2023 (5) TMI 429 - AT - Central Excise

Tribunal grants Cenvat credit for service tax on after-sales services, based on inclusive definition.

M/s. Mahindra & Mahindra Ltd. Versus Commissioner of Central Excise, Mumbai-V

The Tribunal allowed the appeal, setting aside the impugned order. It held that the appellant was entitled to Cenvat credit on service tax paid for ... Recovery of CENVAT Credit alongwith Interest and penalty - input services - after sale service - service tax paid on the same - HELD THAT:- The issue is no longer res integra decided in appellant’s own case by the Tribunal in CCE, NASHIK VERSUS MAHINDRA & MAHINDRA LTD [2012 (8) TMI 530 - CESTAT, MUMBAI] where it was held that if after sale service expenses are included in the assessable value, the assessee is entitled for input service credit on the expenses incurred on after sales charges. Thus, if the value of the services is claimed is included in the assessable value, the credit on the same cannot be denied - As per CA certificate, the value of after sale services is part and parcel of the assessable value for the purpose of payment of central excise duty which is not disputed by the Revenue in the impugned order. Appeal allowed. Issues Involved:1. Entitlement to Cenvat credit on service tax paid for after-sales service.2. Whether after-sales services are covered under the definition of 'input services' as per Rule 2(l) of the Cenvat Credit Rules, 2004.3. Applicability of the extended period of limitation for demand.4. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.Detailed Analysis:1. Entitlement to Cenvat Credit on Service Tax Paid for After-Sales Service:The appellant, engaged in the manufacture of automotive vehicles, provided after-sales services through authorized dealers. The dealers offered free services to customers based on coupons provided at the time of vehicle sale, and the appellant claimed the service tax paid on these services as Cenvat credit. The adjudicating authority denied this credit, which was upheld by the Commissioner (Appeals).2. Whether After-Sales Services are Covered Under the Definition of 'Input Services':The key issue was whether the appellant was entitled to Cenvat credit on service tax paid for after-sales services under Rule 3 of the Cenvat Credit Rules, 2004. The definition of 'input service' includes services used directly or indirectly in or in relation to the manufacture of final products and their clearance up to the place of removal. The Commissioner (Appeals) held that since the services were provided after the goods had been cleared from the place of removal, they did not qualify as 'input services.'However, the Tribunal referenced its earlier decision in the appellant's own case, where it was determined that if the value of after-sales services was included in the assessable value of the vehicles, the services would qualify as 'input services.' The Tribunal emphasized that the term 'transaction value' under Section 4(3) of the Central Excise Act, 1944, includes servicing and warranty, indicating that post-manufacturing expenses are part of the assessable value and thus eligible for input service credit.3. Applicability of the Extended Period of Limitation for Demand:The Commissioner (Appeals) justified the invocation of the extended period under Section 11A(1) of the Central Excise Act, 1944, citing suppression of facts by the appellant. The Tribunal, however, did not specifically address this issue in its final decision, focusing instead on the substantive issue of entitlement to Cenvat credit.4. Imposition of Penalty Under Section 11AC of the Central Excise Act, 1944:The Commissioner (Appeals) imposed a penalty equal to the amount of inadmissible Cenvat credit under Section 11AC, citing suppression of facts with intent to evade duty. The Tribunal's decision to set aside the impugned order implicitly nullifies the penalty imposed, as the primary basis for the penalty (wrongful availment of Cenvat credit) was overturned.Conclusion:The Tribunal allowed the appeal, setting aside the impugned order. It held that the appellant was entitled to Cenvat credit on service tax paid for after-sales services, as these were included in the assessable value of the vehicles. The Tribunal's decision was based on its previous rulings and the inclusive definition of 'input service' under the Cenvat Credit Rules, 2004. The Tribunal did not explicitly address the extended period of limitation or the penalty, but its decision effectively nullified these aspects by allowing the credit.