Special Purpose Vehicle Co wins appeal on cenvat credit for insurance services on plant & machinery

The Tribunal allowed the appeal filed by a Special Purpose Vehicle Company challenging the denial of cenvat credit on general insurance services used for plant and machinery in business activities. It held that the exclusion clause '(BA)' under the Cenvat Credit Rules applied only to insurance services for motor vehicles, not for plant and machinery used in providing output services. The Tribunal emphasized that general insurance services related to business activities fell within the definition of input service, overturning the Revenue's decision. The appeal was partially allowed, with a small demand for service tax not pressed and no penalty imposed.

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Issues: Denial of cenvat credit on general insurance services used for business activities.

Analysis:
The appellant, a Special Purpose Vehicle Company, availed cenvat credit on various input services, including general insurance services for plant and machinery used in providing output service. The Revenue disallowed a portion of the credit, leading to the present appeal challenging the denial of cenvat credit. The key contention was whether the exclusion clause '(BA)' of the Cenvat Credit Rules applied to all insurance services or only to motor vehicles. The appellant argued that the insurance services used for plant and machinery were integral to their business activity and fell within the definition of input service. Reference was made to a Tribunal decision allowing cenvat credit for general insurance services related to business activities. The Revenue, however, supported the impugned order denying the credit.

Upon review, the Tribunal found that the exclusion clause '(BA)' specifically pertained to general insurance services for motor vehicles not used as capital goods and did not extend to insurance for plant and machinery used for providing output services. Citing a previous Tribunal decision, it emphasized that general insurance services for activities connected with the business, such as Marine Cargo and Fire insurance, were included in the definition of input service. Consequently, the Tribunal concluded that the denial of credit was not justified and set aside the impugned order, partially allowing the appeal.

Additionally, a small demand for service tax amounting to Rs. 2400, which the appellant had already paid along with interest, was not pressed in the appeal. The Tribunal decided not to impose a penalty for this minor amount. Therefore, the impugned order was set aside, except for the admitted portion, and the appeal was partially allowed.

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