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TMI Blog2023 (7) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... vice is included in their assessable value, it follows that the credit thereon is admissible as per intent of Cenvat Credit Scheme. Thus service in question of providing warranty and after sales services is the input service eligible for Cenvat. Whether the warranty charges forms part of the assessable value of the final product on which Central Excise duty is paid by the Noticee? - HELD THAT:- As already observed that the cost of the disputed services forms part of the assessable value of the final products and on same applicable service tax has already been discharged as and when due. The Hon'ble Supreme Court in UNION OF INDIA ORS. ETC., ETC. VERSUS BOMBAY TYRE INTERNATIONAL LTD. ETC., ETC. [ 1983 (10) TMI 51 - SUPREME COURT ], has held that all the elements which enrich the value of the excisable goods and contribute to its marketability, must form part of the manufacturing cost of the goods. The intent of Cenvat Credit scheme is to reduce the cascading effect of taxes by preventing the build-up of taxes in the cost of products. Therefore, a manufacturer should be entitled to avail Cenvat credit of Service Tax paid on all those services, the cost of which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20.07.2018. However, department observed that services provided by the ASPs have been rendered after the clearance of the final products. Therefore, the services are not covered in the first part of the definition of input services. In the second part of the definition there is no mention of the services of Free Warranty anywhere, thus, the services does not fall in this part as well. The ASPs are independent entities which provide this service to the customers of the appellant. The said customers are independent service recipient of service provided by the ASPs, although under the directions of the appellant, the ASPS were at the liberty to raise bill on the customers as well. This service rendered by the APSs, during the warranty period, are classified as Business Auxiliary Service by courts of law which do not qualify as input service for the manufacturer in as much as such service are ordinarily rendered beyond the place of removal. Department thus opined that the appellant has availed Cenvat credit on the sole grounds of judicial pronouncement involving identical issue covering the period prior to 01.04.2011 despite the fact that the same has never been defined as input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. Vs. Commissioner of Customs, Central Excise and Service Tax, Noida is relied upon wherein it was held that the amount charged for warranty is included in the price actually paid or payable for the goods sold and such price charge in transaction value. Therefore, the service tax paid on the expenses incurred for providing warranty services qualifies for Cenvat credit of input service. Learned counsel also relied upon the decision of Commissioner of Central Excise, Nashik Vs. Mahindra and Mahindra Ltd., wherein the definition of transaction value was interpreted to include the value of warranty in the scope of the transaction value in Section 4(3) of the Central Excise Act. Further in the case of Carrier Air-conditioning Refrigeration Ltd. Vs. CCE, Gurgaon, It was held that the services provided by dealers to the assessee to further provide the repair and maintenance services to the customers under warranty, were Business Auxiliary Services which have to be treated as an input service for the assessee, being used in or in relation to manufacture of their final products, as free warranty repair and maintenance during warranty period, has enriched the value of the goods. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition and legal services are in the inclusive part of the definition of inputs. It therefore clearly follows that other services which not so specifically included but are clearly identifiable as having being used after the place of removal, no credit could be admissible thereon. It is impressed upon that in view of the specific exclusion of services being utilized after the place of removal, it has rightly been held by the adjudicating authority that any interpretation that would render a provision of law otiose or redundant should be avoided. The decision of Hon ble Supreme Court in the case of Bhavnagar University Vs. PalitanaSugar Mill Pvt. Ltd. reported as AIR 2003 (SC) 511 is mentioned to have been rightly relied upon by the adjudicating authority wherein it was held that warranty service is a service which would relate only to a time and place after removal and hence if the intent was to allow benefit on input credit on such warranty service, then it would have specifically been included along with the other services mentioned therein. The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch and auditing, financing, security, etc. The list is illustrative only; and iii. The last part of the amended definition comprises of the specific exclusions made to the definition of input services. 7. We observe that the first part of the definition, covers services which are used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal. We opine that the phrase in or in relation to' used in the definition of 'input service widens the scope of the said definition. We rely on the judgment of the Hon'ble Supreme Court in Collector of Central Excise Vs. Rajasthan State Chemical Works 1991 (55) E.L.T. 444 (S.C.), wherein it was observed as under: 12. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to, manufactured product emerges. Therefore, each step towards suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such service is included in their assessable value, it follows that the credit thereon is admissible as per intent of Cenvat Credit Scheme. Thus we hold that service in question of providing warranty and after sales services is the input service eligible for Cenvat. 10. Now coming to the aspect as to whether the warranty charges forms part of the assessable value of the final product on which Central Excise duty is paid by the Noticee. As already observed that the cost of the disputed services forms part of the assessable value of the final products and on same applicable service tax has already been discharged as and when due. The Hon'ble Supreme Court in Union of India v. Bombay Tyres International, 1983 (14) ELT 1896 (S.C.), has held that all the elements which enrich the value of the excisable goods and contribute to its marketability, must form part of the manufacturing cost of the goods. The relevant portion of paragraph 49 of the said judgment is reproduced herein: 49. We shall now examine the claim. It is apparent that for purposes of determining the value, broadly speaking both the old Section 4(a) and the new Section 4(1)(a) speak of the price for sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranty forms part of the assessable value and this is no longer res integra. 11. Based on these decisions, we hold that the intent of Cenvat Credit scheme is to reduce the cascading effect of taxes by preventing the build-up of taxes in the cost of products. Therefore, a manufacturer should be entitled to avail Cenvat credit of Service Tax paid on all those services, the cost of which is getting included in the assessable value of the final product. By not allowing the Cenvat Credit on such services would be against the intent of Cenvat Credit scheme. These decisions have been followed in Commissioner v. Relpol Plastic Products Ltd., 2016 (42) S.T.R. J274 (Bom.) and CCE, Bangalore-II v. Millipore India Pvt. Ltd., 2012 (26) S.T.R. 514 (Kar.) 12. We further observe that SCN has alleged that w.e.f. 01.04.2011 the definition of 'input services, as the phrase 'activities relating to business has been removed , does not include the services in question. It is submitted that the types of input services covered for the purpose of allowing credit of Service Tax paid are indeed quite wide in both the periods, i.e. pre and post 2011. The scope apparently has widened not on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is also not sustainable and has to be set aside. 13. Thus, we conclude that the Cenvat credit was allowed for both the period prior to and post the amendment of 2011 on the ground that the warranty charges were included in the value of goods sold to the customers and Central Excise duty was paid on this value. Further, the assessee was under an obligation to provide free repair and maintenance services and instead of directly providing these services they had engaged dealers to provide them to the customers. It is thus clear that it is the consistent view that the services provided to fulfil warranty obligation would be eligible as input services being a service in relation to manufacture. The said clause remains same post 2011 and is not impacted by the amendment made in 2011. Learned Commissioner is held to have wrongly construed the amendment in definition of input which was merely clarificatory as only an explanation has been inserted. The insertion of this explanation cannot be used to interpret tht only credit of inputs used for warranty can be availed and not of input services. Therefore, the Cenvat credit in relation to warranty services, value whereof is in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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