2011 (6) TMI 389 - AT - Service Tax

CENVAT credit on the service tax on telephone installed at the residence of one of the partners of the appellant - Held that - The department could not produce any evidence, contrary to the fact that the telephones were not used for the business purpose and that the expenditure was borne by the appellant company and cost of input service, the department also could not produce any evidence that they have undertaken any investigation to find out that the telephone service was used for other than business purpose nor could refute the contention of the appellant that Income Tax department has accepted such expenditure as business expenditure. As in KELTECH ENERGIES LIMITED Versus COMMISSIONER OF C. EX., MANGALORE 2008 (1) TMI 96 - CESTAT BANGALORE the CENVAT credit in case of telephone installed at the residences of the director and officials of the assessee was allowed - in favour of assessee.

Summary

Issues:
1. Denial of CENVAT credit on service tax paid for telephone installed at partner's residence.
2. Appeal against order-in-appeal upholding denial of credit, recovery of interest, and penalty imposition.
3. Contention regarding business use of telephone and availing CENVAT credit.
4. Comparison of appellant's arguments with department's objections.
5. Precedents cited by both parties.
6. Tribunal's decision on similar cases.
7. Analysis of relevant legal judgments.
8. Lack of evidence against business use of telephone.
9. Distinction from the case of Manikgarh Cement.

Detailed Analysis:
1. The appellant challenged the denial of CENVAT credit on service tax for a telephone installed at a partner's residence. The ld. Commissioner (Appeals) upheld the denial, leading to the appeal against the order-in-appeal, which also included recovery of interest and imposition of a penalty.

2. The appellant contended that the telephone was used for business purposes, particularly to contact overseas customers, and thus, the CENVAT credit was rightfully availed. The Income Tax department did not object to these expenses. The appellant cited various tribunal decisions to support their argument.

3. The department, represented by the ld. SDR, relied on the order of the learned Commissioner (Appeals) which questioned the lack of proof regarding the premises being declared as an office and the payment of telephone bills by the company. The department also cited a decision of the Hon'ble Bombay High Court in a related case.

4. The Tribunal carefully considered the submissions and records. It noted that similar cases were decided in favor of allowing CENVAT credit for telephones installed at residences of directors and officials. The Tribunal emphasized the integral connection of input services with the business of manufacturing the final product, as established in legal precedents.

5. The Tribunal highlighted the lack of evidence provided by the department to refute the business use of the telephone and the acceptance of such expenses by the Income Tax department. It distinguished the case from the one cited by the department, emphasizing the eligibility of input services directly connected to the business.

6. Ultimately, the Tribunal set aside the order of the ld. Commissioner (Appeals) and allowed the appeal, based on the lack of evidence against the business use of the telephone and the alignment of the case with established legal principles.