2019 (11) TMI 232 - AT - Central Excise

CENVAT credit - input services - Sales Promotion Service / Customer Care Services - period from November 2010 to May 2015 and June 2015 and June 2017 - extended period of limitation - HELD THAT - Thus period involved is after 1.4.2011 as well as prior to this date. For the period prior to 1.4.2011 the definition of input services included the words activities relating to the business and therefore the services availed by the appellant would undoubtedly be eligible for credit prior to 1.4.2011. Ld. counsel has explained the segregation of the amounts with different units of the appellant. There are six units of the appellant and the amount shown for services mentioned in the agreement is for all the six units. Thus the appellant unit has to pay ₹ 3 lakhs as per the agreement for the entire services provided. The adjudicating authority has apportioned the whole amount of ₹ 3 lakhs towards customer care services without any basis and thereafter rejected the credit. It is indeed the allegation stated in the SCN that appellant has availed credit of service tax paid on sales promotion and customer care services. Then findings of the adjudicating authority that the entire amount is for customer care services cannot sustain. The manufacturer has to maintain the customer sales / help line / cell for redressing the customer s grievances. Indeed, the manufacturer being liable for the manufacturing defect of the product, the activity is in relation to manufacture. Such customer care services help in augmenting the sales and therefore is closely related with the sales promotion also. The finding of the authorities below that customer care service does not have direct nexus with the final products, in my view is legally incorrect. Extended period of limitation - HELD THAT - The department has not been able to establish any positive act of suppression on the part of the assessee. The audit that culminated in issuance of the SCN in 2015 took place in2012. Further, department did not raise any objection in earlier audits for the availment of credit in respect of these input services - the invocation of extended period cannot sustain. The credit availed in respect of sales promotion service / customer care services are legal and proper - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
- Availment of cenvat credit on input services categorized as "Sales Promotion Service / Customer Care Services"
- Invocation of extended period of limitation for raising demand

Analysis:

Issue 1: Availment of cenvat credit on input services categorized as "Sales Promotion Service / Customer Care Services"

The appellants, engaged in manufacturing Glazed Wall Tiles, availed cenvat credit on input services, including sales promotion and customer care services. The dispute arose when the department alleged that the credit was wrongly availed, leading to show cause notices for disallowance, recovery, interest, and penalties. The appellant argued that the services provided were integral to their manufacturing process and sales strategy. The agreement with the service provider outlined services for sales promotion, customer support, and training, all essential for improving business activities and product knowledge. The appellant contended that the customer care services were directly related to redressing consumer grievances, as mandated by legal requirements, and hence intertwined with sales promotion. The department, however, argued that post-sales customer care services could not be linked to manufacturing activities, especially in the absence of explicit warranties. The appellate authority, after considering both sides' arguments, concluded that the credit availed on sales promotion and customer care services was legitimate and overturned the original authority's decision to disallow the credit.

Issue 2: Invocation of extended period of limitation for raising demand

The department invoked the extended period of limitation while issuing the show cause notice, alleging suppression of facts by the appellant. The appellant contested this claim, highlighting that no evidence was presented to support the allegation of suppression. Additionally, previous audits had not raised objections to the credit availed on similar input services, indicating a lack of grounds for invoking the extended period. The appellate authority agreed with the appellant, noting the absence of any positive act of suppression and the failure of the department to raise concerns in earlier audits. Consequently, the invocation of the extended period of limitation was deemed unsustainable, leading to the dismissal of the department's claim in this regard.

In conclusion, the appellate authority found in favor of the appellant, allowing the appeals and setting aside the impugned orders. The credit availed on sales promotion and customer care services was deemed legal and proper, granting consequential benefits to the appellant as per the law.

This detailed analysis of the legal judgment provides a comprehensive understanding of the issues involved, arguments presented by both parties, and the final decision rendered by the appellate authority.