Cenvat credit on transport insurance for FOR sales allowed for some periods while earlier denial and normal duty upheld

Entitlement to Cenvat credit on transport insurance for goods sold FOR destination is the central issue. Applying the Board circular and High Court precedent, the tribunal allowed Cenvat credit for the period August 2014July 2015. A prior Tribunal final order denying credit for April 2006February 2011 remains binding, so credit is disallowed for that period and duty with interest confirmed. Invocation of extended limitation was set aside for April 2006March 2010 on the basis that suppression with intent was not established, but normal period demand stands. Penalty was quashed due to absence of mens rea and matter remanded for recomputation where directed.

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Issues: Whether the Appellant is entitled to Cenvat Credit on transport insurance where sales are made on FOR (free on road/destination) basis.

Analysis: The Tribunal noted that its earlier Final Order dated 02.12.2015 (not challenged by the Appellant) had denied Cenvat Credit on insurance for the period April 2006 to February 2011 and remanded for re-computation; that order therefore remains final for that period. Subsequently the Board issued Circular No. 1065/4/2018-CX and the Hon'ble High Court of Himachal Pradesh in Inox Air Products held that Cenvat Credit on insurance for goods transported to the customer's premises on FOR basis is allowable; following that authority and the Circular the Tribunal held that Cenvat Credit is allowable for the later period August 2014 to July 2015. On limitation, the Tribunal found no evidence of suppression, fraud or wilful mis-statement by the Appellant and, following a recent decision of this Bench, set aside the demand raised by invocation of the extended period for April 2006 to March 2010 while confirming the remaining normal period demand with interest. The Tribunal also held that penalty is not sustainable because the issue involved interpretation and there was no mens rea on the part of the Appellant.

Conclusion: The appeal is allowed in part: Cenvat Credit on transport insurance is denied for April 2006 to February 2011 (as per the Tribunal's earlier unchallenged order) but allowed for August 2014 to July 2015; demand raised by invocation of extended period for April 2006 to March 2010 is set aside; the remaining normal-period demand is confirmed with interest; penalty is set aside.

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