Cenvat credit on insurance services linked to manufacture cannot be denied without recorded reasons; partial relief granted.

Cenvat credit of service tax paid on insurance services used in connection with manufacturing was treated as admissible where the services were integrally connected with the manufacturing activity and functioned as input services. The appellate authority's direction on quantification was not shown to be erroneous, so that aspect was left undisturbed. However, the disallowance of credit on certain insurance services could not stand because the appellate order gave no reasons for denying the credit, and reasons are necessary for judicial scrutiny. The disallowance on those identified services was set aside, while the order was otherwise maintained to the extent indicated.

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Issues: Whether Cenvat credit of service tax paid on various insurance services used in connection with the manufacturing activity was admissible, and whether disallowance of credit could be sustained when the appellate order gave no reasons for the proposed denial.

Analysis: The allowance of credit on the insured items was not in dispute except to the extent of quantification. The challenge to the direction for quantification did not disclose any specific ground showing error in the appellate authority's approach. At the same time, the appellate authority had not recorded reasons for disallowing credit on the remaining insurance services. As the reasons for disallowance are essential for judicial scrutiny, the denial of credit on those services could not be sustained. The services were treated as integrally connected with the manufacturing activity and as input services for the purpose of manufacture.

Conclusion: The disallowance of Cenvat credit on the identified insurance services was set aside, while the appellate order was otherwise maintained to the extent indicated. The assessee succeeded only in part.

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