2011 (9) TMI 509 - AT - Service Tax

Service Tax Credit on Mobile Telephone - Bill in employee name - Whether used for official purpose only - Held That - the payment for the service has been made by the company only - calls made were relating to business would result in voluminous work for both sides, which would be unproductive. In view of CCE Vs Excel Crop Care Ltd (2008 - TMI - 31579 - HIGH COURT GUJARAT) credit was allowed.

Summary

Issues:
1. Disallowance of credit of Service Tax on mobile telephone services.
2. Imposition of penalty under Section 78 of Finance Act, 1994 but not under Section 76.

Issue 1: Disallowance of credit of Service Tax on mobile telephone services:
The judgment addresses the disallowance of the credit of Service Tax paid on mobile telephone services due to the invoice being in the name of the company c/o an employee's name. The appellant argued that the payment for the service was made by the company, even though the bill was addressed in this manner. The Tribunal found the appellant's explanation reasonable, noting that listing the telephone in the company's name but assigning it to an employee for official use was a practical internal arrangement for monitoring usage and preventing misuse. The Tribunal referenced previous decisions where similar credits were allowed without requiring proof of all calls being business-related, emphasizing that such a requirement would be burdensome and unproductive for both parties. Citing precedents, the Tribunal concluded that the appeal should be allowed based on the established practices and the High Court's decision, thereby rejecting the disallowance of the credit.

Issue 2: Imposition of penalty under Section 78 but not under Section 76 of Finance Act, 1994:
Regarding the imposition of penalties, the Tribunal noted that once the appeal on the merit of disallowance was allowed, the question of imposing penalties under Section 76 or Section 77 of the Finance Act, 1994 did not arise. As the appeal was allowed in favor of the appellant, there was no basis for imposing penalties under the mentioned sections. Consequently, the Tribunal rejected the appeal filed by the Revenue, thereby upholding the decision to not impose penalties under Section 76 or Section 77 of the Finance Act, 1994.

In summary, the judgment by the Appellate Tribunal CESTAT, Ahmedabad addressed the disallowance of Service Tax credit on mobile telephone services and the imposition of penalties under the Finance Act, 1994. The Tribunal allowed the appeal by the appellant, emphasizing the practicality of the company's internal arrangement for telephone usage monitoring and citing precedents to support the decision. Additionally, the Tribunal rejected the appeal by the Revenue, as the imposition of penalties under Section 76 or Section 77 was deemed unnecessary following the allowance of the appeal on the merit of the disallowance.