2018 (1) TMI 429 - AT - Service Tax

CENVAT credit - input services - denial on the premise that during the warranty period, the appellant has provided exempted service of Repair and Maintenance - Revenue is of the view that free warranty service of Repair and Maintenance is an exempted service - Held that - Repairs and Maintenance service is taxable service with effect from 01.07.2003 in terms of provisions of Section 65 (105) (zzg) of Finance Act, 1994 and the said activity thereafter has never been exempted by the Government by way of any notification thereof - merely because the appellant are not charging any amount towards providing this service, does not mean that the service is an exempted service - appellant is providing taxable service of Repairs and Maintenance to the customers free of cost during the period of warranty. Whether the appellant is engaged in the activity of trading or not? - Held that - the appellant is a branch office of their head office and they are getting the goods on stock transfer basis from head office for sale. Therefore, the appellant are selling their own goods, manufactured by them. If the person selling the goods manufactured them, in that circumstance, the appellant cannot be said that he is a trader - the appellant is not engaged in the activity of trading. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the service of Repair and Maintenance provided during the warranty period is an exempted service?
2. Whether the appellant is engaged in trading activity?

Analysis:

Issue 1:
The appellant appealed against the denial of Cenvat credit on input services due to providing free Repair and Maintenance services during the warranty period. The Revenue argued that as no money was charged for these services, they should be considered exempted. However, the Tribunal found that Repair and Maintenance services are taxable under Section 65(105)(zzg) of the Finance Act, 1994, and not exempted. The fact that the appellant did not charge for these services does not make them exempted. Therefore, the Tribunal held that the appellant was providing taxable services during the warranty period, entitling them to Cenvat credit on input services.

Issue 2:
The question of whether the appellant was engaged in trading activity was also raised. The appellant, being a branch office of the head office, sold goods transferred from the head office, which were manufactured by the appellant. The Tribunal concluded that since the appellant was selling their own manufactured goods, they could not be classified as a trader. Therefore, the Tribunal held that the appellant was not engaged in trading activity.

In conclusion, the Tribunal ruled in favor of the appellant on both issues. They cited a previous order allowing Cenvat credit for the appellant and the dropping of demands by the adjudicating authority for subsequent periods. As a result, the impugned order denying Cenvat credit was set aside, and the appeal was allowed with any consequential relief.