Product Liability for Co.s products & Public Liability as per Act.

[Pradeep Jain]

Dear Sir,

Wish to know that that CENVAT credit of Service Tax is available on Product liability for Company and Public Liability for company product as per Act , is eligible or not.

Please advise

Regards

Pradeep Jain

[Madhukar N Hiregange]

Terms are not clear. My understanding is the insurance premium ST. If so then credit should be available.

[YAGAY andSUN]

Dear Pradeep,

Product liability and Public liability are known as offspring of 'Law of Torts' read with Consumer Protection Act,1986,Civil Laws, and also to some extent Criminal Laws . Such liability may occurs mainly due to following reasons, namely: -

• When a product does not fulfill the results as it claimed;
• When due to usage of such product, the customer suffers either physically or mentally or falls sick/ill;
• Selling knowingly/unknowingly expired products to customers which caused serious injury to them or having negative consequence to public at large;
• Selling defective products by claiming that are of high quality or of high standards ( Example: some car companies are nowadays recalling cars due to certain technical faults).

Any amount paid on safeguarding the interest of companies by applying, implementing, adopting, managing or pursuing or defending any legal action/litigation for or against the company would be treated as having nexus with the production/manufacturing business and service tax would be treated as input services. Hence, such service taxes would be available for CENVAT credit.

Regards

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

AI Summary

CENVAT credit eligibility affirmed for service tax on insurance and legal services tied to product and public liability. Service tax paid on insurance premiums and on services used to apply, implement, manage or defend legal actions arising from product and public liability have nexus with the production/manufacturing business and constitute input services; accordingly such service tax should be eligible for CENVAT credit.