2016 (11) TMI 867 - AT - Central Excise

CENVAT credit - input services - after sales service, warranty services - Held that - reliance placed in the judgment in the case of Commissioner of Central Excise, Nashik Versus Mahindra & Mahindra Ltd. 2012 (8) TMI 530 - CESTAT, MUMBAI wherein it was held that Service tax paid on the expenses incurred for providing warranty service were entitled for input service credit. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of Service tax credit for services provided by Authorized Service Centers.
2. Interpretation of input services for the manufacture of goods.
3. Applicability of Rule 14 of Cenvat Credit Rules, 2004.
4. Valuation under Section 4 of Central Excise Act, 1944.
5. Entitlement to input service credit for warranty services.

Analysis:

Issue 1: Admissibility of Service tax credit for services provided by Authorized Service Centers
The appellant, a manufacturer of Electronics & Electrical goods, provided after-sales service through Authorized Service Centers (ASCs). The Revenue contended that services by ASCs were not input services for the manufacture of goods. Show Cause Notices were issued to recover Service tax credit. The Original Authority held that the services by ASCs did not qualify as input services. The appellant argued that warranty services were included in the assessable value of goods as per legal precedents.

Issue 2: Interpretation of input services for the manufacture of goods
The appellant relied on legal precedents to argue that warranty services were related to manufacturing and should be considered as input services. The terms of the contract between the appellant and ASCs, along with warranty provisions, were analyzed to establish that warranty services were integral to the manufacturing process.

Issue 3: Applicability of Rule 14 of Cenvat Credit Rules, 2004
The Revenue issued Show Cause Notices under Rule 14 of Cenvat Credit Rules, 2004, to recover Service tax credit. The appellant contested the applicability of this rule, citing legal interpretations that supported the admissibility of Service tax credit for warranty services.

Issue 4: Valuation under Section 4 of Central Excise Act, 1944
The appellant referred to the definition of transaction value under Section 4 of the Central Excise Act, 1944, to argue that warranty costs were included in the price paid for goods. This supported their claim that warranty services were part of the manufacturing process and should be considered as input services.

Issue 5: Entitlement to input service credit for warranty services
The Tribunal, considering the arguments and legal precedents, held in favor of the appellant. Citing a previous judgment involving Mahindra & Mahindra Ltd., the Tribunal concluded that Service tax paid on expenses for warranty services should be eligible for input service credit. The appeals were allowed, granting the appellant consequential reliefs.

This detailed analysis reflects the legal intricacies involved in the case regarding the admissibility of Service tax credit for warranty services provided by Authorized Service Centers in the context of manufacturing activities.