Custom, Excise & Service Tax Tribunal
J C B India Ltd vs Delhi-Iv on 5 March, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 52362 of 2015
[Arising out of Order-in-Original No. 22-25/KKK/Commr/Adjn/FBD-I/2014-15 dated
24.03.2015 passed by the Commissioner of CE & ST, Faridabad-I]
M/s J C B India Limited ......Appellant
23/7, Mathura Road, Bhallabhgarh,
Faridabad, Haryana 121004
VERSUS
Commissioner of Central Excise, ......Respondent
Delhi-IV Block D, New CGO Complex, NH-IV, N I T, Faridabad, Haryana 121001 WITH
(i) Excise Appeal No. 52363 of 2015 (M/s J C B India Limited vs C C E, Delhi-IV) [Arising out of Order-in-Original No. 22-25/KKK/Commr/Adjn/FBD-I/2014-15 dated 24.03.2015 passed by the Commissioner of CE & ST, Faridabad-I]
(ii) Excise Appeal No. 52364 of 2015 (M/s J C B India Limited vs C C E, Delhi-IV) [Arising out of Order-in-Original No. 22-25/KKK/Commr/Adjn/FBD-I/2014-15 dated 24.03.2015 passed by the Commissioner of CE & ST, Faridabad-I]
(iii) Excise Appeal No. 52365 of 2015 (M/s J C B India Limited vs C C E, Delhi-IV) [Arising out of Order-in-Original No. 22-25/KKK/Commr/Adjn/FBD-I/2014-15 dated 24.03.2015 passed by the Commissioner of CE & ST, Faridabad-I]
(iv) Excise Appeal No. 60494 of 2019 (M/s J C B India Limited vs C C E, Faridabad-I) [Arising out of Order-in-Original No. 19/2018-19/Commr/PP/FBD dated 24.01.2019 passed by the Commissioner of CE & ST, Faridabad] APPEARANCE:
Present for the Appellant: Sh. Vikrant Kackria, Advocate Present for the Respondent: Sh. Narinder Singh (Supdt.), AR Sh. Shivam Syal (Supdt.), AR 2 E/52362 to 52365/2015 & E/60494/2019 CORAM:
HON'BLE Sh. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Sh. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60082-60086/2024 DATE OF HEARING: 05.03.2024 DATE OF DECISION: 05.03.2024 PER : S. S. GARG These five appeals are directed against different impugned Orders passed by the Commissioner of Central Excise. Since the issue involved in all these appeals is identical, therefore, all the appeals are taken up together for discussion and disposal. The details of period, duty and penalty involved in all the five appeals are given herein below in a table form:
Sl. Appeal No. Period Duty Penalty
No.
1 E/52363/2015 February 2011 Rs.1,18,30,653/- Rs.1,18,30,653/-
to December
2011
2 E/52362/2015 January 2012 to Rs.20,99,394/- Rs.20,99,394/-
September 2012
3 E/52364/2015 October 2012 to Rs.3,08,86,674/- Rs.3,08,86,674/-
March 2013
4 E/52365/2015 April 2013 to Rs.5,25,74,628/- Rs.5,25,74,628/-
February 2014
3 E/60494/2019 March 2016 to Rs.6,42,34,134/- Rs.64,23,413/-
March 2017
2. Briefly stated 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 3 E/52362 to 52365/2015 & E/60494/2019 registered with the central excise department under Central Excise Act, 1944.
a) While selling the aforesaid earth moving machineries, the appellant promises "free services" to its customers, during the warranty period of the machines sold.
b) For this purpose, 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.
c) 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.
d) 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.
4 E/52362 to 52365/2015
& E/60494/2019
e) 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 service tax 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.
f) After following due process, the demand of cenvat credit alongwith interest and equivalent penalty, was confirmed vide impugned orders on the following grounds:-
(i) In view of the definition of „input services‟ under Rule 2(l) of Cenvat Credit Rules, 2004 and definition of place of removal under Section 4(c) of Central Excise Act, 1944, the after sale services are not covered under the definition of input services as the said services were provided by the dealers to the customers beyond the place of removal of goods and at the time of provision of the said services, the ownership/title of the goods were not with the appellant.
(ii) As the said services are claimed to be free service by the appellants, the same cannot form part of the assessable value.
Even otherwise, inclusion in assessable value is not criteria for claiming credit as per the above definitions.
(iii) Board‟s Circular No. 87/05/2006-ST dated 06.11.2006 clarified that dealer were liable to discharge service tax liability in respect of payment received by them from the company for 5 E/52362 to 52365/2015 & E/60494/2019 providing free after sale services to the customers. The Circular did not mention anything about the eligibility of credit to the company in respect of the said services.
(iv) The adjudicating authority mainly relied upon the case laws of Ambuja Cement Ltd - 2009 (14) STR 3 (P & H) to support his findings and confirm the above demands of Cenvat Credit.
