Custom, Excise & Service Tax Tribunal
Reliance Industries Ltd vs Vadodara-I on 3 June, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
REGIONAL BENCH - COURT NO. 03
EXCISE Appeal No. 12241 of 2018
[Arising out of OIO-VAD-EXCUS-001-COM-05-18-19 passed by Commissioner of
Central Excise, Customs and Service Tax-VADODARA-I]
M/s Reliance Industries Ltd. .....Appellant
P.o. Petrochemicals,
VADODARA,GUJARAT-391346
VERSUS
C.C.E. & S.T.-Vadodara-i .......Respondent
1ST FLOOR...CENTRAL EXCISE BUILDING, RACE COURSE CIRCLE, VADODARA, GUJARAT-390007 APPEARANCE:
Shri. Vishal Agarwal & Dimple Gohil, Advocate for the Appellant Shri. Sameer Chitkara, Authorized Representative for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL) , MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU FINAL ORDER NO. A/ 10952 /2019 DATE OF HEARIN:01.03.2019 DATE OF DECISION:03.06.2019 PER: RAMESH NAIR The present appeal has been filed against impugned Order dt. 17.05.2008 issued by the Commissioner, CGST & Central Excise, Vadodara wherein credit on insurance related services pertaining to Appellant as manufacturer was disallowed. The brief facts of the case are that the Appellant are engaged in the manufacture of goods falling under Chapter 27, 29,39,54 and 55 of the CETA, 1985 and has Petrochemical Plant at Vadodara. They had taken insurance policies as detailed hereunder :
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i. Marine Open Policy
ii. Survey Fees/ Inspection of goods/ Machinery iii. Mega policy for building plant machinery, stocks & stocks in process and business interruption iv. Standard Fire & Special Peril Insurance v. Marine Hull Policy vi. Comprehensive Off Shore Package Policy (Relating to Off Shore assets and business interruption) vii. Terrorism Risk Industrial Policy viii. Crude Oil/ LSFO Transit Insurance ix. Stock Policy-Liquid and Solid Policy x. Coverage of AGM xi. Electric Equipment Policy xii. Professional Fees xiii. SI Enhancement Policy xiv. Machinery breakdown Policy xv. Workman Compensation Policy xvi. Aviation Refuellers Liability Insurance Policy xvii. Public Liability Industrial Risk Policy xviii. Renewal of Cargo Legal Liability Policy xix. Loss of Hire Policy 1.1 They were issued show cause notice dt. 08.11.2017 proposing denial of credit of service tax on above policies on the ground that the said services were not required either directly or indirectly in or in relation to the manufacture of final product in as much as the lack of insurance cover does not have any bearing on the manufacturing process and therefore the services cannot be considered as "Input Service"as defined in Rule 2 (l) of the CCR, 2004. The demand was
3|Page E/12241/2018-DB confirmed vide impugned order holding that the various insurance coverage preferred by the Appellant are not essential in the day to day working and running of over all operations of the assessee and are not integral to the running of petrochemical complex. Aggrieved, the Appellant has filed present appeal.
2. Shri. Vishal Agarwal Ld. Counsel alongwith Ms. Dimple Gohil, Ld. Advocate, appearing for the Appellant submits that the definition of "Input Service" covers every service used directly, indirectly in or in relation to manufacture of the final product up to place of removal.
The disputed services are adjunct to normal working of plant and machinery and added efficiency of the operation as also brought some assurance to the working of petrochemical complex. The input service definition nowhere excludes the subject insurance services from its purview. He relies upon the Tribunal order in case of Anglo French Drugs & Industries 2017 (3) GSTL 147 (TRI) wherein cenvat credit of service tax paid on various insurance services has been allowed. He also relies upon Tribunal judgment in their own case as reported in 2016 (45) STR 383 and Hon'ble Gujarat High Court's order in Tax Appeal No. 630 of 2017. He submits that in their own case the Mumbai Tribunal vide Order No. A/225/14/EB/C-II dt. 03.03.2014 and Order No. A/3989 - 3990/15/EB DT. 01.12.2015 wherein period of Nov'08 - Mar'13 & Mar'13 - Mar'14 was involved has allowed the credit on general insurance policies holding that the credit would be admissible in terms of Rule 2 (I) since the insurance services form a part of the cost of the production of the goods manufactured. He submits that the said services form part of cost of production/ value of the goods manufactured and thus qualifies as an Input Service. He relies upon the Hon'ble Gujarat High Court Order in case of Essar Oil Ltd. 2016 (41) STR 389 (GUJ.) and M/s Willis Processing Services (India) Pvt. Ltd. 2017 - TIOL - 2072 - HC
-MUM - ST. He also relies upon Tribunal Order in their own case as reported in 2018 (15) GSTL 366 (TRI) and submits that in the light of above judgments also the credit is available to the Appellant.
