TaxTMI 
TaxTMI 
2026 (2) TMI 782
X X X X Extracts X X X X
X X X X Extracts X X X X
....ements under the head 'earnings in foreign currency' as receipts at Schedule 18 of the balance sheet. Further, on detailed scrutiny, it was alleged that these amounts were received for carrying out maintenance/repair for the goods traded by the appellant during the warranty period, for which the consideration was received as reimbursement of cost of components used by the appellant. The Commissioner in the impugned order held that the appellant was providing taxable service under the category of 'Management, Maintenance or Repair Service' and hence, they were liable to pay service tax on the amounts received from IBM, Singapore. The Commissioner also held that the entire amount that was received by them was liable to service tax since the benefit of Notification No.12/2003S.T. dated 20.06.2003 was not applicable to them, accordingly confirmed the service tax amounts invoking suppression and imposed various penalties. Aggrieved by these orders, the appellant is in appeal before us. 3. The Learned Counsel submits that appellant is involved in the business of sale of its products and provides related services both in domestic and export market. They also import products from overse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t which includes warranty charges. It is also submitted that if the allegations of the department were to be accepted, then the parts imported by the appellant would qualify as inputs and they will be eligible for cenvat credit as per the Cenvat Credit Rules, 2004. 3.3 With regard to limitation, it is submitted that since the facts were known to the department from the beginning, the question of suppression does not arise and moreover, when the first show-cause notice was issued on 30.09.2011 invoking suppression for the second show-cause notice dated 22.10.2018 for the second time for the same issue cannot be sustained. Hence, both the show-cause notices being issued beyond the normal period cannot be sustained. Relied on the decision of the Tribunal in the case of Sham Spectra Pvt. Ltd vs. Commissioner of Service Tax, Delhi Final Order No.56196/2024 dated 31.07.2024 to impress on the fact that suppression cannot be invoked. 4. The learned Authorized Representative (AR) on behalf of the Revenue reiterating the findings of the Commissioner in the impugned orders submits that the appellant is liable to pay service tax on the amounts received by them since the same are towards ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eselling in India. Subsequent to import of finished goods / IT products for resale, M/s IBM India sold the products to the end customers in India and as the obligation of warranty was cast on IBM, these products were sold with inbuilt warranty obligation for a specified period. This warranty obligation covered not only replacement of parts but also labour support. I find that since the warranty obligation covered replacement of defective parts and / or repair of the equipment's during 'warranty period' for which no consideration was received from the end customers, no invoices or bills or challans or any other documents, evidencing provision of a taxable service was raised by M/s IBM India. Therefore, the fact of provision of taxable service can only be ascertained from the terms and conditions of the agreements executed by the concerned parties or any other documents, if any. 11.2.3 Further I find that for the purpose of re-sale of information technology products manufactured by the overseas IBM entities in India, M/s IBM India entered into a Distribution Agreement with the overseas IBM entities under which M/s IBM India had procured/Imported IT products from outs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to IBM India. It is pertinent to note that though no consideration was received from the end customers by IBM India towards the warranty provided to them (under warranty obligation), compensation was made by the overseas IBM entities to IBM India for damages equal to the amount of actual financial loss (which contained actual cost of parts and labour charges) incurred by IBM India. Therefore, it is evident that the 'intention of parties in the present case was to provide the warranty service to the end customers who had purchased Machines/IT products from IBM India. xxxx 11.3.2 Therefore, from the terms and conditions of the Distribution Agreements entered into between M/s IBM India and the overseas IBM entities and also the nature of transactions, provision of a taxable service, i.e. warranty service is established. Hence, in light of the above Board's Circular dated 20.06.2003, irrespective of the facts that no consideration was received from the end customers of IBM India and no agreement to provide warranty service to the overseas IBM entities existed, I am of the considered view that M/s IBM India had provided the warranty service which is classifia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oss shall be equal to: a. The actual costs of labor and parts incurred directly by you less anything you receive from the disposal of the parts which were replaced, or b. The actual charges made to you by a third party repair organization working for you in carrying out repairs to defective Machines. 11. Warranty Service We do not provide any warranty to your Customers and you agree not to represent to your Customers that we have any obligation towards them for defects in Machines which you sell. From the above it is evident that the reimbursable expenses are towards the installation cost, transportation cost and for the replacement of parts, which has nothing to do with any services rendered by the appellant. The appellant had also entered into a agreement with their customers which is placed on record as IBM India Pvt. Ltd. Customer Agreement dated 22.08.2007 as per which the appellant provides warranties to their customers which reads as follows: Part 2: Warranties 2.1 The IBM India Private Limited Warranties Warranty for IBM India Private Limited Machines IBM India Private Limited warrants that eac....