2014 (6) TMI 133 - AT - Service Tax

Maintenance and repair services - CENVAT Credit - Held that - warranty is provided by the appellant and a service provider is ensuring repairs and maintenance during the warranty period and the service provider has been engaged by the appellant only. The obligation to ensure smooth running of the machinery supplied by them during the warranty period is on the appellant only and not on the service provider. The service has been provided to the appellant only in view of the above position. Having regard to the facts and circumstances of this case which are similar to the facts and circumstances in the case of Danke Products 2009 (7) TMI 137 - CESTAT, AHMEDABAD , appellant is eligible for the Cenvat credit availed by them - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit for maintenance and repair services during warranty period.

Analysis:
The appellant-assessee engaged a service provider for maintenance and repair services on machines sold during the warranty period, with service tax included in the charges. The denial of Cenvat credit amounting to Rs. 2,66,071/- was based on the argument that such activities were post-removal and post-manufacturing. The appellant contended that the maintenance services were directly linked to the manufacturing activity, as ensuring smooth functioning of the machinery during the warranty period was part of their obligation to customers. The appellant cited a Tribunal decision in a similar case where Cenvat credit was allowed for services provided by a third party during the warranty period. The Tribunal found the issue to be identical, ruling in favor of the appellant, as the warranty obligation and engagement of the service provider were deemed integral to the manufacturing process. Consequently, the denial of Cenvat credit was overturned, granting relief to the appellant.

In conclusion, the appellate tribunal at CESTAT Ahmedabad allowed the appeal of the appellant-assessee, overturning the denial of Cenvat credit for maintenance and repair services provided during the warranty period. The judgment emphasized the direct link between the services rendered, warranty obligations, and the manufacturing activity, following a precedent set in a similar case. The decision highlighted the importance of fulfilling warranty commitments to customers and the eligibility of Cenvat credit in such circumstances.