Insurance charges in invoice.

[SHIVKUMAR SHARMA]

Respected Experts

Please give your opinion on following issue.

We are of the manufacturer & clearing our Finished goods on transaction value at factory gate sale & issue invoice as under.

Basic Value ₹ 100000.00

Excise Duty 12.5% ₹ 12500.00

Insurance 0.08% ₹ 90.00

VAT % ₹ 5630.00

Please confirm Whether we have to pay excise duty on Insurance charged in invoice of ₹ 90/-as we have taken Cenvat credit on service tax on premium paid against insurance policy for risk cover for transit up to the consignee godown. our excise officer is saying that either you reverse service tax credit credit or you have to pay excise/service tax on insurance charged in invoice.Please give your expert opinion & give reference of case law.

Thanks with regards

SHIVKUMAR SHARMA

[Himansu Sekhar]

Please follow the Hon,blue Apex court decision in the case of Accurate meter. You need not add the insurance value in the transaction value as the consignments are handed over to the drivers and the place of removal is the factory gate. The place of delivery has no bearing on the place of removal. Since the place of removal is the factory gate, please reverse the credit. Rule 2(l) of CCR does not support this aspect.

[Nash Industries I Pvt Ltd]

The sale is at the factory gate and hence no excise duty is payable on insurance charges.

The place of removal is the factory gate and not the godown of the consignee. Hence, the insurance charges paid on the outward transportation do not qualify as an input service.

Therefore, the credit availed is not in order and hence needs to be reversed.

Regards

S.Ramaswamy

[KASTURI SETHI]

Dear Querist,

I support the views of both experts. Your sale is complete at the factory gate and not at the buyer's doorstep. Here is the judgement of Supreme Court:-

2015 (324) E.L.T. 670 (S.C.) = 2015 (10) TMI 613 - SUPREME COURT COMMISSIONER OF CUS. & C. EX., NAGPUR Versus ISPAT INDUSTRIES LTD.

[Himansu Sekhar]

Thank you kasturi sir

[YAGAY andSUN]

However VAT/CST shall be payable. Please check the definition of sale and sale price in your state specific VAT Laws.

[Ganeshan Kalyani]

Vat /CST is applicable on sale price. If insurance forms part of sale price then both the aforesaid tax shall become payable on insurance part.

[Ganeshan Kalyani]

For excise applicability i agree with the views of experts. Thanks.

AI Summary

Factory gate sale: insurance charged in invoice not includible in excise transaction value and Cenvat credit should be reversed. Where goods are sold at the factory gate and place of removal is the factory, insurance charged for transit beyond removal is not includible in excise transaction value; Cenvat credit claimed on insurance premium for outward transit does not qualify as an input service and should be reversed. State VAT/CST may apply to insurance only if state law treats it as part of the sale price.