TaxTMI 
TaxTMI 
2019 (3) TMI 236
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....ted, Japan ('Honda Japan')], undertook manufacture of two-wheelers and parts thereof. The Appellant (also a subsidiary of Honda Japan) commenced its operations in 2006. In 2009, the spare parts division of HMSI was hived off to Appellant, considering its specialization in spare parts operation management. The Appellant subsequently executed Service Agreement dated February 21, 2009 ('Service Agreement') with HMSI. The Service Agreement was amended vide Amendment to Service Agreement dated December 24, 2010. 3. The Appellant receives various services from HMSI, the scope of which is detailed in Clause 2.1 of the Service Agreement (as amended). In terms of the Service Agreement, HMSI is entitled to a consideration computed at 8.5 percent of Appellant's net sales. The Appellant avails cenvat credit of the service tax paid on impugned services. Salient aspects of these services as referred in Service Agreement are as under: • Development of vendor network; • Development of dealer network; • Support for quality management; • Marketing and promotion support; • Assistance in statutory compliance; • Assistance....
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....ment of dealers are informed about the benefits of using Honda genuine parts and accessories; and • HMSI also conducts market surveys and field checks to ensure use of Honda genuine spare parts Sales promotion Assistance in statutory compliance • HMSI follows up with dealers for collection of statutory C-Forms; and • HMSI also intimates Noticee about termination or transfer of dealerships and advices Noticee to check liabilities of pending C-Forms and accordingly offers to collect same from such dealers Accounting Assistance in collection of funds • Noticee takes recourse to HMSI's field staff for follow up with dealer for settlement of accounts and balance reconciliations; and • HMSI intimates Noticee before termination of dealership. The Noticee accordingly ensures recovery of balance payable for closure of accounts Services used in or in relation to manufacture and clearance of final products Market information service • HMSI undertakes market research activities of collating data of dealer's performance (sales) and prepares a Key Performance Indicator Re....
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...., it is pertinent to understand the true import of definition of 'input service' as contained in Rule 2(l) of the Cenvat Credit Rules, 2004 ('Credit Rules'). In the present instance, the issue pertains with period post 2011. The extract of definition (during relevant period) is reproduced as under: "input service means any service,- (i) used by a provider of output service for providing an output service; or (ii) ... and includes services used in relation to modernisation, 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 up to 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 up to the place of removal, but excludes......;" 10. The definition of 'input service' is divided into three parts: • Means clause, covering services used directly or indirectly, in or in relation to....
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....rs supplying raw materials. Thus, the above service qualifies under Means clause and 'procurement of inputs' under Inclusive clause. The detailed scrutiny undertaken by HMSI helps the Appellant ensure the quality of raw materials employed and hence the quality of final products supplied. Hence, the above services also qualify under 'quality control' covered under Inclusive clause. Development of dealer network 16. HMSI identifies potential dealers and undertakes a detailed scrutiny by assessing them on various parameters. As noted above, the activity of clearance is not possible without presence of dealers in favour of whom sales can be conducted. Wehave been informed that these dealers form the major source of customers to whom Appellant supplies its final products. Thus, the above activity is squarely covered under the Means clause. The above services also qualify under 'sales promotion' specifically mentioned under Inclusive clause. Support for quality management 17. HMSI inspects two-wheelers upon receiving a complaint. In case defect is found in any of the parts, HMSI issues an alert to Appellant for undertaking necessary measures. The Appellant may on such alert i....
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..... The above services fall within the sweep of 'market research' specifically mentioned under Inclusive clause. Business support service 22. The Appellant also receives help from HMSI for issuing notices to its dealers and vendors and addressing their concerns. The sustenance of a strong vendor and dealer network is vital for continuous manufacturing activity. The Appellant through such interactions can ensure that the concerns highlighted by vendors and dealers can be rectified in timely manner without having an adverse impact on manufacturing activity. The above services are part and parcel of business of manufacturing activity covered under Means clause. The above services are also covered under 'procurement of inputs', 'sales promotion' and 'quality control' specifically mentioned under Inclusive clause. 23. We also do not find any merit in the revenue's contention that services must be received within the factory in order to qualify as 'input service'. In this regard, Rule 3 of the Credit Rules allows a manufacturer to avail cenvat credit on 'input services received'. It is noteworthy, that the availment of credit on input service is not qualified by the condition that....