Whether availment of credit of service tax paid on the insurance service to cover the damage or loss to the exported goods in the foreign countries except India is eligible as input service?

The dispute in the present appeal relates to the availment of service tax paid on the insurance service availed by the appellant to cover the damage or loss to the goods exported by the appellant, in as much as the said policy is for covering the goods in the foreign countries except India, lower authorities have held that the same cannot be considered as input services.

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD
COURT NO.II

Appeal No. E/1805 & 1806/2009

Arising out of Order-in-Appeal No.309 to 310/2009(Ahd-II) CE/CMC/Commr(A)/Ahd/S/44 to 45(A-II)09, Dated: 15.9.2009
Passed by the Commissioner of Central Excise & Customs (Appeals), Ahmedabad

Date of Decision: 15.3.2011

M/s HARSHA ENGINEERS LTD
SHRI NAYNESH S JOSHI

Vs

CCE, AHMEDABAD

Appellant Rep by: Shri J C Patel, Adv.
Respondent Rep by: Shri J S Negi, SDR

CORAM: Archana Wadhwa, Member (J)

ORDER NO.A/505-506/WZB/AHD/2011

Per: Archana Wadhwa:

The dispute in the present appeal relates to the availment of service tax paid on the insurance service availed by the appellant to cover the damage or loss to the goods exported by the appellant, in as much as the said policy is for covering the goods in the foreign countries except India, lower authorities have held that the same cannot be considered as input services. For better appreciation para 10 of Commissioner (Appeals) is reproduced below.

“10. Generally the importer-exporter entered into an agreement and arrived at a price at the FOB value. In other words, price will includes all expenditures upto the boarding of goods in the ship. The sale is completed at the time of boarding of the goods by the exporter i.e. the appellant. I find that the appellant and TATA AIG General Insurance Co. Ltd. have entered in an agreement to insure the bodily injury and property damage on payment of the premium having territory and jurisdiction worldwide including USA and CANADA excluding INDIA. Further the insurance coverage a bodily injury and property damage. In other words, it does not cover the appellants’ goods within India. Since the insurance is no way concern within India and do not cover the goods manufactured by the appellant in India upto boarding cargo at ship. Therefore, it cannot be called as input services defined under Rule 2(1) of Cenvat Credit Rules, 2004. Hence, the cenvat credit is not admissible. The case laws relied upon are of no help as the facts and circumstances are all together different in the present case. Therefore, the impugned order is sustainable. “

2. As is seen from above the credit stands denied on the ground that the insurance is meant for operating in foreign countries and not in India and hence cannot be called as input services.

3. Both the sides have relied upon various decisions of the Tribunal in support of their submissions. The learned advocate, Shri J.C. Patel appearing for the appellant draws my attention to the following decisions wherein the expression input service was held to be of wide connotation and was held to be admissible services for the purpose of input credit, as long as they are related to the business activities of the appellant.

1. 2009 (15) STR 657 – Coca Cola India P. Ltd. Vs. CCE

2. 2010 (20) STR 577 – CCE V Ultratech Cement Ltd.

3. 2010 (10) STR 662 – CCE V Ambika Forgings

4. 2010 (19) STR 431  – CCE V Nilkamal Crates & Bins

5. 2010 (18) STR 466  – CCE V Raipur Rotocast Ltd.

6. 2010 (20) STR 644 – CCE V Sundaram BNP Paribas

7. 2010 (17) STR 134  – Cadila Healthcare Ltd. V CCE

4. On the other hand learned DR has relied upon the following decisions of the Tribunal:

1. 2010 (19) STR 52 (Tri.-Mumbai)  – Vikram Ispat Vs. CCE Rajkot

2. 2010 (18) STR 281 (Tri.-Bang.)  – KBACE Tech Pvt. Ltd. Vs. CCE & ST Bangalore

5. I find that Commissioner (Appeals) while disposing off the appeal has not considered any of the above decisions of the Tribunal and has given a finding that the said service cannot be held to be an input service on the sole ground of the same being operative in a foreign country. As such I am of the view that the matter needs to be remanded to Commissioner (Appeals) for denovo adjudication in the light of the case law referred supra. Accordingly I set aside the impugned order and remand the matter to Commissioner (Appeals) for fresh decision in the light of the law declared in the above referred judgments.

(Pronounced in Court on 15.03.2011)

NF