Cenvat credit on service used for warranty

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2015 my client is a manufacturer of steel containers and giving free warranty of repair for specific period to customer.
In case any free warranty comes, he used to engaged a in-house subcontractor for repair.
subcontractor raised bill with service tax to client but customer gives free service to customer.
Query:-
Can this service tax be treated as input service to my client i.e. can he take this service tax as cenvat credit and utilize for payment of excise duty on final product.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 February 2015 Yes it can be treated as input service and cenvat credit can be availed.

As the price of the original supply of the good has already included the charge for the warranty service, the manufacturer is not required to charge a deemed output tax on the supply of any items associated with the warranty service. The input tax incurred on any items used to carry out the warranty repairs is also allowable to the manufacturer since it was incurred in the making of taxable supplies.