Cenvat credit on dealer warranty services allowed where warranty cost formed part of assessable value and contractual obligation.

Cenvat credit was held admissible on service tax paid for warranty services provided by dealers on behalf of the assessee, because the warranty obligation was contractual and the warranty cost formed part of the assessable value. The service tax related to an expenditure integral to manufacture, sale of quality products, and customer satisfaction, so the credit could not be disallowed.

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Issues: Whether Cenvat credit was admissible on service tax paid on warranty services provided by dealers on behalf of the assessee.

Analysis: The cost of warranty formed part of the assessable value and the warranty obligation was contractual in nature. Service tax had been paid on the warranty services rendered on behalf of the assessee, and such expenditure was treated as an integral element connected with manufacture, sale of quality products, and customer satisfaction.

Conclusion: Cenvat credit could not be disallowed on the service tax paid on warranty services, and the assessee succeeded on this issue.

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