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2022 (4) TMI 130 - AT - Central ExciseCENVAT Credit - maintenance and repair services provided during the warranty period for periods both prior to 01.04.2011 and after 01.04.2011 - HELD THAT - The issue regarding admissibility of cenvat credit on warranty service has been examined in detail by the Tribunal in the order in the case of M/S CASE NEW HOLLAND CONSTRUCTION EQUIPMENT (I) PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, UJJAIN 2021 (8) TMI 963 - CESTAT NEW DELHI . It is seen that the said order examines the admissibility of credit for periods both pre and post 01.04.2011, where it was held that The appellant 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. The ratio of aforesaid decision is squarely applicable to instant case - the credit on warranty service provided free of cost during the warranty period through third parties cannot be denied - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Entitlement to avail Cenvat Credit on services provided during the warranty period. 2. Demand of interest. 3. Imposition of penalty. Issue-wise Detailed Analysis: 1. Entitlement to Avail Cenvat Credit on Services Provided During the Warranty Period: The primary issue in this case is whether the appellants are entitled to avail Cenvat Credit for services provided to their customers during the warranty period through third parties free of cost. The appellants claimed Cenvat Credit for maintenance and repair services provided by authorized dealers/franchises to customers without any charge, for which the appellants paid the authorized dealers/franchises, who in turn paid service tax on the amount received from the appellants. This situation applies to both the periods before and after 01.04.2011. The Tribunal referenced the case of M/s Case New Holland Construction Equipment (I) Pvt Ltd, which examined the admissibility of credit for both pre and post 01.04.2011 periods. The Tribunal observed that the definition of "input service" under rule 2(l) of the Credit Rules is broad, encompassing services used directly or indirectly in relation to the manufacture of final products. The appellants argued that the maintenance and repair services are integral to their promotional strategy and are linked to the sale of their final products, thus justifying the availing of Cenvat Credit. The Tribunal noted that similar issues had been examined in previous cases, such as Carrier Airconditioning & Refrigeration and Honda Motorcycle & Scooter India, where it was held that services provided by dealers during the warranty period are considered "input services" used in relation to the manufacture of final products. These decisions cover periods both before and after 01.04.2011 and are based on the "means" part of the definition of "input service," which had not changed with the 01.04.2011 amendment. The Tribunal concluded that the earlier decision in the appellant's own case, which took a contrary view for the period from April 2011 to June 2015, was per incuriam (rendered in ignorance of binding authority). Therefore, the Tribunal followed the earlier decisions, ruling that the appellants correctly availed Cenvat Credit on the service tax paid for services provided by dealers during the warranty period. 2. Demand of Interest: Given that the Tribunal found the appellants were entitled to avail Cenvat Credit on the services provided during the warranty period, the demand for interest on the allegedly wrongfully availed credit was also set aside. The Tribunal did not find any valid reason to uphold the demand for interest. 3. Imposition of Penalty: Similarly, the imposition of penalties related to the denial of Cenvat Credit was also overturned. Since the Tribunal ruled in favor of the appellants regarding their entitlement to Cenvat Credit, the basis for imposing penalties was invalidated. The Tribunal found no grounds for penalizing the appellants under these circumstances. Conclusion: The Tribunal allowed the appeals, setting aside the demands and penalties imposed by the lower authorities. The Tribunal's decision emphasized the broad interpretation of "input service" and reaffirmed the appellants' entitlement to Cenvat Credit for services provided during the warranty period through third parties. The Tribunal's ruling was pronounced in the open court on 31.03.2022.
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