The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the demand for service tax on the payment of insurance premiums on marine cargo policy on the ground of the lack of clarity in show cause notice.
EID Parry (India) Ltd, the appellant assessee appealed against the order passed by the Commissioner for confirming the demand of service tax based on the issuance of show cause notice.
Kailash Nath, the counsel for the assessee contended that marine cargo and fire extinguishers are directly connected with business and therefore included in the definition of input service under Rule 2(l) of the CENVAT Credit Rules,2004, and entitled to avail service tax credit on “insurance premium” paid on marine cargo policy.
Further submitted that the show cause notice has not given any detailed grounds based on which the department has alleged that subject credit was not admissible in the facts of the case and only quoted the legal provisions, but had not brought on record any grounds based on which they have concluded that the premium paid for Marine Insurance was not an admissible credit.
A V L N Chary, the counsel for the department contended that the service on which the assessee had taken credit and utilized the credit was not like input service as the said service has no nexus either directly and indirectly with manufacturing or clearance activity of the assessee and not entitled to take the service tax credit.
The Bench observed that the matter cannot be decided by the Original Authority or in appeal by the Appellate Authority on the grounds not covered or alleged in the show cause notice and the revenue department failed to prove the allegations given in the show cause notice.
A single-member bench comprising A.K Jyotishi (Technical) quashed the order passed by the Commissioner (Appeals) while allowing the appeal filed by the assessee.
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