Cenvat Credit Allowable On The Service Of Repair & Maintenance During Warranty Period: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that cenvat credit is allowable on the service of repair and maintenance during the warranty period.

The two-member bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Judicial Member) observed that Rule 2(l) of the Cenvat Credit Rules, 2004, particularly in the inclusion clause, covers "activities relating to business." Therefore, the said service during the warranty period also clearly falls under the category of ‘activities relating to business’.

The issue raised was whether the appellant is entitled to cenvat credit in respect of after-sale service provided during the warranty period of the sale of the goods manufactured by the respondent.

The respondent/assessee provided service during the warranty period after the removal of the goods from the factory; therefore, the service was not provided in relation to the manufacture of excisable goods.

The department submitted that, as per Rule 2(l), the only services that were provided up to the place of removal are cenvatable, whereas the service of after-sales services in respect of the goods manufactured and sold by the respondent was provided after the removal and sale of the pumps. Therefore, the cenvat credit was not admissible.

The respondent submitted that the after-sale service during the warranty period is included in the term ‘in or in relation to the manufacture of excisable goods'. The value of service has been included in the transaction value of the pumps sold by the respondent on which excise duty was discharged. The service was used in or in relation to the manufacture of the final product; even if there is any demand, the service is clearly covered under the inclusion clause of service related to business activity. Therefore, on both counts, the respondents are entitled to the cenvat credit.

The tribunal held that services provided by the services provider are a condition of sale and covered by the definition of Rule 2 of the Cenvat Credit Rules, 2004 under any activity relating to the business. If the appellant does not provide the services, the customer is not able to do business. These services are apparently availed of by the appellant as an activity relating to the business. Consequently, the appellant is entitled to take Cenvat credit on repairs and maintenance provided by the service provider during the period of warranty on behalf of the appellant.

Case Title: C.C.E. & S.T.-Rajkot Versus Falcon Pumps Private Limited

Citation: Excise Appeal No.11285 of 2013

Date: 01.03.2023

Counsel For Appellant: Vijay G. Iyengar

Counsel For Respondent: P D Rachchh

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