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3. Shri Sameer Chitkara, Ld. Additional Commissioner(AR) appearing for the revenue supports the findings of the impugned order.
4. Heard both the sides and perused the records. We find that the Appellant has taken the general Insurance policies to safeguard its petroleum Complex. The services of insurance as found from the list are integral to the safety. The value of plant and machinery running into thousands of crores are required to be safeguarded against various risks. Without such insurance services in case of any mis - happening, the enterprise would be at great loss and can never re- start its operations. We also find that the cost of such services stands included in the cost of production/ value of goods as certified by the Cost Accountant. We have no doubt in our mind that the services are integral part of cost of goods manufactured and would merit classification as "Input Service". Unless and until a business is safeguarded against risk and losses it cannot work continuously. Moreover we find that in the Appellant's own case the Tribunal vide Order dt. A/10371-10373/2017 dt. 20.01.2017 has allowed the credit on advertising agency service, insurance auxiliary service, air travel agent service, cable operator, clearing and forwarding agent services etc. by relying upon Appellant's own case as reported in 2016 (45) STR 383. The Tribunal in case held that the services used in relation to business activity would merit consideration as "Input Service". We find that in case of Anglo French Drugs & industries 2017 (3) GSTL 147 (TRI), the credit on impugned services were allowed by the Tribunal. In the Appellant's own case as reported in 2018 (15) G.S.T.L 366 (TRI), the Tribunal, on being satisfied that the cost of service is included in cost of production, has allowed the credit. The relevant paras of the findings are as under :
"9. This is 2nd round of litigation. The dispute is regarding the eligibility to avail Cenvat credit on the Service Tax paid by various service providers who are insurance Companies. The insurance policies are taken by the respondent-assessee in respect of plant and machinery, inputs, other goods and factory building and building & residential township. It is also undisputed that the cost of such insurance is included in the valuation of
5|Page E/12241/2018-DB the final product manufactured by them. We find that in the 1st round of litigation when the matter came before this Bench and this Bench while remanding the matter back to the adjudicating authority in paragraph No. 5.1 has recorded as under :-
"5.1 Prima facie, we find that the costs of various services availed forms part of the assessable value of the goods manufactured and sold by the appellant. Therefore, there is no reason to deny Cenvat credit of the duty/taxes paid on the various inputs/input services availed by the appellant for undertaking their business operations. The appellant has also furnished Cost Accountant's certificates certifying the above. For any reason, if the department does not want to place reliance on these certificates, under Section 14AA of the Central Excise Act, they can conduct special audit where the credit of duty availed of or utilised is not within the normal limits or such credit has been availed by reason of fraud, collusion or any willful misstatement or suppression of facts. The department has not invoked these powers available to it. In these circumstances, we are of the view that the matter has to go back to the adjudicating authority either to consider the Cost Accountant's Certificates furnished by the appellant or to undertake special audit in terms of the powers of Section 14AA of the Central Excise Act and satisfy himself as to the eligibility of the credit taken by the appellant on these various services. Accordingly, we remand the case back to the adjudicating authority for de novo consideration."
9.1 It can be seen from the above reproduced paragraph that we had directed the adjudicating authority either to consider the Cost Accountant's certificates furnished by the assessee are to undertake special audit in terms of Central Excise Act, 1944. The adjudicating authority has exercised his option of accepting the Cost Accountant's certificates as furnished by the assessee and satisfied himself as to the fact that the value of the insurance cost has been included in the pricing of the final product. It is also recorded by the adjudicating authority that the order of the Tribunal is accepted by Revenue. On this factual matrix, we find that the findings as recorded by the adjudicating authority are in consonance of the law as has been settled by this Bench in the respondent- assessee's similar case. The factual findings of the adjudicating authority that the cost of the insurance as indicated in the valuation of the final products remain undisputed. We find that this Bench in the respondent- assessee's own case by order dated 15-10-2015 has relied upon various judgments of the Hon'ble High Court of Bombay, and held that when the cost of any service is included to determine the valuation of the final product, Cenvat credit cannot be denied of such tax paid on the services. We do not find any reason to deviate from such a view already taken.
9.2 We also find that our earlier order dated 3-3-2014 has been accepted by the department as recorded in order-in-original, if that be so, in the absence of any contest to the option chosen by the adjudicating authority
6|Page E/12241/2018-DB on the direction of Tribunal, in our considered view, cannot be contested now by the Revenue.
10. In view of the foregoing, we find that the impugned orders are correct and legal and do not suffer from any infirmity.
11. Accordingly appeals filed by Revenue are rejected and the impugned orders are upheld."
5. In view of above citations and the use of the impugned service we thus hold that the Appellant are eligible to avail credit of service tax paid on Insurance Services as all are related to secure the plant and machinery and thus merit consideration as "Input Services". Resultantly the impugned order is set aside and the appeal is allowed with consequential reliefs, if any.
(Order pronounced in the open court on 03.06.2019) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Neha