Marine insurance on FOR supplies qualifies as input service where transit risk remains with the manufacturer until delivery.

Marine insurance for goods supplied on FOR terms up to the buyer's doorstep qualifies as an input service under Rule 2(l) of the Cenvat Credit Rules, 2004, because the place of removal is determined with reference to the point of sale. Where the manufacturer retains responsibility for safe delivery and transit risk until delivery at the buyer's premises, insurance covering that risk is connected with clearance of final products up to the place of removal. The exclusion for general insurance did not apply on these facts, as it was confined to specified motor-vehicle related services. Accordingly, Cenvat credit on the marine insurance service was admissible.

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Issues: Whether Cenvat credit on marine insurance services availed for goods supplied on FOR basis up to the buyers' doorstep is admissible under Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis: Rule 2(l) permits credit on services used directly or indirectly in relation to manufacture and clearance of final products upto the place of removal. The place of removal has to be determined with reference to the point of sale, and where goods are supplied on FOR terms with the manufacturer retaining responsibility for safe delivery and transit risk, the sale is completed only at the buyer's premises. In such a situation, insurance taken to cover transportation risk is connected with clearance of goods upto the place of removal. The exclusion for general insurance does not assist the Revenue because the relevant exclusion in the definition is confined to specified motor vehicle related services and does not cover the present marine insurance service. The circular relied upon also supports determination of place of removal with reference to the point of sale.

Conclusion: Cenvat credit on the marine insurance services was admissible and the disallowance was unsustainable.

Final Conclusion: The denial of credit was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Where goods are supplied on FOR basis and the manufacturer bears the risk till delivery at the buyer's premises, insurance taken for transit of the goods is a service used in relation to clearance of final products upto the place of removal and qualifies as input service.

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