2012 (12) TMI 112 - AT - Service Tax

Cenvat Credit - Removal of inputs and capital goods for providing output servcies - Rule 3(5) - Held that - If any Inputs or Capital goods are removed outside the premises of the provider of output service for providing such service, there is no requirement for any demand of duty or reversal of credit. Hence, the impugned order is set aside and the appeals are allowed.

Summary

Issues involved: Interpretation of the 2nd proviso to Rule 3(5) of the Cenvat Credit Rules, 2004 prior to the amendment on 01.04.2008 regarding removal of telephone cables outside the premises of a Public Sector Telephone Company.

Analysis:
The judgment delivered by Dr. Chittaranjan Satapathy, Technical Member, and D.N. Panda, J., addressed the issue involving two appeals related to a demand made against a Public Sector Telephone Company, M/s. BSNL, for allegedly violating the 2nd proviso to Rule 3(5) of the Cenvat Credit Rules, 2004. The main contention was that telephone cables, for which credit was taken, were removed outside the premises and not brought back within 180 days. The advocate for the appellants argued that the cables were not removed outside but laid underground between telephone exchanges and customers' premises, essential for providing telephone services. It was undisputed that the cables were laid underground for service provision, making it impractical to bring them back to the company's premises without disrupting services.

The tribunal, considering the circumstances, concluded that there was no contravention of the 2nd proviso to Rule 3(5 as it existed at the material time. Moreover, the amended Rule 3(5) stated that if inputs or capital goods are removed outside the provider's premises for service provision, there is no duty demand or credit reversal requirement. Consequently, the impugned order was set aside, and the appeals were allowed. Additionally, both stay petitions were disposed of in light of the decision. The judgment emphasized the importance of interpreting tax laws in a manner that aligns with practical business operations and service provision requirements, ensuring a fair and just application of the legal provisions.