Whether assessee entitled to avail input service credit on after sales service provided by the dealer which are included in the assessable value?

PJ/Case Laws/2012-13/1389

Case:- COMMISSIONER OF C. EX., NASHIK V/S MAHINDRA & MAHINDRA LTD.

Citation:- 2012 (28) S.T.R. 382 (Tri. – Mumbai)

Brief Facts: - The present appeal has been filed by the Revenue against the order passed by the adjudicating authority holding that the assessee is entitled to take input service credit on after sales service provided by the dealer subject to the conditions that the service charges are included in the assessable value of the vehicle. An appeal has been filed by the assessee, M/s. Mahindra & Mahindra for disallowing the input service credit on after sales service charges paid by the dealer which claimed by the assessee that they have included the same in the assessable value. As both the appeals have common issue, they are disposed of by a common order.

Appellant’s Contention: - The revenue-appellant contended that the input service credit taken by the assessee on after sales service, in fact, is not an ‘input service’. They further submitted that this is not a sale promotion of the goods as every manufacturer in the industry is giving offer to the customers to sell the vehicle. Therefore, it is a general offer given to the customer which does not amount to sale promotion. Therefore, the assessee’s appeal should be dismissed and the Revenue’s appeal be allowed.

Respondent’s Contention: - The respondent-assessee argued that as per the Cenvat Credit Rules, 2004, for any transaction value the assessee is required to include warranty charges/after sales service charges which are provided free of cost to the customer by the dealer. It is further submitted that for the earlier period they were issued a show-cause notice whether they have included these after sales service charges in the assessable value or not. After ascertaining the fact that they has included in the assessable value, the show-cause notice was dropped. They further submitted that as they has included the cost of these after sales service charges in the assessable value, therefore on the service tax paid by the dealer, they are entitled to avail input service credit. Further they submitted that in the case of Samsung India Electrics P. Ltd. v. CCE - 2009 (16) S.T.R. 576 (Tri. - Ahmd.), this issue came up before this Tribunal. This Tribunal has held that the assessees eligible for after sales service charges during the warranty period if any expenses have been incurred by the dealers for the same; assessee is entitled for input service credit.

Reasoning of Judgment: - The Hon’ble Tribunal held that The first issue by the learned A.R. is that after sales service of the vehicle is not an ‘input service’ on the ground that the service has been availed after sale of the vehicle and expenses incurred towards manufacture of the vehicle are entitled for input service credit. By going through the Section 4(3) of the Central Excise Act, 1944 they find that the transaction value means the price actually paid or which are payable for the goods when sold and those includes servicing and warranty also. Admittedly the service and warranty is post manufacturing expenses which are to be provided to the customer after sale. As per the provision of Section 4(3)(d) the value of warranty and servicing which is a post manufacturing are includible in the assessable value and therefore, these expenses incurred in the service are entitled for input service credit. Further they held that they do not find any force in the arguments of the revenue that the expenses incurred after sales service is not an ‘input service’. The said issue came up before this Tribunal in the case of CCE v. Danke Products (supra) wherein the facts of the case are that the appellants were engaged in the manufacture of electrical transformers and those were cleared on payment of duty. As per the terms of contract, the assessee was under obligation to repair and maintain the transformers during the warranty period free of charge. That job of repair and maintenance was entrusted to 3rd person who raised bills for repair and maintenance on assessee in turn the assessee took input service credit. The issue was dealt with by the Tribunal. In view of observations from those cases they hold that if after sales service expenses are included in the assessable value, the assessee is entitled for input service credit on the expenses incurred on after sales charges. Therefore, the appeal filed by the Revenue is dismissed and the appeal filed by the assessee is remanded to the adjudicating authority for verification whether after sales service charges are included in the assessable value or not as the assessee did not produce the Chartered Accountant’s certificate before the adjudicating authority. Therefore, the adjudicating authority shall consider the certificate issued by the Chartered Accountant/Cost Accountant and thereafter pass an appropriate order after giving a reasonable opportunity to the appellant to present their side.

Decision: - The Revenue’s appeal dismissed and assessee’s appeal allowed.

Comment:- The analogy drawn from this case is that as far as warranty charges are included in the assessable value, input service credit on the service provided to the customers after sales have been made in lieu of warranty is clearly eligible for cenvat credit.

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PJ/Case Laws/2012-13/1389

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