By TIOL News Service

MUMBAI, MAR 30, 2018: THE appellant is a leading paint company and has installed Automatic Colour Dispensing Machine (ADM) at the premises of their authorized dealer/distributor.

The ADM is owned by the appellant company and is given on lease to authorized dealers.On the lease rent, the appellant is paying Service Tax. The repair and maintenance of such ADMs under Annual Maintenance Contract (AMC) are controlled by their Head Office at Gurgaon, which is registered as Input Service Distributor (ISD) and Service Tax credit thereof is distributed between their three plants under Rule 7 of CCR, 2004.

A SCN was issued to the appellant proposing denial of CENVAT Credit on the ground that AMC service of ADMs at the dealers/distributors premises would not come under the ambit of input service under Rule 2(l) of CCR, 2004 as such service had been rendered neither at their manufacturing premises nor at their Head Office.

Both the lower authorities held against the appellant and, therefore, they are before the CESTAT.

It is submitted that the ADMs were leased out to the dealers/distributors and on the lease rental the appellants were discharging Service Tax; repair and maintenance received for repair of ADMs is an input service for rendering of the output service i.e. renting of machine. Albeit the fact remains that the service was provided outside the factory premises but that cannot be a ground to deny the credit in view of the following decisions –

(a) Endurance Technology Pvt. Ltd. - 2015-TIOL-1371-HC-MUM-ST – Held: CENVAT credit on maintenance and repair service of wind mills located away from the factory is admissible; CCR does not say that input service must be received at the factory premises.

(b) Akzo Nobel India Ltd - 2017-TIOL-3976-CESTAT-MUM – Held: Providing service brings the appellant as service provider within the fold of law and dealer as a recipient of service is recognized by authorities below – service tax payable for the repair of machine wherever that is installed makes no difference in law – credit admissible.

The AR submitted that since the service was provided outside the premises of the appellant, the credit is not admissible.

After considering the submissions, the Bench observed -

"5. As regards leasing, the appellant has admittedly discharged the Service Tax. In this fact, the leasing of the machine is output service on which Service Tax has been discharged. During the leasing period, the repair and maintenance service was provided on the leased machine. Therefore, repair and maintenance service become input service for providing output service i.e. leasing of machine. Accordingly, the repair and maintenance in the facts of the present case is indeed an input service and CENVAT Credit is admissible on that…"

The impugned order was set aside and the appeal was allowed.

(See 2018-TIOL-1016-CESTAT-MUM)