By TIOL News Service

CHANDIGARH, FEB 18, 2016: THE dispute in the appeal relates to admissibility of CENVAT Credit on various services like Rent paid for Branch offices, Insurance Service, Construction Service, Travel agent Service, Interior decorator service and Architect Service. The period involved is both prior to as well as post 01.04.2011.

The appellant inter alia contended that the credit is admissible as the Branch offices were used not only procurement of orders, but also for provision of ECIS service. The appellant contended that they are entitled for credit of Service Tax and relied on various precedent orders. Revenue contended that the insurance services in respect of goods beyond the place of removal would not clearly be eligible for CENVAT credit.

After hearing both sides, the Tribunal held:

+ The definition of input service clearly states that input service inter-alia means any service used by provider of taxable service for providing an output service. The appellant contended that it used the branch offices which were taken on rent, not only for procurement of orders and delivery of goods but also for provision of ECIS and repair and maintenance service. This contention has been duly recorded in the impugned order but has not been adverted to and dealt with by the adjudicating authority. CESTAT in the case of Oracle Granito Ltd.- 2013-TIOL-822-CESTAT-AHM held that renting of immovable property for marketing offices was allowed to be treated as input service for the purpose of taking credit. Seen in this light, denial of CENVAT credit by the adjudicating authority is clearly untenable specially when the other ground pleaded by the appellant that the branch offices were also used for provision of ECIS and repair and maintenance service has not been adverted to by it.

+ Regarding the insurance services, it is pertinent to mention that life insurance and health insurance relating to employees was expressly excluded from the definition of input service w.e.f . 01.03.2011 and the appellant categorically stated that it has not taken credit of S.T. paid on such services with effect from that date. In the case of CCE, Bangalore-III vs. Stamen Toyotetsu India (P) Ltd. - 2011-TIOL-866-HC-KAR-ST involving period prior to 01.03.2011 it was held by Karnataka High Court that insurance/ health policy in respect of employees would be covered within the scope of input service. A perusal of the nature of insurance policies and the risks covered by them make it obvious that these were used in or in relation to the manufacture of the goods and their clearance upto to the place of removal except the insurance policy which insured the goods during their journey from the place of removal onwards. As regards the place of removal, it is no longer res- integra that in respect of goods exported, the port of export is the place of removal The definition of input service clearly states that input services inter alia means any service used by the manufacturer in or in relation to the manufacture of final products and clearance of final products upto the place of removal. Thus the insurance policies except to the extent they cover journey of goods from the place of removal onwards would be covered within the scope of input service.

+ The construction service in question was used for dismantling of building and construction of storage shed. In this regard, as per Rule 2(l) of Cenvat Credit Rules, 2004 input service also includes service in relation to setting up, modernization, renovation or repairs of a factory. In the light of judicial precedents, the finding of the adjudicating authority with regard to denial of cenvat credit on construction service is unsustainable.

Accordingly, the Tribunal held that the impugned demand is not sustainable except to the extent of CEVNAT credit taken on insurance service relating to insurance of goods beyond the place of removal.

(See 2016-TIOL-450-CESTAT-CHD)