Aggrieved by the said impugned orders, the appellant filed the present appeals.
3. Heard both the parties and perused the material on record. 4.1 The learned Counsel for the appellant submits that the impugned orders are not sustainable in law and are liable to be set aside as the same have been passed without properly appreciating the facts and the law and binding judicial precedents in the appellant‟s own case.
4.2 He further submits that Cenvat Credit on „warranty free services‟ has been correctly availed in terms of Rule 3(1) of the Cenvat Credit Rules since such services are covered under Rule 2(l) of the Cenvat Credit Rules, 2004.
4.3 He further submits that „in-warranty repair and maintenance services‟ rendered by the dealers are covered under „means‟ clause of the definition of „input service‟. The repair and maintenance services were received by the appellant from the dealers in order to fulfill warranty obligations annexed to the final products manufactured and 6 E/52362 to 52365/2015 & E/60494/2019 cleared by the appellant. He also submits that such warranty obligations enhance the marketability of the final products, thereby having a significant role to play in increasing sale of the final products by the appellant. He also submits that the sale of the goods is integrally connected in relation to the manufacture of goods, the services in question were used indirectly in relation to the manufacture of final products and the same would fall under the definition of „input service‟.
4.4 The learned Counsel further submits that this issue is no more res integra as the same has already been decided in favour of the assessee by the Tribunal as well as the Hon‟ble High Courts in various judgements. In support of his contention, he relies on the following case-laws:
(a) M/s J C B India Ltd vs CCE, Delhi-IV - Final Order No. A/60111-60112/2023 dated 28.04.2023 in Appeal Nos.
E/137/2010 & E/160/2010 (Tri. Chandigarh)
(b) M/s J C B India Ltd vs CCE, Delhi-IV - Final Order No. A/60214-60215/2023 dated 20.07.2023 in Appeal Nos. E/150/2012 & E/255/2012 (Tri. Chandigarh)
(c) Order-in-Appeal No. C. Appeal - favour- 38/CE/CGST-Appeal- Gurugram/SG/2019 dt. 31.05.2019
(d) Commissioner of Central Excise, Vadodara-II vs Danke Products - 2009 (16) STR. 576 (Tri.-Ahmd.)
(e) Carrier Airconditioning and Refrigeration Ltd. vs CCE Gurgaon
- 2016 (41) STR 1004 (Tri.-Del.)
(f) Zinser Textiles Systems Pvt. Ltd. vs CCE, Ahmedabad - 2014 (33) STR 301 (Tri.-Ahmd.) 7 E/52362 to 52365/2015 & E/60494/2019
(g) Leroy Somer India Pvt. Ltd. vs CCE, Noida - 2015 (39) STR 466 (Tri.-Del.)
(h) Elgi Equipments Ltd. vs CCE, Coimbatore - 2017 (51) STR 457 (Tri.-Chennai)
(i) Gujarat Forging Ltd. vs CCE, Rajkot -2014 (36) STR 677 (Tri.- Ahmd.)
(j) Lucas TVS Ltd. vs Comm. Of GST & C. Ex., Chennai 2020 (37) GSTL 180 (Tri.-Chennai)
(k) Johnson Controls Hitachi Air Conditioning India Ltd. vs CCE & ST- Ahmedabad-III - 2022-VIL-482-CESTAT-AHM-ST
(l) M/s New Holland Construction Equipment Pvt. Ltd. vs Commissioner of Central Excise, Ujjain - 2021-VIL-282-CESTAT- DEL-ST
(m) Coca Cola India Pvt. Ltd. vs Commissioner of Central Excise, Pune-III - 2009 (15) STR 657 (Bom.)
(n) Reliance Industries Ltd. vs CCE & ST- LTU, Mumbai 2022 (380) ELT 457 (Tri.-LB)
(o) Commissioner of Central Excise, Ludhiana vs Ambika Overseas - 2012 (25) STR 348 (P & H) 4.5 The learned Counsel also submits that the Commissioner (Appeals) in the appellant‟s own case for the subsequent period has allowed the Cenvat Credit of service tax on free warranty services vide Order-in-Appeal No. 38/CE/CGST/Appeal-Gurugram/SG/2019 dated 31.05.2019, which is for the subsequent period, whereas the present appeals pertains to earlier period, except the period there is no change in the facts and circumstances of the case. 4.6 He further submits that in the appellant‟s own case, cited supra, this Tribunal vide its Orders dated 28.04.2023 and 8 E/52362 to 52365/2015 & E/60494/2019 20.07.2023, has allowed the appeals of the appellant on the identical issue by passing detailed orders.
