Cenvat credit on transit insurance for FOR destination sales is admissible despite buyer reimbursement of insurance charges.

Cenvat credit was held admissible on service tax paid for transit insurance where goods were sold on FOR destination basis and delivered at the buyer's premises. Because the contract required delivery at the customer's destination, the place of removal was treated as the buyer's premises, and the insurance up to that point was connected with delivery of the goods. Buyer reimbursement of the insurance charges did not change the character of the service tax paid on the transit insurance. Credit denial was therefore unsustainable.

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Issues: Whether Cenvat credit of service tax paid on transit insurance for goods sold on FOR destination basis and delivered at the buyer's premises was admissible, notwithstanding reimbursement of the insurance charges by the buyer.

Analysis: The sale contract required delivery of the goods at the customer's destination and the goods were sold on FOR destination basis. On that footing, the place of removal was treated as the customer's premises and the insurance for transit up to that point formed part of the transaction connected with delivery of goods. The authorities relied on decisions dealing with valuation and transportation credit, but those decisions did not decide the specific question of entitlement to Cenvat credit on transit insurance in the present factual setting. The reimbursement of insurance charges by the buyer did not alter the character of the service tax actually paid on the insurance taken for movement of goods up to the buyer's premises.

Conclusion: Cenvat credit on transit insurance premium was admissible and the denial of credit was unsustainable.

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