2007 (12) TMI 90 - AT - Service Tax

Demand, interest & penalty of equal amount imposed u/r 6 of service tax credit rules on the ground that, inadmissible credit was taken on bills issued in name of the proprietor for telephone installed at her residential address and other bills, which didn t exist - Service Tax would be admissible on telephone installed at business premises & not at residence - however, since Tax held to be inadmissible is a little over Rs. 2,000, penalty is reduced from 5,961 to 2,000 appeal partly allowed

Summary

Issues:
Confirmation of demand for Service Tax, admissibility of credit for telephone bills, imposition of penalty under Rule 6 of Service Tax Credit Rules, 2004.

Analysis:
The Appellate Tribunal confirmed the demand for Service Tax amounting to Rs. 5,961/-, along with interest and a penalty, based on the inadmissible credit taken on telephone bills. The Tribunal noted that the proprietor had both residential and business premises, and Service Tax was deemed admissible only for the telephone installed at the business premises, not the residence. Consequently, the credit availed on bills for the residence was deemed inadmissible. However, the credit for bills issued by M/s BSNL for phones installed at the business premises in Panchkula was considered admissible for the period specified. Moreover, the credit availed on bills for telephones installed at the residential address in the name of the proprietor's husband was also deemed inadmissible. The Tribunal found that a penalty was warranted for the incorrect credit availed, but due to the Service Tax amount being slightly over Rs. 2,000/-, the penalty was reduced from Rs. 5,961/- to Rs. 2,000/-.

The judgment highlights the importance of correctly determining the admissibility of Service Tax credit on telephone bills based on the location of installation, whether at the residential or business premises. It clarifies that the credit is only permissible for telephone installations at the business premises, not the proprietor's residence. The Tribunal's decision to partially allow the appeal by reducing the penalty emphasizes the significance of adhering to the rules and regulations governing the availing of Service Tax credit. The judgment serves as a reminder for taxpayers to ensure compliance with the applicable provisions to avoid penalties for incorrect credit claims, thereby promoting tax discipline and adherence to legal requirements in such matters.