5. On the other hand, the learned DR reiterated the findings of the impugned orders.
6. After considering the submissions of learned Counsel for the appellants and perusal of the material on record, we find that the identical issue in the appellant‟s own case has been considered at length by this Tribunal and thereafter, this Tribunal has allowed the appeals of the appellant. It will be relevant to reproduce the said findings of this Tribunal on this issue itself, which are recorded in para 16 to 28 in Final Order No. A/60111-60112/2023 dated 28.04.2023 in Appeal Nos. E/137/2010 & E/160/2010, which are reproduced herein below:
"16. We have considered the rival submissions made by both the parties and perused the records and the written submissions and additional written submissions filed by the both the parties.
17. The appellant claims that 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 „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 in relation to the manufacture of the final products.9 E/52362 to 52365/2015
& E/60494/2019
18. The appellant further claims that the final products manufactured and cleared by the appellant are expensive and their maintenance is also cost-intensive for which specific training is required. The after sales services is the central pillar of the appellant‟s promotional strategy towards sale of its final products, since these services augment the value of final products and thus, become important considerations for the customers while purchasing such products. Accordingly, the final products carry contractual obligations of the appellant as the manufacturer of such goods, which are enumerated under the warranty policy of the final products. The dealers provide the services in accordance with the checklist provided by the appellant. The appellant also contends that it manufactured the final products with the sole intention to sell them and thus, sale of goods is integrally connected in relation to the manufacture of goods. The contention, therefore, is that since the repair and maintenance services are fundamentally linked to sale and sale directly affects the manufacturing activities, the services were used indirectly in relation to the manufacture of final products and would fall under the „means‟ part of the definition of „input service‟. Thus, it has been contended that the appellant was justified in availing CENVAT credit of the service tax paid by the appellant on „maintenance and repair services‟.
19. The issue, therefore, that arises for consideration in the present appeal is whether CENVAT credit of service tax paid by the appellant on „repair and maintenance services‟ provided by the dealers for fulfilling the warranty obligations of the appellant has been denied for good and valid reasons.
20. To examine this issue, it would be necessary to reproduce the relevant portion of the definition of „input 10 E/52362 to 52365/2015 & E/60494/2019 service‟, as defined in rule 2(l) of the Credit Rules. Rule 2(l) was substituted by Notification dated 01.03.2011 w.e.f. 01.04.2011 and it is reproduced below :
w.e.f. 01.04.2011- 2(l) "input service" means any service,-
(i)used by a provider of output service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;
but exclude, Xxxxxxxxxxx xxxxxxxxxxx xxxxxxxxxxx"
(emphasis supplied)
21. Rule 2(l), as it stood prior to 01.04.2011, is also reproduced below :
prior to 01.04.2011- 2(l) "input service" means any service,-
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final 11 E/52362 to 52365/2015 & E/60494/2019 products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;"
(emphasis supplied)
22. „Input service‟ either prior to 01.04.2011 or w.e.f. 01.04.2011 means any service used by the manufacturer, whether directly or indirectly, or in relation to the manufacture of final products. The appellant is under an obligation to provide after sale service on the final products manufactured by it. The dealers provide the services and the appellant pays service tax on the amount paid by it to the dealers. The service is provided free of cost by the dealers during the warranty period but the appellant makes payment to the dealers for the services they provide to the customers. The repair and maintenance services are, therefore, linked to the sale. The services are, therefore, used indirectly in relation to the manufacture of final products.
23. Further, we find that the Ld. Commissioner (Appeals) has dropped the demand of the appellant on the very same issue for the subsequent period vide its order dated 31.05.2019 and the department has not brought anything on record to show that they have been challenged the said 12 E/52362 to 52365/2015 & E/60494/2019 decision, if that is correct, then the department has accepted the said decision and in the present appeals they are precluded from taking a contrary stand.
24. Further, we also find that the department has filed appeals before the Hon‟ble High Court where the Tribunal has given the relief to the assessee but the decisions of the Tribunal in those cases have not been stayed and hence, the ratio of the said decisions are binding on the lower authorities.
25. Further, we also find that the department has not been able to distinguish the latest two decisions of the Tribunal in the case of Johnson Controls Hitachi Air Conditioning India Ltd. and M/s Case New Holland Construction Equipment (I) Pvt. Ltd. cited (supra) involving identical issues wherein all earlier decisions of the Tribunal were considered and thereafter, the demands were dropped.
26. Further, we are of the opinion that the decisions relied upon by the Revenue are not directly on the issue and does not reflect the controversy involved in the present case.
27. In view of our discussion above, 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.
28. The ratio of the decisions relied upon by the appellant is squarely applicable to the instant case and relying upon the aforesaid decision, we find that the credit on warranty service provided free of cost during the warranty period through third parties cannot be denied." 13 E/52362 to 52365/2015
& E/60494/2019
7. By following the ratio of the above cited decisions, we are of the considered opinion that the impugned orders are not sustainable in law and therefore, we set aside the same by allowing the appeals of the appellant with consequential relief, if any, as per law.
(Operative part of the order pronounced in the open court) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) RA_Saifi