2016 (11) TMI 318 - AT - Service Tax

Denial of CENVAT credit - clip phones push button phones line jack and wires & cables installed in the premises of the consumer of the telecommunication service - taking back of equipments to ensure undisrupted service - Held that - verification is one of the object provided by the statute as to the use of the goods to provide output service. Had the goods come back to the appellant the appellant would have made other alternative arrangement to provide service with those goods. Therefore it does not stand to reason as to why denial of CENVAT credit shall be made if the goods cleared shall lie in the premises of the consumer and public places to ensure provision of the output service. The Division Bench has taken a decision in such pragmatic approach looking into the object of the amendment of Rule 3(5) and allowed refund to the appellant in the past. Therefore as a measure of judicial discipline it is impractical to differ with that decision for which appeal is allowed.

Summary

Issues: Interpretation of Rule 3(5) of the CENVAT Credit Rules, 2004 regarding the denial of CENVAT credit for goods lying in premises of consumer or public places.

Analysis:
1. The appellant, a major telecommunication agency, argued that certain goods like clip phones, push button phones, line jack, wires & cables were left in the premises of consumers and public places for verification purposes to ensure uninterrupted service. The appellant contended that denying CENVAT credit for such goods would disrupt public service and defeat the purpose of the law. The Division Bench, in a previous case, held that there was no violation of Rule 3(5) and allowed relief to the appellant. The current Bench was urged to follow this precedent to maintain judicial discipline and uphold the objective of the statute.

2. On the contrary, the Revenue argued that the goods should not be eligible for CENVAT credit as they did not return to the appellant from where they were placed, which, according to Revenue, goes against the CENVAT Credit Rules.

3. After hearing both sides and examining the records, the Bench concurred with the appellant's position. It was noted that verification of goods was essential for providing output services, and if the goods had returned to the appellant, alternative arrangements would have been made to ensure service provision. Denying CENVAT credit in such cases would be unreasonable, as the goods were essential for maintaining service continuity. The Bench emphasized the pragmatic approach taken by the Division Bench previously, which allowed refunds to the appellant in similar situations. Upholding judicial discipline, the Bench decided to grant relief to the appellant in line with the previous decision.

In conclusion, the judgment highlights the importance of interpreting Rule 3(5) of the CENVAT Credit Rules, 2004 in a manner that upholds the purpose of the law and ensures the smooth provision of public services without unnecessary disruptions. The decision to grant relief to the appellant based on past precedents demonstrates the significance of judicial discipline in maintaining consistency and fairness in legal interpretations.