2007 (5) TMI 26 - AT - Service Tax

Cenvat credit Appellant contended that they entitle for credit in respect of service tax paid on telephone bills as the same is covered as input service which is denied by the revenue - Impugned order is set aside and matter remanded for fresh adjudication

Summary

Issues:
1. Denial of credit in respect of service tax paid on Mobile Phone Bills.
2. Interpretation of Cenvat Credit Rules, 2004 regarding input service.
3. Requirement to prove direct or indirect use of input service in relation to manufacture of final product or clearance of final product.
4. Consideration of Board Circular dated 20-6-2003 in denying credit.

Analysis:
1. The appellant filed an appeal against the denial of credit for service tax paid on Mobile Phone Bills. The Revenue based its denial on Board Circular No. 59/8/2003-S.T., dated 20-6-2003, which restricted credit for phones installed in the factory.

2. The appellant argued that as per Cenvat Credit Rules, 2004, they were entitled to credit for service tax paid on telephone bills as it qualifies as an input service. The definition of input service under the rules includes any service used directly or indirectly in the manufacture of the final product or its clearance. They cited a Tribunal decision supporting their claim.

3. The Revenue contended that the credit could only be availed if the input service was used in relation to the manufacture or clearance of the final product. They emphasized the need for the appellant to demonstrate the direct or indirect utilization of the input service for these purposes.

4. The Tribunal, after considering the Board Circular and the precedent cited by the appellant, found no prohibition under the rules for claiming credit on service tax paid on mobile phone bills. However, the Tribunal noted the lack of analysis by the lower authorities on whether the input service was indeed used in the manufacturing process or clearance of final products. Consequently, the impugned order was set aside, and the matter was remanded to the adjudicating authority for a fresh decision with proper consideration and opportunity for the appellants. The appeal was allowed for remand.