Can Avail Service Tax Input Credit of Product Liability Insurance

[Uttam Javia]

Can I avail Service Tax of Insurance Policy for Product Liability Insurance,

which is covered a manufacturing product export to outside of India in case of any defect company has to re-call and pay all losses to buyer.

[Rajagopalan Ranganathan]

Sir,

If the insurance service is provided in India before despatch of the goods for export and the Insurance Company is also located in India you are eligible to avail the credit of service tax paid on such service.

[Uttam Javia]

Dear Sir,

Thanks for replay…

Regarding your replay further inform that:

• It is a continuing export goods (regular supply) and insurance policy for one year and before expiring it’s renewed for next year (it min policy covered before supply of goods)

• The Insurance company located in India and provide service in India but effective area not in India

In connection with my query further inform you that this query raised by audit party and issue show cause with below points:

• The Insurance Premium of Product Recall Liability/Product Liability Policies for any eventuality that may arise post-export and hence, in any case, after the goods had left the place of removal or in other words i.e. beyond the place of removal as defined under Rule 2(L) (ii) of Cenvat Credit Rule 2004 read with Explanation VI(II) (c) to Section 4 of the Central Excise Act, 1944.

• Whereas, it appears that the Cenvat Credit availed on the services i.e. insurance premium of policies viz. Product Recall Liability / Product Liability policies issued by the insurance company in relation to goods exported, is the services availed on goods after its removal from place of removal as defined under Rule 2(L) (ii) of Cenvat Credit Rules 2004 read with Explanation VI(II) (c) to Section 4 of the Central Excise Act, 1944. and accordingly, the notice is not entitled to take credit under Rule 3 of the Cenvat Credit Rules, 2004.

• Is it any court judgment available for this type of query?

[PAWAN KUMAR]

Dear Sir,

As per my view, you can take cenvat credit of insurance policy taken for your final products.

[Rajagopalan Ranganathan]

Sir,

As per para 5 & 6 of CBEC's Circular No. 999/6/2015-CX dated 28th February, 2015clearance of goods for exports from a factory can be of two types. The goods may be exported by the manufacturer directly to his foreign buyer or the goods may be cleared from the factory for export by a merchant exporter.

6. In the case of clearance of goods for export by manufacturer exporter, shipping bill is filed by the manufacturer exporter and goods are handed over to the shipping line. After Let Export Order is issued, it is the responsibility of the shipping line to ship the goods to the foreign buyer with the exporter having no control over the goods. In such a situation, transfer of property can be said to have taken place at the port where the shipping bill is filed by the manufacturer exporter and place of removal would be this Port/ICD/CFS. Needless to say, eligibility to CENVAT Credit shall be determined accordingly.

In view of the above clarification place of removal for export goods is the port/ICD/CFS. I hope you are insuring the goods before it is handed over to shipping liner at the port. Any service availed up to the place of removal is eligible for input service credit. Therefore you are eligible to take the credit.

AI Summary

Cenvat credit on insurance allowed when availed in India before goods are handed to the shipping line. Cenvat credit on product recall/product liability insurance is available where the insurance service is provided in India and availed before the goods are handed to the shipping line; the place of removal for export is the port/ICD/CFS where shipping bill is filed, and services availed up to that place of removal qualify as input services for credit.