Custom, Excise & Service Tax Tribunal
Ifb Industries Limited, Bhopal vs C.C.E. Bhopal on 23 December, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. IV
Appeal No. ST/1724/2010-Cu[SM]
[Arising out of Order-in-Appeal No. 142/BPL/2010, dated28.09.2010, passed by the Commissioner of Central Excise, Bhopal]
For approval and signature:
Honble Shri V. Padmanabhan, Member (Technical)
IFB Industries Limited, Bhopal .Appellant
Vs.
C.C.E. Bhopal .Respondent
Appearance:
Pulak Saha, FCA for the Appellant Sh. H.C. Saini, AR for the Respondent CORAM:
Honble Shri V. Padmanabhan, Member (Technical) Date of Hearing: 23.12.16 FINAL ORDER NO. 56363 /2016-Cu[SM] Per V. Padmanabhan The appeal is directed against the Order-in-Appeal dated 28.9.2010 passed by the Commissioner (Appeal), Bhopal. The appellant is registered for providing services of repair and maintenance. They are also engaged in the manufacture of washing machines, which are cleared with warranty for a certain period. During the period of warranty, the appellant, through their branch offices, undertakes repair and maintenance, for which no amount is specifically charged. For purposes of such repair and maintenance during warranty period, certain spare parts are consumed. The Department took the view that since no consideration is charged and no Service Tax is paid on such activity of repair and maintenance undertaken during the warranty period, the appellant is not entitled to the Cenvat Credit as inputs to the extent of spares used for rendering such service. Original Authority ordered for recovery of Cenvat Credit to the extent of Rs. 3,29,716/- along with interest and penalty. Further, he also demanded service Tax to the extent of Rs. 2,07,439/-, which was paid by utilizing such Cenvat Credit.
2. When the issue was challenged before the Commissioner (Appeals), he upheld the order to the extent that he permitted cash recovery of the difference between the two amounts mentioned above. Aggrieved with the above order, the present appeal has been filed.
3. With the above background, we heard Shri Pulak Saha, ld. Counsel for the appellant as well as Shri H.C. Saini, ld. AR for the respondent.
4. The Ld. Counsel for the appellant submitted that the demand has three components as under:-
(i) Rs. 30,268/- which corresponds to Cenvat credit taken on inputs said to be used by them for rendering free service during the warranty period.
(ii) Rs. 1,52,278/- being Cenvat credit taken on cargo handling, courier service etc. on the ground that these services have no nexus with their output service.
(iii) Rs. 60,270/- this amount is towards Cenvat credit wrongly utilized and he says that this demand is also covered by the previous two components.
5. With reference to (i) above, Ld. Counsel submitted that the issue stands decided in their favour by the Tribunal in the case of Carrier Airconditioning & Refrigeration Ltd. Vs. C.C.E., Gurgaon 2016(41) S.T.R. 1004 (Tri.- Del.).
6. With reference to the second issue, he submitted that Cenvat credit on services such as Cargo handling, Courier service etc which stands denied by the authorities below, are also permissible, in view of the Tribunals decision in the case of Montage Enterprises Pvt. Ltd. Vs. Commissioner of C. EX. & S.T., Indore 2015 (38) S.T.R. 219 (Tri.- Del.) as well as in the case of Commissioner of C. Ex. & Cus., Vapi Vs. Apar Industries Ltd 2010(20) S.T.R. 624 (Tri.- Ahmd.). He further submitted that if the above two issues are decided in their favour the third point becomes anfractuous.
7. The ld. DR supported the orders passed by the authorities below.
8. Cenvat Credit taken on the inputs used as spares for providing repair and maintenance service during the warranty period has been disallowed in the impugned order. Such repair and maintenance services, when they are rendered during the warranty period are not specifically charged separately; hence Revenue has taken the view that Cenvat credit on such inputs will not be admissible. But I find that such benefit has been allowed by the Tribunal in the case of Carrier Air conditioning & Refrigeration Ltd. (Supra). The Tribunal in that case held as follows:-
10. The Cenvat credit demand of Rs. 9,82,03,090/- is in respect of the service received from the dealers who had provided repair and maintenance service during warranty period on behalf of the appellant to the customers. The sale price of the air conditioners sold by the appellant to their consumers during the period of dispute included the warranty charges. There is no dispute that Central Excise duty had been paid on the value which included the warranty charges. During the warranty period, the appellant were under obligation to provide free repair and maintenance services to the consumers, who had purchased the air conditioners from them. However, instead of providing the free repair and maintenance service directly in discharge of their obligation, the appellant roped in the dealers who provided free repair and maintenance to the consumers on their behalf and the dealers for providing this service on behalf of the appellant, received the payment from the appellant and on that amount, they paid the service tax. The point of dispute is as to whether the service provided by the dealers to the appellant is an input service and whether the appellant would be eligible for Cenvat credit in respect of the same. The service received by the appellants from their dealers is Business Auxiliary Service which has to be treated as an input service for the appellant used in or in relation to manufacture of their final products, as free warranty repair and maintenance during warranty period, has enriched the value of the goods. This issue stands decided in favour of the appellant by the Tribunals judgment in the case of Danke Products (Supra) and Gujarat Forgings(supra and also in the case of Zinser Textile Systems Pvt. Ltd. (supra). In view of this, this Cenvat credit demand is also not sustainable and has to be set aside.
By following the decision of the coordinate bench (DB), I am of the view that such Cenvat credit cannot be denied.
9. The Cenvat credit availed on services such as Cargo handling Courier services etc. stand denied on the ground that these services have no nexus with their output services. Admittedly such services, have been used for purposes of repair and maintenance services, which have not been explicitly charged to Service Tax since the same has been rendered during warranty period. I find that the credit on such services has been permitted as input services under Rule 2(l) of the Cenvat Credit Rules, 2004, in the cases cited by the appellant. In view of the above, denying Cenvat credit on such service is not justified.
10. As already discussed above, the balance demand of Rs. 60,270/- becomes un-sustainable in the light of my findings above.
11. In view of the above, the impugned order is set aside and appeal allowed.
[Dictated and Pronounced in the open court] V. Padmanabhan (Member Technical) RS 5 ST/1724/2010-Cu[SM]