Whether credit admissible on insurance paid for protection of plant & machinery from risk and hazards ?

PJ/Case Law/2013-14/2030

Case:- FEDERAL MOGUL GOETZE (INDIA) LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH-II

Citation:-2013 (31) S.T.R. 628 (Tri. - Del.)

Brief Facts:-The issue in the present case is the admissibility of service tax credit on insurance premium paid for protection of plant and machinery from risks and hazards.

Appellant Contentions:-The Appellant mentions that Service Tax paid on insurance premium in respect of building, plant and machinery and stock being relevant to the manufacture, Cenvat credit is admissible in respect of Service Tax paid. But the authority below has disallowed the same for no reason. It is contended that when the insurance premium has nexus to the manufacturing facility/infrastructure and is taken for protection of plant and machinery, the same cannot be isolated for the sake of disallowance. The credit of service tax paid on insurance services that has been availed is relevant and is having nexus and cannot be simply brushed aside.

Respondent Contentions:-The Respondent reiterates the findings of the lower appellate authority.

Reasoning of Judgment:-We have heard both sides and perused the record. When the appellant has undisputedly paid insurance premium for protection of its plant and machinery from various risks and hazards that cannot be isolated from consideration of Cenvat credit of Service Tax paid against premium. Although it does not contribute to manufacture directly but manufacture is made with such facility which had indirect nexus. On such premise the reasoning of the first appellate authority does not stand to reason nor sound well in law. Therefore, that order is set aside and appeal No. E/347/2011 is allowed.

Decision:-Appeal allowed.

Comment:- The gist of this case is that Cenvat Credit is admissible on any service used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products. As the insurance taken for protection of plant and machinery from risks and hazards, it indirectly contributes in smooth manufacturing operations. Therefore, the credit of the service tax paid on insurance is admissible to the assessee.

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PJ/Case Law/2013-14/2030

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