2011 (11) TMI 767 - AT - Service Tax

Summary

Issues:
Denial of Cenvat credit on service tax paid to an outside agency for services rendered to customers during warranty period.

Analysis:
The case involved two stay petitions seeking the waiver of pre-deposit of specific amounts under Rule 15 of Cenvat Credit Rules, 2004 read with 11AC of Central Excise Act, 1944. The main issue revolved around the denial of Cenvat credit on the service tax paid by an outside agency for services provided to the manufacturer's customers during the warranty period. The appellant was contractually obligated to provide repairs and services during the warranty period, which were outsourced to another organization. This outsourced organization billed the appellant for the services rendered. The Tribunal considered whether these services fell under additional consideration for sale. The Tribunal referred to a similar situation in the case of Samsung India Electronics Pvt. Ltd., where the denial of Cenvat credit was addressed. The Tribunal found that the services provided by the outsourced entity did not constitute additional consideration for sale, indicating that the situation might be covered by the precedent set in the Samsung India Electronics case. Consequently, the Tribunal allowed the applications for waiver of pre-deposit and stayed the recovery of the amounts until the appeals were disposed of.

This judgment highlights the importance of analyzing the nature of services provided by an outsourced agency in the context of contractual obligations towards customers. The Tribunal's decision was influenced by the interpretation of Cenvat credit rules and previous rulings in similar cases. The reference to specific legal provisions and precedents helped in determining the applicability of Cenvat credit in the present scenario. The judgment underscores the significance of contractual arrangements and the nature of services in determining the eligibility for Cenvat credit, providing clarity on the treatment of service tax paid to outside agencies for services rendered to customers during warranty periods.