TaxTMI 
TaxTMI 
2021 (8) TMI 963
X X X X Extracts X X X X
X X X X Extracts X X X X
....oods as well as service tax paid on input service under the CENVAT Credit Rules, 2004 [the Credit Rules]. 3. The appellant sold the final products to its customers, either directly at the factory gate or through the dealers appointed by it. According to the appellant, the central pillar of the appellant's promotional strategy, as also the unique selling point, is its after-sales services to be provided to customers during the warranty period in respect of final products sold. The appellant mandatorily included charges for such services in the assessable value of final products, as contemplated under section 4 of the Central Excise Act, 1944[the Excise Act]. 4. Pursuant to the aforesaid promotional strategy, the appellant entered into "Dealership Agreement" with various dealers across India. As per the Dealership Agreement, the dealers so appointed have to make efforts to promote the sale of final products and also provide after sales services thereof mandatorily during the warranty period, for which the dealers are required to maintain proper infrastructure and documentary evidences, including the service reports. Such services pertain to machine servicing activities comprisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l, 2011 to June, 2015. xxxxxxxx xxxxxxxx xxxxxxxx 4. The ld. Counsel submitted that during the period under warranty, the dealers provided after sales service to the customer and the same was reimbursed to them by the appellant. The value of in-warranty repair was included in the cost of the goods and such services qualified as 'input service'. He also relied on the following decisions in which the issue stands settled in favour of assesses : i) M/s Carrier Air Conditioning & Refrigeration Ltd. vs CCE, Gurgaon, 2016 (41) STR 1004 (Tri.-Delhi) ii) Samsung India Electronics Pvt. Ltd. vs CCE & ST, Noida, 2017-TIOL-05-CESTAT-All. 5. The ld. DR justified the impugned order. He submitted that the definition of 'input service' was modified w.e.f. 01.04.2011 and after such amendment, after sales service in the form of repair etc. is not covered by the definition. He further submitted that in the case laws cited by the appellant, the benefit stands allowed by the Tribunal during the period prior to 01.04.2011 and hence the cases are distinguishable. xxxxxxxx xxxxxxxx xxxxxxxx" 9. After considering the amended definition of 'input service' w.e.f. 01.04.2011, as contained....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... We find that these case laws are not applicable for the period under consideration. 10. In view of the above discussions, we find no reason to interfere with the impugned order which is upheld and the appeal filed is dismissed." [emphasis supplied] 10. This order of the Tribunal was assailed by the appellant before the Madhya Pradesh High Court in Central Excise Appeal No. 57/2018, but the Appeal was ultimately dismissed as withdrawn by order dated 13.01.2021 for the reason that the matter was settled under the Sabka Vishwas Scheme, 2019. 11. For the subsequent period from July 2015 to December 2016, a show cause notice dated 03.05.2017 was also issued to the appellant proposing to deny CENVAT credit amounting to Rs. 63,95,326 with interest and penalty on the ground that the 'repair and maintenance services' are not a specified category of input service and further are not used directly or indirectly, in or in relation to the manufacture of the final products. The show cause notice also mentions that the said services are also not covered under rule 2(l) of the Credit Rules because the definition of input service is restricted upto the factory or place of removal. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....grally 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". In support of this submission, reliance has been placed on the following decisions of the Tribunal : (a) Carrier Airconditioning & Refrigeration Ltd. v. C.C.E., Gurgaon [2016 (41) STR 1004 (Tri.-Del)]; (b) Honda Motorcycle & Scooter India Pvt. Ltd. & Ors. v. CCE&ST, Alwar [2018 (12) TMI 929 - CESTAT New Delhi] ; (c) Commissioner of C. Ex., Nashik v. Mahindra & Mahindra Ltd. [2012 (28) STR 382 (Tri.