Tribunal allows input service credit on insurance for telecommunication services

The Tribunal ruled in favor of the appellant, allowing input service credit on insurance services for errors and omission policy and transit insurance policy for moving goods for installation activities related to telecommunication services. The errors and omission policy covering defects in software products was deemed eligible for credit as it had a direct nexus with the output service provided. Similarly, the transit insurance policy necessary for moving goods to the site for providing output services was also considered eligible for credit. The appeal was allowed with consequential relief, setting aside the disallowance of credit on both insurance policies.

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Issues:
1. Eligibility of input service credit on insurance services for errors and omission policy.
2. Disallowance of credit on transit insurance policy for moving goods for installation.

Analysis:

Issue 1:
The appellant claimed input service credit on insurance services for an errors and omission policy covering defects in software products supplied by them. The original authority disallowed the credit, but the appellant argued that such insurance services have a direct nexus with the output service provided and are thus eligible for credit. The appellant relied on precedents like M/s. Rane brake Lining Ltd. and Granules India Ltd. The Tribunal analyzed the definition of input services and held that insurance services covering product liability in case of defects fall within the inclusive part of the definition. The Tribunal disagreed with the authorities' view that these were post-manufacturing activities, as the definition includes services availed up to the place of removal, such as storage and outward transportation services. Consequently, the errors and omission policy availed by the appellant was deemed eligible for credit.

Issue 2:
The second issue pertained to the disallowance of credit on a transit insurance policy amounting to a specific sum. The appellant contended that the insurance was necessary for moving goods for providing output services, specifically for installation activities related to telecommunication services. The department argued that such insurance services were post-manufacturing activities and thus ineligible for credit. However, the Tribunal held that the transit insurance policy, essential for moving goods to the site where output services were to be provided, was indeed eligible for credit. The impugned order disallowing credit was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, allowing input service credit on insurance services for errors and omission policy and transit insurance policy for moving goods for installation activities related to telecommunication services.

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