Service tax paid on general insurance covering building, plant, machinery, equipment, computers, workmen compensation, group accident policy, and transit insurance is admissible as CENVAT credit

CESTAT Ahmedabad allowed the appeal and set aside the demand for recovery of CENVAT credit on general insurance services. The tribunal held that service tax paid on general insurance covering building, plant, machinery, equipment, computers, workmen compensation, group accident policy, and transit insurance is admissible as CENVAT credit. Following precedents from Karnataka HC and CESTAT New Delhi, the tribunal found these services directly or indirectly relate to manufacturing operations, as employers must comply with statutory obligations including ESI Act requirements. The issue was considered settled law (res integra) with consistent judicial decisions favoring credit eligibility.

---

---

Issues Involved:
1. Entitlement of the appellant to Cenvat credit on general insurance services.
2. Validity of the demand raised invoking the extended period on the grounds of limitation.

Summary:

Issue 1: Entitlement to Cenvat Credit on General Insurance Services

The appellant sought Cenvat credit on general insurance services related to building, plant and machinery, equipment, computers, workmen compensation, group accident policy, and transit insurance. The appellant argued that the issue is settled in various judgments, which allow Cenvat credit for service tax paid on general insurance services. Reliance was placed on several judgments, including *Dharti Dredging & Infrastructure Ltd vs. Commissioner of Central Tax, Secunderabad* (2022), *Coca Cola India Pvt Ltd vs. CCE, Pune* (2009), and *Reliance Industries Ltd vs. CCE & ST, Vadodara-I* (2019).

The Tribunal reviewed these judgments and found that the definition of "input services" is broad and inclusive, covering services used in connection with business activities. The Tribunal cited *CCE Bangalore vs Millopore India Private Limited* (2012), which held that services forming part of the cost of final products entitle the assessee to Cenvat credit. The Tribunal also referenced *Hindustan Zinc Ltd* (2015), emphasizing that insurance services integral to manufacturing operations qualify as input services.

The Tribunal concluded that insurance services for plant and machinery, goods in transit, and other business-related insurance are eligible for Cenvat credit, as these services are integral to the manufacturing business. The Tribunal noted that the cost of such services is included in the cost of production/value of goods, as certified by a Cost Accountant.

Issue 2: Validity of Demand Raised Invoking Extended Period

The appellant contended that the demand for Cenvat credit was raised by invoking the extended period, which is unsustainable due to the absence of fraud, collusion, suppression of facts, or contraventions with the intention to evade duty. The appellant argued that the availment of credit was clearly disclosed in the monthly ER-1 return, negating any suppression of facts.

The Tribunal, having decided the matter on merit, did not address the issue of limitation. The Tribunal found that the service tax paid on general insurance services is admissible as Cenvat credit, as these services are directly or indirectly related to the manufacture of the final product in the appellant's factory.

Conclusion:

The Tribunal set aside the impugned order and allowed the appeal, affirming that the appellant is entitled to Cenvat credit on general insurance services. The demand raised was deemed unsustainable. The appeal was allowed with consequential reliefs, if any.

Pronounced in the open court on 03.01.2024.

---