CESTAT Allows CENVAT Credit on Insurance, Forex Hedging and Employee Training Services for National Engineering Industries

April 20, 2026 : The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed the appeal filed by National Engineering Industries Ltd., holding that insurance services, forex hedging consultancy, and employee training-related services qualify as “input services” under the CENVAT Credit Rules, 2004, as they bear a direct or indirect nexus with manufacturing activity.

The appeal arose from a dispute concerning denial of CENVAT credit amounting to ₹38.19 lakh for the period August 2014 to April 2015 on services including insurance policies, consultancy (including forex advisory), and travel-related expenses. The appellant, engaged in the manufacture of ball bearings and axle boxes, challenged the partial disallowance sustained during earlier rounds of adjudication.

Forex Hedging Consultancy Held Eligible
The Tribunal accepted the appellant’s contention that forex hedging services were essential due to its import of raw materials and export of finished goods, exposing it to currency fluctuation risks. It held that engaging consultants for hedging foreign exchange risks is an activity integrally connected to business operations and indirectly linked to manufacturing. Accordingly, service tax paid on such consultancy was held admissible for CENVAT credit.

Insurance Services Covered Under Input Services
On insurance services, the Tribunal noted that policies covered raw materials, semi-finished and finished goods, and capital goods used in manufacturing. Rejecting the Department’s objection that certain policies also covered sister concern premises, it held that no contrary evidence was produced and that the service tax had been borne by the appellant. It ruled that insurance of business assets is intrinsically connected with manufacturing operations, making the credit admissible.

Employee Training and Travel Also Qualify
The Tribunal further held that employee training programmes conducted through human resource agencies, aimed at enhancing communication skills and innovation, contribute to productivity and efficiency. Such services were found to be indirectly related to the manufacture of final products and therefore eligible for CENVAT credit.

Technical Defects in Invoices Not Fatal
Addressing objections regarding invoices issued in names or addresses other than the appellant’s unit, the Tribunal clarified that substantive eligibility cannot be denied where the appellant has borne the cost and used the services for its manufacturing activities.

Conclusion
After examining the record, the Tribunal concluded that all disputed services satisfied the “in or in relation to manufacture” test under Rule 2(l) of the CENVAT Credit Rules, 2004. The impugned order denying credit was set aside, and the appeal was allowed with consequential relief.

Case Details:
Case Title: National Engineering Industries Ltd. v. Commissioner of CGST, Jaipur
Case No.: Excise Appeal No. 52372 of 2024
Coram: Dr. Rachna Gupta, Member (Judicial)