2007 (8) TMI 63 - AT - Service Tax

Cenvat credit - Revenue contended that appellant is not entitle for credit in respect of service tax paid on mobile phone for providing output service i.e. travel agency - Held that revenue contention was not correct and allowed credit

Summary

Issues:
Appeal against allowing credit for Service Tax paid on mobile phones to a travel agency providing output service.

Analysis:
The appeal was filed by the Revenue challenging the order allowing credit for Service Tax paid on mobile phones to a travel agency providing output service. The Revenue contended that Cenvat credit is not available for Service Tax paid on mobile phones, citing a Board's Circular. However, the Tribunal noted that as per the Cenvat Credit Rules applicable during the period in dispute, input service includes any service used by a provider of taxable service for providing an output service. It was established that the mobile phone connections were in the name of the company and were used in relation to the output service provided by the travel agency. The Tribunal referred to a previous case where it was held that Service Tax paid on mobile phones is eligible as credit for service providers. Since there was no prohibition in the rules for taking credit on Service Tax paid on mobile phones used by the service provider, the Tribunal found no fault in the impugned order and dismissed the appeals.

This judgment highlights the importance of interpreting the Cenvat Credit Rules in determining the eligibility of credit for Service Tax paid on mobile phones used by service providers. The Tribunal emphasized that input service includes any service used for providing an output service, and since the mobile phones were used in connection with the business of the travel agency, they qualified for credit. The decision also underscores the significance of consistency in applying legal provisions, as demonstrated by referring to a previous case where a similar issue was resolved in favor of the service provider. Overall, the judgment provides clarity on the availability of Cenvat credit for Service Tax paid on mobile phones in the context of service providers, reinforcing the principle that credits should be allowed unless specifically prohibited by the rules.