2023 (12) TMI 601 - AT - Central Excise

CENVAT Credit - input service - after sales services - denial on the ground that the said services were allegedly not used in or in relation to manufacture of products and hence could not be covered in the definition of input service as provided under Rule 2(l) of the CCR, 2004 - HELD THAT - This issue has also been considered by this Tribunal recently in the case of JCB India Ltd. 2023 (5) TMI 133 - CESTAT CHANDIGARH wherein this Tribunal on identical facts has considered various decisions rendered on the issue of cenvat credit of service tax paid on repair and maintenance service during the warranty period and has also considered the definition of input service prior to 01.04.2011 and after 01.04.2011 and held 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. Further, it is found that this Tribunal in various decisions relied upon by the appellant on identical issues has consistently held that the assessee is entitled to cenvat credit of service tax paid on Repair and Maintenance during the warranty period as the same fall within the ambit of Input Service as provided in Rule 2(l) of CCR, 2004. The impugned order is not sustainable in law - Appeal allowed.

Summary

Issues Involved:
1. Denial of CENVAT credit on service tax paid for after-sales warranty services.
2. Applicability of the definition of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004.
3. Invocation of the extended period of limitation.

Summary:

1. Denial of CENVAT Credit on Service Tax Paid for After-Sales Warranty Services:
The appellant, engaged in manufacturing cranes and earthmoving machinery, availed CENVAT credit on service tax paid for after-sales warranty services provided through authorized dealers. The Department issued a Show Cause Notice proposing to deny this credit, arguing these services were not used in or related to the manufacture of products and thus not covered under the definition of 'input service' as per Rule 2(l) of the CENVAT Credit Rules, 2004. The Additional Commissioner confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals).

2. Applicability of the Definition of 'Input Service' under Rule 2(l) of the CENVAT Credit Rules, 2004:
The Tribunal considered the appellant's argument that warranty services enhance the marketability of final products and are indirectly related to their manufacture. The Tribunal referred to its own previous decisions, including the appellant's case for a different period, and other cases such as JCB India Ltd. v. Commissioner of Central Excise and CCE, Nashik v. Mahindra & Mahindra Ltd., where it was held that repair and maintenance services during the warranty period qualify as 'input services'. The Tribunal emphasized that 'input services' should be construed liberally and include after-sales support services as a business activity.

3. Invocation of the Extended Period of Limitation:
The Tribunal found no grounds for invoking the extended period of limitation, noting that the issue had already been settled in favor of the appellant in previous rulings. The Department failed to prove suppression of material facts by the appellant. The Tribunal also noted that the audit of the appellant's records was conducted well before the issuance of the Show Cause Notice, making the substantial demand beyond the period of limitation.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief, reiterating that the appellant correctly availed CENVAT credit on service tax paid for warranty services, which fall within the ambit of 'input service' as defined in Rule 2(l) of the CENVAT Credit Rules, 2004. The Tribunal also highlighted that pending appeals in higher courts without a stay do not affect the binding nature of its decisions.