cenvat credit of Rs. 18,813/- and penalty of Rs. 10,000/- and interest on demand regarding this is not justifiable. For the same reasons, they also submit that stay should be granted and the appeal should be disposed.

Respondent Contentions:- The Respondent has relied on the findings of the adjudicating authority.

Reasoning of Judgment:- We have considered the submissions from both sides and perused record. We find that issue relating to availment of Cenvat credit on Insurance service which is availed by appellant for coverage of risk of plant and machinery and inventories. Such coverage is considered as useful for carrying out manufacturing activity without being affected by any unforeseen event and protects the assessee against uncertain event and hence, this is related to manufacturing activity. Accordingly, the appellant succeeds for which the appeal is allowed and stay application is also disposed.

Decision:-Appeal allowed.

Comment:-The essence of this case is that for admissibility of cenvat credit on input services, what is required to be seen is that the said service is being used in relation to manufacturing activity. As the insurance services for plant and machinery is taken for avoiding unforeseen event so that in case of accidental damage the manufacturing activities are not disturbed, the credit of service tax on the same will be admissible.

Comments

PJ/Case Law/2013-14/1960

Post a Comment

Query