2018 (2) TMI 563 - AT - Service Tax

CENVAT credit - input services - repair and maintenance of ADMs under Annual Maintenance Contract - Held that - the repair and maintenance service received by the appellant for repair of the ADMs which has been leased out to the dealers/distributors an input service i.e. repair and maintenance is carried out during the leasing of the machine - the leasing of the machine is output service on which Service Tax has been discharged. During the leasing period the repair and maintenance service was provided on the leased machine. Therefore repair and maintenance service become input service for providing output service i.e. leasing of machine - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of CENVAT Credit on Annual Maintenance Contract (AMC) service for Automatic Colour Dispensing Machines (ADM).
2. Interpretation of Rule 2(l) of CENVAT Credit Rules, 2004.
3. Eligibility of repair and maintenance service as an input service for output service.

Analysis:
1. The appellants installed Automatic Colour Dispensing Machines (ADM) at their dealer's premises and provided repair and maintenance services under an Annual Maintenance Contract (AMC). The issue arose when a show-cause notice was issued proposing denial of CENVAT Credit on the ground that AMC service for ADMs at the dealer's premises did not qualify as an input service under Rule 2(l) of CENVAT Credit Rules, 2004. The adjudicating authority disallowed the credit, a decision upheld by the Commissioner (Appeals), leading the appellants to appeal.

2. The appellant argued that the repair and maintenance services for ADMs, being an input service for the output service of renting the machines, should be eligible for CENVAT Credit. Despite the services being provided outside the appellant's premises, they contended that it was still related to the provision of the output service and thus qualified as an input service. The appellant cited relevant judgments to support their argument.

3. On the other hand, the Revenue representative reiterated the findings of the impugned order, emphasizing that since the repair and maintenance services were carried out at the dealer's premises, the credit should not be admissible to the appellant. However, upon careful consideration, the Tribunal found that the repair and maintenance services for the ADMs, leased to dealers, constituted an input service as they were essential during the leasing period. As the appellant had discharged Service Tax on the leasing of the machines, the repair and maintenance services were deemed as input services for providing the output service of leasing the machines. Citing a previous order with similar facts, the Tribunal set aside the impugned order and allowed the appeal.

In conclusion, the Tribunal ruled in favor of the appellants, holding that the repair and maintenance services for the Automatic Colour Dispensing Machines were indeed eligible for CENVAT Credit as they constituted input services for the output service of leasing the machines.