2023 (5) TMI 133 - AT - Central Excise

CENVAT Credit - input service - free warranty services - place of removal - service tax paid by the appellant on repair and maintenance services provided by the dealers for fulfilling the warranty obligations of the appellant has been denied for good and valid reasons or not - suppression of material facts - extended period of limitation - HELD THAT - Input service either prior to 01.04.2011 or w.e.f. 01.04.2011 means any service used by the manufacturer, whether directly or indirectly, or in relation to the manufacture of final products. The appellant is under an obligation to provide after sale service on the final products manufactured by it. The dealers provide the services and the appellant pays service tax on the amount paid by it to the dealers. The service is provided free of cost by the dealers during the warranty period but the appellant makes payment to the dealers for the services they provide to the customers. The repair and maintenance services are, therefore, linked to the sale. The services are, therefore, used indirectly in relation to the manufacture of final products. The appellant has correctly availed cenvat credit on the amount of service tax paid for the services provided by the dealers to the customers on behalf of the appellant for fulfilling the warranty obligations of the appellant. Extended period of limitation - Suppression of facts - HELD THAT - There does not exists any reason for invoking the extended period of limitation as the issue involved in the present case has already been decided in favour of the appellant. Moreover, the department did not bring any material on record to show that the appellant has suppressed the material facts with intend to evade payment of service tax. Besides this, the audit of the record of the appellant was conducted in February/March 2007 whereas the show cause notice was issued in 2009 after the expiry of two and half years which makes the substantial demand beyond the period of limitation. The impugned orders are set aside - Appeal allowed.

Summary

Issues Involved:

1. Eligibility of CENVAT credit on 'repair and maintenance services' provided by dealers for fulfilling warranty obligations.
2. Invocation of the extended period of limitation for issuing the show cause notice.

Summary:

1. Eligibility of CENVAT Credit on 'Repair and Maintenance Services':

The appellant, engaged in manufacturing Excavator Loaders & Earthmoving Machines, provided "free services" during the warranty period through its dealers. The dealers charged the appellant for these services and paid service tax, which the appellant claimed as CENVAT credit under the Cenvat Credit Rules, 2004. The department issued show cause notices alleging wrongful availment of CENVAT credit, arguing that after-sale services provided by dealers were not covered under the definition of 'input services' as per Rule 2(l) of the Cenvat Credit Rules, 2004, since these services were provided beyond the place of removal and after the transfer of ownership.

The appellant contended that the services were integrally connected to the manufacture and sale of the final products, enhancing their marketability. The Tribunal found that the repair and maintenance services were indirectly related to the manufacture of final products, thus falling under the definition of 'input service'. The Tribunal noted that the appellant's obligation to provide after-sale services was central to its promotional strategy, impacting the sale and, consequently, the manufacturing activities. The Tribunal also observed that the Ld. Commissioner (Appeals) had allowed CENVAT credit for the subsequent period, which the department had not challenged, precluding the department from taking a contrary stand in the present appeals.

2. Invocation of Extended Period of Limitation:

The Tribunal held that there was no justification for invoking the extended period of limitation. The issue had already been decided in favor of the appellant in previous cases, and the department did not present any material evidence of fraud, suppression, or willful misstatement by the appellant. The audit conducted in 2007 revealed all relevant facts, but the show cause notice was issued only in 2009, making the substantial demand beyond the period of limitation.

Conclusion:

The Tribunal set aside the impugned orders, allowing the appellant's appeals with consequential relief as per law, and pronounced the judgment on 28.04.2023.