TaxTMI 
TaxTMI 
2026 (4) TMI 1425
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....s repair charges on inputs damaged during transportation. 2. The brief facts are during audit for the period from February 2014 to February 2015, it is observed that the Appellant had availed irregular input service tax credit in respect of repair services and raised debit note towards goods received in damaged condition, but availed full CENVAT credit, in other words, not reversed the CENVAT credit proportionate to the goods damaged and in certain cases, invoices has mentioned the description as parts supplied free of cost, however on the contrary charged value of excise duty in some invoices. Accordingly, a show cause notice was issued on 14.08.2015 and thereafter one more show cause notice issued for the period from March, 2015 to Dec....
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....llant further submits that Appellant is a manufacturer of 'shot blasting machine' for which they purchase various components from local suppliers as well as from outside India. Learned Chartered Accountant also submits that the appellant has cleared the bought-out items as warranty replacement without payment of duty. However, wherever manufactured goods were cleared as warranty replacement, duty was paid. As the appellant has to prepare the invoice for each and every removal of goods and also has to mention the value of the goods for the purpose of transportation, the Audit officer has made an observation based on the single reason that appellant had followed divergent practice. In this regard, Learned Chartered Accountant submits ....
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....en the value of clearances (in this case spare parts) under free warranty are included in the final products. Therefore, it is seen that excise duty is payable in respect of final products unless it is exempted as per Notification No. 3/2011-CE (NT) dated 1.3.2011 and the rule 3(5) of the Cenvat Credit Rules, 2004, For this exemption, it is necessary to establish on records that warranty charges (value of spare products) are already included in the final product and also the fact that value of present clearances of spare parts are already taken care while discharging duty for the final product". 4. Learned Chartered Accountant submits that the learned adjudicating authority has mixed up the meaning of 'input' and also Rule 3(5) of Cenvat....
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....y on the debit note on the conclusion that the inputs were not used. Learned CA submits that in such cases, the duty demand should have been very much by invoking Rule 2(k) read with Rule 3(1) of the Cenvat Credit Rules, 2004 to demand back the Cenvat element as such. There is nothing on record to show that the appellant has not used the material in the production. It is clearly mentioned that the appellant had charged the amount to the extent of cost of repair incurred to repair the goods and it is not the case of discarding the damaged goods as such. Therefore, appellant is very much eligible for the input tax credit and duty cannot be demanded on the amounts in the debit notes issued for the recovery of repair charges incurred by the app....
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....ppeal No. 35 to 36/2018 dated 17.01.2018, wherein it is held that appellant had a strong case related to demand of Central Excise duty on free warranty replacements and remanded with a specific direction to consider all the submissions made by the appellant. As per Notification No. 3/2011-CE (NT) dated 01.03.2011, inputs means any goods including accessories, along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products. As per the procedure followed by the Appellant, if these removed goods were inputs, no duty was paid and if the removed goods were manufactured goods, duty was charged and paid. We find that such practice cannot be considered as d....