The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad bench has held that Central Value Added Tax (CENVAT) credit cannot be denied on free warranty service through third parties.
The appellant, Johnson Controls Hitachi Air Conditioning India Limited is a manufacturer of air conditioners and was also providing the service of “repairing and maintenance” of the air conditioners sold to the customers either directly or through the dealers. The appellant claimed CENVAT credit on the in-warranty repair and maintenance services. The claim was disallowed and hence the appellant filed an appeal before the CESTAT.
The counsel for the appellant submitted it is eligible for CENVAT credit on the in-warranty repair and maintenance services under the “means” clause of the definition of “input service” in rule 2(l) of the Credit Rules which requires the service to be “used, directly or indirectly, in or in relation to the manufacture of final products”. The contention is that the “means” clause of the definition is very widely worded and words such as “directly or indirectly” and “in or in relation to”, further expand the scope of the definition to include even those services which are indirectly used to the manufacture of the final products
that the same issue in the appellant’s case has been decided by the Tribunal in favor of the appellant. The appellant further submitted that the after-sales services are the central pillar of the appellant’s promotional strategy for the sale of its final products. These services augment the value of final products and thus, become important considerations for the customers while purchasing such products.
The Tribunal by relying on the decision of the appellant’s case observed 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. Hence, the credit on warranty service provided free of cost during the warranty period through third parties cannot be denied.
The Coram of Mr. Ramesh Nair, Member (Judicial), and Mr. Raju, Member (Technical) has held that the issue was finally settled based on the Tribunal’s decision in the appellant’s case and set aside the impugned order.
Advocate Mr. S J Vyas and Mr. Dinesh Prithiani appeared on behalf of the appellant and respondent.
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