2007 (10) TMI 669 - AT - Service Tax

Summary

Issues:
Appeal against Order-in-Appeal, Cenvat Credit Rules interpretation, Eligibility of Modvat/Cenvat credit on service tax paid on mobile phones.

Analysis:
The appeal was filed against Order-in-Appeal No. SVS/327/NGP-I-/2006, challenging the Commissioner of Central Excise (Appeals), Nagpur's decision regarding the availed Cenvat credit on service tax paid on mobile phones. Despite the respondent's absence, the appeal was considered due to the narrow compass of the issue. The appellant contended that the Commissioner (Appeals) did not interpret the Cenvat Credit Rules correctly and that the credit availed was not covered by a specific Circular dated 20-6-2003.

Upon reviewing the records, it was found that the respondent had claimed credit for service tax paid on mobile phones from December 2004 to February 2006. The Commissioner (Appeals) concluded that such Modvat/Cenvat credit was indeed eligible, citing the Tribunal's judgment in the case of Indian Rayon & Industries Ltd. v. CCE, Bhavnagar - 2006 (4) S.T.R. 79. The Tribunal's decision emphasized that the old Circular from 2003, which had been relied upon to deny the credit, was no longer applicable under the new Cenvat Credit Rules of 2004.

The Tribunal's ruling highlighted that Rule 4(1) of the Cenvat Credit Rules, 2004 allowed credit for inputs received in the factory of the manufacturer or the premises of the output service provider, without any such restriction for input services. It was noted that the Rules did not prohibit claiming credit for service tax paid on mobile phones, especially considering their increasing use over fixed line phones. Therefore, the Tribunal held that under the new Cenvat Credit Rules, 2004, service tax paid on mobile phones was creditable for eligible service providers and manufacturers.

In line with the Tribunal's decision in the Indian Rayon & Industries Ltd. case, the Commissioner (Appeals) correctly applied the law, leading to the rejection of the Revenue's appeal. The judgment upheld the eligibility of Modvat/Cenvat credit on service tax paid on mobile phones, setting aside the earlier decision and granting consequential benefits to the appellants.