-Mumbai)]; and (d) Samsung India Electronics Pvt. Ltd. vs Commissioner of Customs, Central Excise & Service Tax, Noida. [2017-TIOL-05-CESTAT-MUMBAI] (iii) In the alternative, the in-warranty 'repair and maintenance services' are also covered in the 'inclusive' portion of the "input service" definition under the term 'sales promotion'; (iv) Reliance on the order of the Tribunal in the own case of the appellant for the previous period, is misplaced. The Tribunal wrongly distinguished the authorities cited by the appellant by holding that the same were rendere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nance 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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) 23. '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 fin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o had purchased the air conditioners from them. However, instead of providing the free repair and maintenance service directly in discharge of their obligation, the appellant roped in the dealers who provided free repair and maintenance to the consumers on their behalf and the dealers for providing this service on behalf of the appellant, received the payment from the appellant and on that amount, they paid the service tax. The point of dispute is as to whether the service provided by the dealers to the appellant is an input service and whether the appellant would be eligible for Cenvat credit in respect of the same. The service received by the appellants from their dealers is Business Auxiliary Service which has to be treated as an input service for the appellant used in or in relation to manufacture of their final products, as free warranty repair and maintenance during warranty period, has enriched the value of the goods. This issue stands decided in favour of the appellant by the Tribunal's judgment in the case of Danke Products (supra) and Gujarat Forgings (supra) and also in the case of Zinser Textile Systems Pvt. Ltd. (supra). In view of this, this Cenvat credit demand is al....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In Samsung India Electronics, the appellant provided after sale service to the customers in respect of the products sold through authorized service centres and bore expenses incurred for providing such service during the warranty period. The authorized service centres paid service tax and the appellant took CENVAT credit. The Department, however formed an opinion that the services provided by the authorized service centres were not 'input services' for the goods manufactured and cleared by the appellant. The Tribunal, in view of the earlier decision of the Tribunal in Mahindra & Mahindra Ltd., held that the CENVAT credit can be taken on service tax paid on expenses incurred for providing warranty service. 29. The Division Bench of the Tribunal, in the own case of the appellant, for the earlier period from April 2011 to June 2015, however, took a contrary view holding that the earlier decisions of the Tribunal in Carrier Airconditioning & Refrigeration and Samsung India Electronics were distinguishable since they were rendered for the period prior to 01.04.2011, when the definition of 'input service' was different. The finding recorded by the Tribunal in this decision dated 24.1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e law laid down in the aforesaid three decisions of the Tribunal rendered in Carrier Airconditioning & Refrigeration, Honda Motorcycle and Samsung India Electronics. 34. The principle of per incuriam has been developed in relaxation to the rule of stare decisis. While referring to exception to the rule of stare decisis, it has been observed in 'Precedent in England Law' by Rupert Cross, 1961 Edition: "No doubt any court would decline to follow a case decided by itself or any other court (even one of superior jurisdiction), if the judgment erroneously assumed the existence or non-existence of a statute, and that assumption formed the basis of the decision. This exception to the rule of stare decisis is probably best regarded as an aspect of a broader qualification of the rule, namely, the courts are not bound to follow decisions reached per incuriam." 35. In State of U.P. vs. Synthetics and Chemicals Ltd [(1991) 4 SCC 139], the Supreme Court observed: "40. 'Incuria' literally means 'carelessness'. In practice per incuriam appears to mean per ignoratium. English courts have developed this principle in relaxation of the rule of stare decisis. The 'quotable in l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ule having the force of statute. The rule apparently applies even though the earlier court knew of the statute in question. If it did not refer to and had not present to its mind, the precise terms of the statute. Similarly, a court may know of the existence of a statute and yet not appreciate its relevance to the matter in hand; such a mistake is again such incuriam as to vitiate the decision. These are the commonest illustrations of decision being given per incuriam. In order that a case can be decided per incuriam, it is not enough that it was inadequately argued. It must have been decided in ignorance of a rule of law binding on the court, such as a statute. (See the observations in 'Salmond on Jurisprudence" Twelfth Edition, pages 150 and 169)." 39. It, therefore, follows that the principle of per incuriam can be applied for such decisions which have been given in ignorance of some statutory provision or some authority that is binding. 40. In the present case, the Tribunal in the decision dated 24.11.2017, distinguished the earlier binding decisions of the Tribunal on a mistaken belief that an amendment had been made in a definition of "input service", whereas the 'means....