Appellant granted cenvat credit for product liability insurance service tax. Tribunal overturns decisions, providing consequential benefits.

The tribunal ruled in favor of the appellant, allowing them to claim cenvat credit on the service tax paid for product liability insurance. The insurance was deemed directly connected to the manufacturing activity and qualified as an input service for the production of finished products. The tribunal overturned the original authority and Commissioner (Appeals) decisions, setting aside the demand, interest, and penalties, granting the appellant consequential benefits.

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Issues:
Whether the appellant is eligible for cenvat credit of service tax paid on product liability insurance.

Analysis:
The case involved the appellant, engaged in manufacturing automobile wheels and parts, who availed credit of service tax paid on premium for product liability insurance for the period 2012-13 to 2015-16. The department contended that the credit was not eligible as it was post-sales/post-manufacturing service. A show cause notice was issued, leading to confirmation of demand, interest, and penalties by the original authority and the Commissioner (Appeals).

The appellant argued that the product liability insurance was to cover the risk of any manufacturing defect in their finished products, supplied to automobile manufacturers, and extended warranty to the wheels. The insurance was directly connected with their manufacturing activity and qualified as an input service. The appellant cited relevant tribunal decisions supporting their position.

The respondent contended that the warranty was extended by the automobile manufacturer, not the appellant, making the insurance a post-manufacturing activity. They argued that the insurance was a compensation for defects found after the vehicle's purchase, reimbursed by the appellant.

After hearing both sides, the tribunal held that the product liability insurance was directly connected with the manufacturing activity of the appellant and qualified as an input service for the manufacture of finished products. Citing previous decisions, the tribunal found the denial of credit unjustified and set aside the impugned order, allowing the appeal with consequential benefits.

In conclusion, the tribunal ruled in favor of the appellant, allowing them to claim cenvat credit on the service tax paid for product liability insurance, emphasizing the direct connection of the insurance with the manufacturing activity and its qualification as an input service.

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