2016 (10) TMI 1289 - AT - Service Tax

CENVAT Credit - rent for office-cum-residence of Director - office-cum-guest house of the appellant - service of telephone installed - denial of credit on account that the appellant failed to establish that the said building is also being used as office - HELD THAT - On perusal of the rent agreements produced by the appellant during the course of hearing it is seen that the agreement was entered into in the name of the company and the purpose of hiring of residence-cum-office for the Directors and also guest house-cum-office for the appellant-company. The denial of credit of service tax on these services and also on telephone services is not justifiable - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of Cenvat credit on service tax paid on rent for office-cum-residence of Director, office-cum-guest house, and telephone service.

Analysis:
1. The appellant challenged the denial of Cenvat credit amounting to &8377; 67,625 for service tax paid on rent for the office-cum-residence of the Director, office-cum-guest house, and telephone service. The appellant contended that the expenses were directly related to the business activity of the company as the building was hired under two rent agreements dated 30-9-2005. One part of the building was used by the full-time Director as office-cum-residence, and the other part served as an office-cum-guest house for the company. The telephone service charges were also paid by the company and were essential for business operations.

2. After hearing both parties and examining the appeal records, it was observed that the denial of credit was based on the appellant's alleged failure to establish the office use of the building. However, upon reviewing the rent agreements submitted by the appellant, it was evident that the agreements were in the name of the company, specifying the purpose of hiring as a residence-cum-office for the Directors and a guest house-cum-office for the company. This clarification indicated a direct connection between the rented premises and the business activities of the appellant.

3. Consequently, the Tribunal found the denial of Cenvat credit on the mentioned services unjustified. The Tribunal noted that the expenses incurred on rent and telephone services were directly linked to the business operations of the appellant, as supported by the rent agreements and the nature of usage specified therein. Therefore, the impugned order denying the credit was set aside, and the appeal was allowed. The decision was made after a thorough examination of the agreements and the essentiality of the services in relation to the business activities of the appellant.

4. In conclusion, the Tribunal's judgment highlighted the importance of establishing a direct nexus between the expenses incurred and the business activities to claim Cenvat credit. The specific details provided in the rent agreements played a crucial role in overturning the denial of credit, emphasizing the significance of proper documentation and evidence to support such claims in tax matters. The decision underscored the need for clarity and substantiation in demonstrating the business-related nature of expenses to avail tax benefits and credits.