Goods and Services Tax

M/s. Rane Brake Lining Ltd. Versus Commissioner of GST & Central Excise

2018 (7) TMI 611 – CESTAT CHENNAI – TMI – CENVAT Credit – input services – Director Sitting Fees – premium for product liability insurance – Revenue claims that the insurance is post manufacturing activity – Held that:- The risk covers the defects with the product. In such cases, when there are defects to the product, the appellant / manufacturer will have to recall the product and thereby incur huge financial loss. The insurance is for covering the financial loss of the appellant / manufacturer and it cannot be considered as a post-manufacturing activity – This cannot be said to be a post-manufacturing activity for the reason that such insurance policies addresses the financial risks of the manufacturer – denial of credit unjustified.

Director Sitting Fees – Held that:- It is the duty of the director to attend the meetings and therefore the service tax paid on such fees is eligible for credit – credit allowed.

Appeal allowed – decided in favor of appellant. – Appeal No. E

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f the product defects if any. The said insurance covers the risk which includes product liability, product guarantee, financial loss and product risk insurance for product linings, disc pads, clutch facings and railway brake blocks. This service was availed and service tax was paid on such expenses in order to cover the financial loss if any occurred because of defects in the finished products manufactured and cleared by the appellant and thus it has a direct nexus with the manufacturing activity carried out by them. Thus the denial of credit on product liability insurance is incorrect. She relied upon the decision in the case of Granules India Ltd. Vs. Commissioner of Central Excise, Hyderabad – 2017 (5) TMI 1079 – CESTAT Hyderabad. With regard to the disallowance of credit on fees paid for director sitting, she submitted that they have discharged the liability under reverse charge mechanism and it is incumbent upon the Director to attend the meetings and therefore the same is directl

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t-manufacturing activity and the liability arose only when the goods are handed over to the buyers. In fact, as per the explanation given by the appellant, it can be seen that the risk covers the defects with the product. In such cases, when there are defects to the product, the appellant / manufacturer will have to recall the product and thereby incur huge financial loss. The insurance is for covering the financial loss of the appellant / manufacturer and it cannot be considered as a post-manufacturing activity. The finance / raising a capital or adjustment of finances by way of taking insurance etc. falls within the inclusive part of the definition. This cannot be said to be a post-manufacturing activity for the reason that such insurance policies addresses the financial risks of the manufacturer. Further, in the case of Granules India Ltd. (supra), the Tribunal has held that the credit availed on directors liability insurance is eligible. I find that the disallowance of credit on th

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