2018 (8) TMI 943 - AT - Central Excise

CENVAT Credit - input services - amount paid to the dealers for providing free services to the buyers of vehicles during warranty period - denial on the ground that the said services have been received beyond the place of removal after sale of goods - Held that - Similar issue came up before this Tribunal in the case of CCE, Nashik vs. Mahindra & Mahindra Ltd. 2012 (8) TMI 530 - CESTAT, MUMBAI , where it was held that Service of repair and maintenance of transformers during warranty period is a service covered by definition of input service and the assessees are entitled to take Cenvat Credit of service tax paid on such services. The free service sale services of the vehicle provided during warranty period is an input service for the manufacturer - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of service tax credit for free services provided to buyers during warranty period.

Analysis:
The appellant appealed against the denial of service tax credit for free services provided to buyers during the warranty period, contending that such services are input services under Rule 21(I) of Cenvat Credit Rules, 2004. The Tribunal referred to a similar case involving Mahindra & Mahindra Ltd., where it was established that post-manufacturing expenses like servicing and warranty are included in the assessable value of goods. The Tribunal rejected the argument that after-sales service is not an input service, emphasizing that such services are an obligation of the manufacturer and are covered by the definition of 'transaction value' under the Central Excise Act, 1944.

The Tribunal further cited a case involving Danke Products, where it was clarified that services provided by a third party for repair and maintenance during the warranty period are considered input services. The Commissioner (Appeals) in that case highlighted that repair and maintenance during the warranty period are part of the assessable value of the final products. The Tribunal concluded that the repair and maintenance services were actually provided to the manufacturer and not to the buyer, supporting the eligibility for input service credit.

Moreover, the Tribunal considered the definition of 'input service' under Rule 2(1) of Cenvat Credit Rules, 2004, which was deemed broad enough to encompass services like repair and maintenance of goods during the warranty period. Referring to a previous ruling by a Larger Bench, it was established that activities related to business, including repair and maintenance, are considered relevant to the business and thus qualify as input services. Consequently, the Tribunal dismissed the Revenue's appeal and remanded the appellant's appeal for further verification regarding the inclusion of after-sales service charges in the assessable value.

In conclusion, the Tribunal upheld that free services provided during the warranty period are indeed input services for the manufacturer, entitling them to claim input service credit. The impugned order denying the service tax credit was set aside, and the appeal was allowed with consequential relief, if any.