2010 (9) TMI 507 - AT - Service Tax

CENVAT Credit - A show-cause notice was issued to the appellant on the ground that the input Service credit on mobile phones is not admissible to them as they were not used in or in relation to the manufacture of the excisable goods - ITC Ltd. v. Commissioner of Customs and Central Excise, Salem - 2009 -TMI - 33960 - CESTAT, CHENNAI - Accordingly decided in the favour of the assessee

Summary

Issues:
Claim for input service credit on mobile phone service denied as fringe benefit.

Analysis:
The appellant appealed against the order denying input service credit on mobile phone service, claiming it was essential for business activities. The adjudicating authority initially acknowledged the eligibility for credit but later denied it due to the mobile phones not being registered at the factory premises. The Commissioner (Appeals) upheld the denial, stating the phones were provided as a fringe benefit, usable for personal or official purposes. The appellant contended that the denial was unjust as there was no direction on desired usage. The appellant cited legal precedents supporting their entitlement to credit.

The dispute centered on whether the mobile phones were used in or in relation to the manufacturing process. The appellant argued that ownership and bill payment confirmed their right to credit. The Departmental Representative (DR) contended that without a clear connection between phone usage and manufacturing, credit should be denied as per CENVAT Credit Rules. After hearing both sides, the Tribunal observed that the phones were provided as part of the remuneration package, akin to fringe benefits like cars or laptops. Referring to past judgments, the Tribunal concluded that the appellant was entitled to input service credit. The Tribunal noted that the adjudication order had already favored the appellant on the issue raised in the show-cause notice, which had attained finality. Consequently, the impugned order denying credit was set aside, and the appeal was allowed.