2017 (12) TMI 841 - AT - Service Tax

CENVAT credit - Interconnectivity Usages Services - denial on the ground that the appellant is providing interconnectivity service to other telecom operators which is his output service for which the interconnectivity services received has no connection as input service - Held that - Inter-connectivity of services of various telecom operators is a basic requirement for providing telecommunication service. No telecom operator operates alone. In the present case DGM (Maintenance) is managing inter-connectivity inward as well as outward for BSNL who is providing telephone service to the ultimate consumers. Inter-connectivity is between the telecom operators only - there is no legal justification to deny the credit on such input service which are essentially required for providing telecommunication service of further inter-connectivity and telephony - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over Cenvat credit on input service of "Interconnectivity Usages Services" provided by other telecom operators.

Analysis:
The appellant, engaged in providing telecommunication services, availed Cenvat credit on input services, specifically on interconnectivity services. The Revenue objected to this credit, arguing that the interconnectivity services received have no connection as input service to the appellant's output service. The impugned order denied the credit and imposed a penalty equal to the availed credit.

The appellant contended that interconnectivity with other telecom operators is essential for providing telecommunication services. They argued that the denial of credit based on the lack of direct connection between input and output interconnectivity services is erroneous. The appellant, as part of BSNL, is responsible for arranging interconnectivity services, both inward and outward, necessary for providing telephone services, and the denial of credit is unjustified.

The Revenue pointed out that separate tax registrations were obtained for BSNL and the appellant, and Cenvat credit provisions apply to Service Tax registrants. They argued that credit cannot be allowed based on output services provided by another registrant, even within the same company.

Upon review, the Tribunal found that interconnectivity of services among telecom operators is fundamental for providing telecommunication services. The Tribunal emphasized that the input interconnectivity services are essential for further interconnectivity and telephony services, rejecting the Revenue's argument that direct connection between input and output interconnectivity is necessary for availing Cenvat credit.

Referring to a similar case involving the same appellant, the Tribunal highlighted that Cenvat credit, being a significant benefit, should not be denied due to minor procedural defects. The Tribunal overturned the impugned order, allowing the appeal and setting aside the denial of credit, as it found no justification for the same.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the importance of interconnectivity services for telecommunication operations and rejecting the Revenue's argument that direct connection between input and output services is necessary for availing Cenvat credit.