2008 (2) TMI 349 - AT - Service Tax

Credit on telephone Rule 2(1) of CCR - telephones are admittedly installed in the residential premises of the director and other employees - Credit has also been availed in respect of cell-phones which are in the names of different individuals - remand the matter to the original authority for requantification of the demand taking in to consideration other land-line phones installed in factory premises/branch office and cell phones in name of company

Summary

Issues:
Service tax liability on telephones and mobile phones, eligibility of Modvat credit, applicability of input service tax credit, penalty imposition.

Analysis:
The Appellate Tribunal CESTAT Ahmedabad addressed the issue of service tax liability on telephones and mobile phones in this case. The authorities had confirmed a service tax amount and imposed a penalty after rejecting the Modvat credit claimed by the appellant. The Tribunal noted that some telephones were installed in residential premises and some cell phones were in the names of different individuals, leading to a finding that they may not be exclusively used for manufacturing or clearance activities. The appellant conceded that certain phones were not eligible for input credit. However, the appellant argued that phones in factory premises or branch offices and cell phones in the company's name should qualify for input service tax credit, citing relevant tribunal decisions.

The Tribunal, after considering the appellant's submissions, set aside the impugned order and remanded the matter for re-adjudication by the original authority. The Tribunal directed the authority to reassess the demand in accordance with the legal principles established in the referenced tribunal judgments. The appellant was granted the opportunity to present their defense during the re-adjudication process. Additionally, the Tribunal agreed with the appellant's argument that the issue was a bona fide interpretation, leading to the decision to set aside the penalty imposed.

In conclusion, the Tribunal's decision revolved around the eligibility of Modvat credit for service tax paid on telephones and mobile phones. The appellant's concession regarding certain phones not being eligible for input credit was noted, but the Tribunal allowed for a re-evaluation of the demand based on the applicability of input service tax credit as per relevant legal precedents. The penalty imposed was overturned due to the issue being considered a bona fide interpretation.