2012 (2) TMI 413 - AT - Central Excise

Denial of Cenvat credit - After-sale repair services during warranty period - Service has been received after the removal of the goods from the place of removal of the goods - Held that - On going through the definition of input service and especially the inclusive portion of the definition, we are of the prima facie view that this ground for denial of credit is not correct, as there are a number of services mentioned in the inclusive portion of the definition of input service which cannot be linked with the removal of the goods. Moreover, it has not been denied by the Department that the cost of providing free after-sale services i.e. warranty charges are part of the price of the goods on which Central Excise duty had been paid. In view of this, Cenvat credit of Service Tax paid on the after-sale services cannot be denied - the appellant have a strong prima facie case and requiring the pre-deposit of the Cenvat credit demand, interest and penalty would cause undue hardship - Stay granted.

Summary

Issues:
1. Whether after-sale warranty services received by the appellant from their dealers qualify as "input service" for Cenvat credit.
2. Whether the demand for Cenvat credit, interest, and penalty imposed by the Commissioner is justified.
3. Whether the requirement of pre-deposit of Cenvat credit demand, interest, and penalty should be waived.

Analysis:
1. The appellants, manufacturers of certain equipment, availed Cenvat credit for Service Tax paid on after-sale warranty services provided by their dealers. The department disputed this claiming the services were not "input services" as they were received after goods removal. The Commissioner upheld the demand, invoking extended period under the Central Excise Act, 1944. The appellants argued that the after-sale services were part of the goods' price on which Excise duty was paid, citing precedents where similar services were considered "input services." The Tribunal agreed, emphasizing that such services add value to goods and are covered by the definition of "input service."

2. The department contended that the warranty services lacked nexus with goods manufacture and were received post-removal, thus not qualifying as "input services." However, the Tribunal found that the inclusive portion of the definition of "input service" includes services not linked with goods removal. It noted that the warranty charges were part of the goods' price on which Excise duty was paid, supporting the appellants' claim for Cenvat credit. Precedents were cited where similar services were deemed "input services," contrary to the department's argument relying on a non-applicable judgment.

3. Considering the strong prima facie case of the appellant and the undue hardship pre-deposit would cause, the Tribunal waived the requirement of pre-deposit for Cenvat credit demand, interest, and penalty. The stay application was allowed, providing relief to the appellants pending the appeal's disposal. The Tribunal's decision favored the appellants, acknowledging the value-added nature of the after-sale warranty services and their eligibility for Cenvat credit, contrary to the department's contentions.