The Hyderabad Bench of the Customs, Excised and Service Tax Appellate Tribunal (CESTAT), observed that cenvat credit is allowable on warranty services when included in assessable value of the final product.
The appellant, M/s. Delta Electronics India Pvt Ltd is engaged in the manufacture of Telecom Power Solution, Uninterrupted Power System, Wind Power Generating System, Solar Power Generating System. For the purpose of manufacturing these goods the appellant utilizes various inputs, capital goods and input services and had availed Cenvat credit of the tax paid for these goods and services.
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 service under the Credit Rules.
The counsel for the appellant has submitted that in the instant case, appellant provided repair and maintenance for the products covered under warranty on a free of cost basis. The repair and maintenance of the in-warranty products requires provision of service as well as of supply of parts. Hence appellant has entered into an agreement with Authorized Engineers to provide after sale services to the customer.
The Counsel thus submitted that Cenvat credit was available to the assessee selling air-conditioning, the cost of which included the cost for providing the warranty services.
The Supreme Court in the case of Collector of Central Excise, Chandigarh v. Eicher Tractors Ltd., has held that the labour charges for repair during the warranty period compulsorily collected from the customers has to be included in the assessable value of the final products.
A Two-Member Bench of the Tribunal comprising Dr Rachna Gupta, Judicial Member and Hemambika R Priya, Technical Member observed that “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. 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.”
“Therefore, the Cenvat credit in relation to warranty services, value whereof is included in the assessable value of final product is available to the appellant as it contributes to the marketability of the product” the Tribunal concluded.
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