2009 (3) TMI 142 - AT - Service Tax

Cenvat Credit on Input Service - respondent had availed Cenvat credit on the Service Tax paid by them to the telephone companies in respect of the mobiles given to their employees. The revenue objected to such credit being taken and issued a show-cause notice held that - All the contentions raised by the revenue in their grounds of appeal are covered in favour of respondent in the case of Indian Rayon & Industries Ltd. v. CCE Cenvat credit allowed.

Summary

Issues:
- Availing Cenvat credit on Service Tax paid for mobiles provided to employees.
- Eligibility of Cenvat credit on various insurance services.
- Interpretation of input services under CENVAT Credit Rules, 2004.
- Applicability of Tribunal decisions on the case.

Availing Cenvat Credit on Service Tax for Mobiles:
The case involved the respondent availing Cenvat credit on Service Tax paid to telephone companies for mobiles provided to employees. The revenue objected, leading to a show-cause notice and penalties. The Adjudicating Authority upheld the demand, but the Commissioner (Appeals) set it aside. The Commissioner's findings highlighted that mobile phones provided for business purposes could be considered an input service under the CENVAT Rules. The Commissioner emphasized that the circular restricting credit on mobile phones had lost relevance with the new Cenvat Credit Rules in effect. The Tribunal noted the Commissioner's decision aligned with past rulings and dismissed the revenue's appeal.

Eligibility of Cenvat Credit on Insurance Services:
Regarding burglary insurance services, the Commissioner disagreed with the assessee's claim that it fell within the scope of business activities eligible for Cenvat credit. The Tribunal concurred, stating that securing property against theft was a standard business practice not directly related to manufacturing or business activities as defined under the rules. Similarly, fidelity insurance against employee dishonesty was deemed unrelated to business activities under the inclusive definition of input services. Additionally, the Mediclaim policy for workmen/staff, providing medical aid during hospitalization, was considered a welfare activity rather than directly linked to manufacturing. The Tribunal upheld the Commissioner's decision on these insurance services.

Interpretation of Input Services under CENVAT Credit Rules, 2004:
The Commissioner's analysis of input services under the CENVAT Credit Rules, 2004, was crucial in determining the eligibility of Cenvat credit for various services. The Tribunal emphasized the need for services to be directly or indirectly related to the manufacture of final products or business activities to qualify for credit. The case highlighted the importance of aligning service utilization with business objectives to claim Cenvat credit successfully.

Applicability of Tribunal Decisions:
The Tribunal referenced past decisions, such as the case of Indian Rayon & Industries Ltd. v. CCE, to support the Commissioner's findings. By citing precedents where similar contentions were resolved in favor of the respondent, the Tribunal reinforced the consistency in interpreting Cenvat credit eligibility. Upholding the Commissioner's decision, the Tribunal dismissed the revenue's appeal, emphasizing the relevance of established legal principles and precedents in resolving tax disputes.