Tribunal allows Cenvat credit for warranty services, branch office not engaged in trading

The Tribunal held that Repair and Maintenance services provided during the warranty period are taxable and not exempted, entitling the appellant to Cenvat credit on input services. Additionally, the Tribunal determined that the appellant, as a branch office selling its own manufactured goods, was not engaged in trading activity. Consequently, the impugned order denying Cenvat credit was set aside, and the appeal was allowed with any consequential relief.

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Issues:
1. Whether the service of Repair and Maintenance provided during the warranty period is an exempted serviceRs.
2. Whether the appellant is engaged in trading activityRs.

Analysis:

Issue 1:
The appellant appealed against the denial of Cenvat credit on input services due to providing free Repair and Maintenance services during the warranty period. The Revenue argued that as no money was charged for these services, they should be considered exempted. However, the Tribunal found that Repair and Maintenance services are taxable under Section 65(105)(zzg) of the Finance Act, 1994, and not exempted. The fact that the appellant did not charge for these services does not make them exempted. Therefore, the Tribunal held that the appellant was providing taxable services during the warranty period, entitling them to Cenvat credit on input services.

Issue 2:
The question of whether the appellant was engaged in trading activity was also raised. The appellant, being a branch office of the head office, sold goods transferred from the head office, which were manufactured by the appellant. The Tribunal concluded that since the appellant was selling their own manufactured goods, they could not be classified as a trader. Therefore, the Tribunal held that the appellant was not engaged in trading activity.

In conclusion, the Tribunal ruled in favor of the appellant on both issues. They cited a previous order allowing Cenvat credit for the appellant and the dropping of demands by the adjudicating authority for subsequent periods. As a result, the impugned order denying Cenvat credit was set aside, and the appeal was allowed with any consequential relief.

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