Relief to LG Electronics: CESTAT Allows CENVAT Credit on Call Centre Services for After-Sales Support [Read Order]

The Allahabad Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT), has held that LG Electronics India Pvt. Ltd. is entitled to avail CENVAT credit on service tax paid for call centre services utilized for after-sales support. The Tribunal found that such services directly contribute to the brand image and sales promotion of the company’s manufactured goods, thereby qualifying as an input service under Rule 2(l) of the CENVAT Credit Rules, 2004.

The appellant, LG Electronics India Pvt. Ltd.is engaged in the manufacture and clearance of consumer electronics such as air conditioners, televisions, refrigerators, and washing machines. The company also provides repair and maintenance services through Authorized Service Centres (ASCs) and Direct Service Centres (DSCs) for products covered under warranty and beyond.

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To facilitate customer service requests, LG Electronics provided a toll-free call centre where customers could register complaints or seek assistance. These calls were either directed to DSCs (owned by LG Electronics) or to ASCs, depending on the customer’s location. The call centre services were availed by LG Electronics, and service tax was duly paid on these expenses.

During an audit for the period April 2013 to March 2014, the tax department disallowed the CENVAT credit claimed by the appellant on call centre services. A Show Cause Notice (SCN) was issued on the grounds that these services did not have a direct or indirect nexus with the manufacture or clearance of final goods and were merely post-manufacturing services, making them ineligible under Rule 2(l) of the CENVAT Credit Rules, 2004.

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The CESTAT observed that the adjudicating authority had incorrectly interpreted the definition of "input service" by ignoring its inclusive part. The Tribunal emphasized that sales promotion activities directly contribute to the marketability of goods, and call centre services play a crucial role in enhancing customer satisfaction and brand loyalty.

The Tribunal noted that the call centre services facilitated after-sales support, which is an essential part of sales promotion and brand building. It was held that these services were used by LG Electronics for handling customer complaints, coordinating repairs, and ensuring product servicing, which directly contributed to increasing customer trust and future sales. The cost of such services was included in the assessable value of the final product, making them eligible for CENVAT credit.

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The Tribunal relied on several judicial precedents, such as CCE, Nagpur v. Ultratech Cement Ltd. (2010) where ut was held that any service that contributes to the final value of a product is eligible for CENVAT credit. Similarly in the case of Coca-Cola India Pvt. Ltd. v. Commissioner (2009) the court had recognized that services used in brand building and customer engagement qualify as input services.

After analyzing the facts and legal provisions, the CESTAT allowed LG Electronics' appeal and set aside the demand raised by the department. 

The Tribunal consisting of P.K. Choudhary (Judicial Member) and Sanjiv Srivastava (Technical Member) concluded that the denial of CENVAT credit was unjustified, as call centre services directly contributed to sales promotion, which is covered under the inclusive definition of input service.

To Read the full text of the Order CLICK HERE

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