JCB India Ltd. Vs CCE (CESTAT Chandigarh)
CESTAT Chandigarh held that CENVAT Credit on warranty service provided free of cost during the warranty period through third parties dealer cannot be denied to the manufacturer.
Facts- The appellant is engaged in manufacturing and selling of earth moving machineries. While selling, the appellant promises to provide ‘free services’ to its customers, during the warranty period of the machines sold.
The appellant entered into a contractual relationship with its dealers, who are requested to provide the aforesaid free service to the customers, on behalf of JCB India Limited. Pursuant to aforesaid contractual relationship, the dealers of the appellant render free service to the customers concerned, which service is rendered on behalf of the appellant. The dealer does not charge anything from the customer in this regard inasmuch as, the contract for rendition of service is with the appellant and not with customer concerned.
For rendition of aforesaid services, the dealers of appellant charges JCB India Limited. This service is subject to service tax and accordingly, the dealers admittedly pay service tax on the aforesaid services rendered to the appellant. This service tax so paid is in turn charged and recovered from the appellant and the appellant being entitled in law, takes Cenvat Credit thereof under Cenvat Credit Rules, 2004.
During the course of audit conducted by the department, it was noticed that the appellant paid certain payment to their dealers which they claimed to be charges after sale services provided by the dealers free of cost to their customers on behalf of the appellant.
On the allegations of wrongful availment of cenvat credit by the appellant, the show cause notices were issued for denial and recovery of said credit availed by the appellant in respect of charges paid by them to the dealers for carrying out after sale services on the ground that the after sale services provided by the dealer were not covered under the definition of input services as provided under Rule 2(l) of Cenvat Credit Rules, 2004.
The demand of cenvat credit alongwith interest and equivalent penalty, was confirmed vide impugned order.
Conclusion- We hold that the appellant has 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.
We find that the credit on warranty service provided free of cost during the warranty period through third parties cannot be denied.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
These two appeals are directed against the common impugned order dated 30.10.2009 passed by the Commissioner of Central Excise, Delhi-IV. Since the issue involved in both the appeals are same, therefore, both the appeals are taken up together for disposal.
2. Briefly stated the facts of the present case are that the appellant is engaged in the manufacture of Excavator Loaders & Earthmoving Machines of chapter 85 of Central Excise Tariff Act, 1985 and was registered with the central excise department under Central Excise Act, 1944.
