CENVAT Credit eligible on Product Recall Policy expenses

Last updated: 28 September 2021

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Quick Summary

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that expenses incurred for a Product Recall Insurance Policy are eligible for CENVAT credit. The tribunal found that such policies are taken to secure goods, thus qualifying the related services as 'input services'. This decision overturns previous rulings that denied CENVAT credit for these expenses.

Court :
CESTAT, Ahmedabad

Brief :
In Bhavani Industries v. CCE & ST, Rajkot [Excise Appeal No.10416 of 2019 dated September 21, 2021], Bhavani Industries ("the Appellant") filed an appeal impugning Order No. OIA-RAJ-EXCUS-000-APP-023-2018-19 dated April 18, 2018 passed by Commissioner (Appeals) Commissioner of Central Excise, Customs and Service Tax, Rajkot ("the Respondent").

Citation :
[Excise Appeal No.10416 of 2019 dated September 21, 2021]

In Bhavani Industries v. CCE & ST, Rajkot [Excise Appeal No.10416 of 2019 dated September 21, 2021], Bhavani Industries ("the Appellant") filed an appeal impugning Order No. OIA-RAJ-EXCUS-000-APP-023-2018-19 dated April 18, 2018 passed by Commissioner (Appeals) Commissioner of Central Excise, Customs and Service Tax, Rajkot ("the Respondent").

Issue: Eligibility of Central Value Added Tax Credit ("CENVAT Credit") on Product Liability and Product Recall Insurance Policy.

The Appellant counsel relied on an erstwhile judgement [M/s. Bhavani Industries V/s. C.C.E. & S.T. Rajkot 2018 (10) TMI 626 CESTAT Ahmedabad] wherein the matter was adjudged in the favor of the Appellant.

The Respondent, as opposed to the contentions raised by the Appellant, reiterated the findings of the impugned order; wherein it was held that the expenses towards product recall policy expenses are not eligible for CENVAT credit.

After taking perusal of all the facts and evidences, the Customs, Excise and Service Tax Appellate Tribunal ("CESTAT"), Ahmedabad held that the Product Recall Policy expenses is born for the purpose of security of the goods and for this reason the service falls under the definition of input services and is therefore, eligible for CENVAT Credit.

FAQ :

The main issue was whether expenses related to a Product Liability and Product Recall Insurance Policy were eligible for CENVAT credit.

The CESTAT ruled in favour of Bhavani Industries, holding that expenses for a Product Recall Policy are eligible for CENVAT credit.

The tribunal determined that these expenses are incurred for the security of goods, classifying the service as an 'input service' eligible for CENVAT credit.

No, the Commissioner (Appeals) had previously held that expenses towards a product recall policy were not eligible for CENVAT credit.