2014 (8) TMI 814 - AT - Central Excise

Eligibility to avail CENVAT Credit - Repairs & maintenance services - Credit denied on the ground that the maintenance and repair services provided by authorized dealers/ franchisees during the warranty period of the product manufactured by the appellant, are not the services rendered to the appellant - Held that - Rrepairs & maintenance services are given to the customers of the product manufactured by the appellant; that the appellant is extending the said warranty for a specific period on the sales of goods manufactured by them. On perusal of the definition of Rule 2(l) of CENVAT Credit Rules, 2004 which defines input service, we find that CENVAT Credit is allowed on input services which are used by the manufacturer, whether directly or indirectly, in or in relation to manufacture of final product and clearance thereof. Prima facie, any services rendered during warranty period which are rendered by the manufacturer of the goods, are in respect of final product and are in relation to the manufacture in as much as the assessee improves upon the product quality on the various complaints attended on the product. Be that as it may, we find that the ld. Counsel was correct in bringing to our notice that in a similar issue, on an appeal filed by the Department in the case of Mahindra & Mahindra Ltd 2012 (8) TMI 530 - CESTAT, MUMBAI , the co-ordinate Bench of the Tribunal has taken a view in favour of the assessee. - appellant has made out a prima facie case for the waiver of the pre-deposit - stay granted.

Summary

Issues:
- Eligibility to avail CENVAT Credit on repair and maintenance services provided by authorized dealers/franchisees during warranty period.

Analysis:
1. The Stay Petition was filed seeking waiver of pre-deposit of an amount confirmed as ineligible CENVAT Credit, interest, and penalties. The adjudicating authority denied CENVAT Credit, stating that repair and maintenance services during the warranty period were not rendered to the appellant.

2. The appellant, a manufacturer of air-conditioners, argued that they authorized dealers to handle repair and maintenance services during the warranty period, which should qualify for CENVAT Credit. The appellant cited relevant judgments supporting their claim, emphasizing that the services were related to the final product's manufacture.

3. The Departmental Representative contended that the services were not rendered to the appellant directly, thus disallowing CENVAT Credit. They referenced legal precedents like the Cadila Healthcare Ltd case to support their argument that a direct or indirect connection to manufacturing activity is necessary for availing CENVAT Credit.

4. The Tribunal analyzed the issue of CENVAT Credit eligibility under Rule 2(l) of CENVAT Credit Rules, 2004, concerning repair and maintenance services provided by dealers/franchisees during the warranty period. The Tribunal noted that services improving product quality during the warranty period are related to the final product's manufacture. Citing previous judgments, the Tribunal found in favor of the appellant, granting waiver of pre-deposit.

5. The Tribunal acknowledged the Department's cited case laws but noted that the issue was already addressed in previous Tribunal judgments favoring the appellant. The Tribunal concluded that the appellant established a prima facie case for waiver of pre-deposit, allowing the application and staying recovery until the appeal's disposal.

6. The judgment was pronounced on 09.07.2014 by the Tribunal, granting the appellant's request for waiver of pre-deposit based on the eligibility of repair and maintenance services for CENVAT Credit during the warranty period.