Cenvat Credit cannot be denied for Warranty Services provided Free of Cost during Warranty Period through Third Parties: CESTAT [Read Order]

The CESTAT, Ahmedabad bench has held that the cenvat credit cannot be denied on warranty services provided free of cost during the warranty period.

The appellants approached the Tribunal challenging the order of the department denying Cenvat Credit of services provided by them to their customers during warranty period through a third party on free of cost basis. The credit is in respect of maintenance and repair services provided by the authorized dealers/ franchises of the appellant, to the customers, for which there is no charge on the customers and for which the appellant are paying the authorized dealers/ franchises. The Authorized dealers/franchises paid service tax on the amount received from the appellant and the appellant have claimed Cenvat Credit of the said amount.

The Tribunal bench comprising Judicial Member, Mr. Ramesh Nair and Technical Member Mr. Raju found that it is not in dispute all these services are provided during the warranty period.

The Tribunal further relied on a similar issue wherein the Bombay High Court, in the case of Yeshbai vs. Ganpat Irappa Jangam, has held that the appellant correctly availed CENVAT credit on the amount of service tax paid for the services provided by the dealers to the customers on behalf of the appellant for fulfilling the warranty obligations of the appellant.

Relying on the above decision, the Tribunal held that “The ratio of aforesaid decision is squarely applicable to instant case. Relying on the aforesaid decision, we find that the credit on warranty service provided free of cost during the warranty period through third parties cannot be denied.”

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