2008 (7) TMI 282 - AT - Service Tax

Credit of service tax paid on mobile phone services credit denied on the ground that the mobile phones have not been shown/proved to have been used for providing output service or used in or in relation to manufacture of finished goods - in view of the Circular issued by the Board subsequently, that credit is admissible in respect of mobile phone services and also in view of the stand taken by the Tribunal in various judgments, appeal filed by Revenue fails and is accordingly rejected

Summary

Issues Involved:
- Whether the Commissioner (Appeals) erred in allowing the credit of service tax paid on mobile phone services.

Analysis:
The appeal filed by the Revenue against the Commissioner (Appeals) order raised the issue of whether the credit of service tax paid on mobile phone services should be allowed. The Revenue contended that the mobile phones in question were not shown to have been used for providing output service or in relation to the manufacture of finished goods. The department argued that the matter should be remanded to verify the actual usage of the mobile phones. On the other hand, the respondent highlighted that a substantial amount of Cenvat credit was involved, and the use of mobile phones for personal purposes was not proven. The show cause notices focused on the absence of mobile phone usage within the factory premises.

Upon hearing both parties, the Tribunal noted that the original adjudicating authority disallowed the Cenvat credit on the basis that the mobile phones were used outside the factory premises, thereby not directly or indirectly related to manufacturing activities. The Tribunal also observed the conflicting interpretations of a previous judgment regarding the usage of mobile phones for business transactions. The Commissioner (Appeals) had allowed the credit based on the same judgment. Ultimately, the Tribunal found that the disallowance of the Cenvat credit was primarily due to the mobile phones being used outside the factory, despite subsequent circulars from the Board and previous Tribunal judgments supporting the admissibility of credit for mobile phone services. Consequently, the appeal by the Revenue was rejected.

This detailed analysis of the judgment showcases the key arguments presented by both sides, the reasoning behind the decision, and the legal interpretations that influenced the Tribunal's ruling on the issue of allowing service tax credit on mobile phone services.