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2024 (3) TMI 227 - AT - Central ExciseCENVAT Credit - disallowance of credit on the service tax paid for warranty charges by the appellant is legal and proper or not - HELD THAT - The issue stands covered by the decision in the appellant s own case ELGI EQUIPMENTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, COIMBATORE 2016 (11) TMI 1644 - CESTAT CHENNAI for the period October 2013 to October 2014 and November 2014 to January 2015, where it was held that when cost of warranty was part of the contract of sale, the Cenvat credit of the service tax paid on the servicing of vehicles by the dealers should not be disallowed in the hands of the appellant. In the case of M/S. LUCAS TVS LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI NORTH 2019 (9) TMI 1131 - CESTAT CHENNAI , it was observed that the warranty service is eligible for credit though the same is provided after the clearance of the final products. The demand cannot sustain and requires to be set aside. The impugned orders are set aside - Appeal allowed.
Issues:
The issue involved in this case is whether the disallowance of credit on the service tax paid for warranty charges by the appellant is legal and proper. Summary: The appellants, engaged in the manufacture of Air Compressors, were availing credit of service tax paid on Management, Maintenance, or Repair service provided by their authorized dealers to customers during the warrant period. Show cause notices were issued proposing to disallow the credit. The original authority confirmed the demand along with interest and penalty. On appeal, the Commissioner (Appeals) upheld the orders. The main contention was whether the disallowance of credit on the service tax paid for warranty charges was justified. The Ld. Consultant for the appellant argued that warranty charges were incurred by the appellant, though paid by dealers, and were included in the assessable value while discharging Excise Duty. The appellant, being the manufacturer, had to provide warranty services, even though provided through dealers. Previous tribunal decisions were cited in favor of the appellant's case. The Ld. A.R for the Department reiterated the findings in the impugned order. The issue was whether the disallowance of credit on the service tax paid for warranty charges was legal and proper. The Tribunal, in the appellant's own case for a specific period, allowed the appeal stating that the service tax paid by dealers, being on behalf of the appellant, was allowable as Cenvat Credit. The decision was based on the contractual obligation of the appellant to meet the cost of servicing vehicles sold through dealers. In another case, it was observed that warranty service is eligible for credit even if provided after the clearance of final products. The obligation on the part of the manufacturer to fulfill warranty claims and the payment of service tax on repair and maintenance services during the warranty period were highlighted. A similar issue was decided in a different case, where the Cenvat credit demand in respect of services received from dealers providing repair and maintenance services during the warranty period was set aside. After considering the facts and evidence, the Tribunal set aside the impugned orders, allowing the appeals with consequential reliefs. The demand for disallowance of credit on service tax paid for warranty charges was deemed unsustainable and was set aside based on previous decisions and the contractual obligations of the manufacturer.
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