2015 (7) TMI 712 - AT - Service Tax

Appeal allowed: Cenvat credit for transit insurance cannot be denied if inseparable from risk.

The tribunal allowed the appeal, emphasizing that Cenvat credit for Service Tax paid on transit insurance premium should not be denied if the insurance ... CENVAT Credit - input service - transit insurance - whether the insurance premium has relevancy to the risk covering the goods. - Held that:- it is the coverage of risk and that is attributable to goods in transit is in question. But not the Service Tax paid on transport delivering goods at buyer’s doorstep. While the goods are in transit, the risk cover is made by insurance. Transport service and insurance on goods being distinct, the claim of Cenvat credit is also distinct. - Decided in favour of assessee. Issues: Disallowance of transit insurance Cenvat creditIn this judgment, the issue at hand was the disallowance of Cenvat credit on Service Tax paid in relation to transit insurance for goods being transported. The adjudicating authority had disallowed the credit, stating that the insurance was related to goods meant for delivery at the buyer's destination. However, the tribunal pointed out that the nature of the claim was not related to goods transport agency (GTA) services but rather focused on whether the insurance premium was relevant to covering the risk of the goods in transit. The tribunal emphasized that if the insurance cover is inseparable from the risk it covers, then the Cenvat credit claimed is valid and should not be denied.The Revenue contended that Cenvat credit on Service Tax paid for insurance covering goods meant for delivery at the buyer's destination should not be allowed. The tribunal clarified that the key issue was the coverage of risk during transit and not the Service Tax paid on transport services delivering goods to the buyer's doorstep. It was highlighted that insurance for risk during transit and transport services are distinct, and therefore, the Cenvat credit claim should also be considered separately. The tribunal found that the Revenue's contentions failed to consider the distinct nature of insurance for transit risk and upheld that denying Cenvat credit for Service Tax paid on transit insurance premium could contradict Rule 2 of the Cenvat Credit Rules, 2004. Consequently, the appeal was allowed, emphasizing the importance of recognizing the relevance of transit insurance in covering the risk associated with goods in transit.