Whether credit of service tax paid on repair and maintenance of goods sold with warranty clause is admissible?

PJ/CASE LAW/2015-16/2868

Case:-LEROY SOMER INDIA PVT. LTD. VERSUSCOMMISSIONER OF C. EX., NOIDA

Citation:- 2015 (39) S.T.R. 466 (Tri. - Del.)

Brief Facts:-The appellant is in appeal against the impugned order denying Cenvat credit availed by the appellant for repairs and maintenance services of the goods sold by them during the period of warranty. The facts of the case are that the appellants is manufacturer of alternator and selling them to their buyer giving the guarantee that if in certain period any repairs and maintenance is required that is to be done by the appellant. To provide these services of repairs and maintenance appellant engaged certain services providers who provide these repairs and maintenance services on behalf of the appellant and appellant is paying Service Tax thereon and taking Cenvat credit on the Service Tax paid to the services provider. Revenue is of the view that as the services has been rendered after the sale of the goods and the ownership of the appellant is not on the goods after sale. Therefore, that cannot be input service to the appellant. Therefore, show cause notice was issued to deny the Cenvat credit. The Adjudicating Authority allowed the Cenvat credit after relying on the decision in the case of CCE, Vadodara v. Dankey Products - 2009 (16)S.T.R.576 (Tri.-Ahmd.)which has been appealed against by the Revenue in the case of Dankey & ABB Ltd. v. CCE - 2009 (15) S.T.R. 23 (Tri.-LB) of this Tribunal. The said order was appealed against by this Revenue before the ld. Commissioner (A) who set aside the order. Consequently, the Cenvat credit was denied to the appellant. Therefore, appellant is before the tribunal.

Appellants Contention:-The ld. Counsel for the appellant submits that as it is the condition of sale that appellant shall provide free services during the warranty and for providing that services the appellant has appointed service provider on their behalf. Therefore, appellant is entitled to take Cenvat credit on the services taken by the services provider. To support his contention he relied on the decision in the case of CCE, Nashik v. Mahindra & Mahindra Ltd. - 2012 (28)S.T.R.382 (Tri.-Mumbai) and Telco Construction Equipment Co. Ltd. v. CCE, Belgaum - 2013 (32) S.T.R. (482) (Tri.-Bang.).

Respondents Contention:-On the other hand ld. AR oppose the contention of the ld. Counsel and submits that in the case of Dankey Products this Tribunal has relied on the decision in the case of ABB Ltd. Although the said decision has been affirmed by the Hon’ble High Court of Karnataka and same has been discussed by the Hon’ble High Court of Karnataka in the case of Vesuvious India Ltd. v. CCE, Kolkata - 2014 (34) S.T.R. 26 (Cal.) wherein the decision of ABB Ltd. - 2011 (23) S.T.R. 97 (Kar.). High Court of Karnataka was distinguished and it was held that on GTA services the said services is post manufacturing of the services. Therefore, appellant is not entitled to take Cenvat credit. She further submits that it is the case of valuation, therefore, matter be referred to the Larger Bench.

Reasoning of Judgement:-Heard the parties. Considered the submissions. In this case the short issue involved is that whether the appellant is entitled to take Cenvat credit on repairs and maintenance services provided by the service provider on behalf of the appellant to the buyers during the period of warranty or not. As from the facts it is not the case of valuation, therefore, arguments advances by the ld. AR is turned down. Further, tribunal find that there is a concrete decision on GTA service whether assessee is entitled to take Cenvat credit or not by the various High Courts and fortunately none of the Hon’ble High Court is jurisdictional High Court who have dealt the issue which is placed before them. Therefore, tribunal was not relying on the High Court’s decision in the case of Vesuvious India Ltd., ABB Ltd. and Dankey Products (supra). Moreover, the facts of those case are for availment of Cenvat credit on GTA services and issue before the Hon’ble High Court was that whether the services availed after transportation of goods after manufacturing is entitled to take Cenvat credit or not and whether Cenvat credit is available upto the place of removal or not. In this case, appellant has sold alternators under warranty. During the warranty period, appellant is duty bound to provide free services to the buyers of alternator. For that, appellant has appointed services providers. Therefore, services provided by the services provider is a condition of sell and covered by the definition of Rule 2 of the Cenvat Credit Rules, 2004 under any activity relating to the business. Admittedly, if appellant does not provide the said services to the customers, the appellant is not able to do the business. Therefore, these services are apparently availed by the appellant as the activity relating to the business. Consequently, tribunal hold that appellant is entitled to take Cenvat credit on repairs and maintenance provided by services provider during the period of warranty on behalf of the appellant. With these terms appeal is allowed by setting aside the impugned order.

Decision:- Appeal allowed.

Comment:- The gist of the case is that as the assessee is duty bound to provide free services to buyers during the warranty period, the service tax paid on repair or maintenance of alternators is related to business and the cenvat credit of the same is admissible. It was held that the repair services have been provided by the services provider on behalf of the assessee as a condition of sale and is treated as an activity related to business and accordingly the assessee is entitled to take Cenvat credit on the same. This was based on the remarkable decision in the case of CCE, Vadodara v. Dankey Products.

Prepared By:- Neelam Jain

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