2018 (5) TMI 377 - AT - Central Excise

CENVAT credit - mobile phone bills - Commission paid to their selling agents - Held that - Admittedly, the phones were registered in the name of the appellant firm and the payment of the bills inclusive of the service tax was being made by the appellant. The expenditure incurred by the assessee was duly reflected in their books of accounts - the breakup of the telephone bills into private and official calls is an irrelevant exercise and denial of credit on that basis is untenable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of Cenvat credit on mobile phone bills and commission paid to selling agents.

Analysis:
The case involved a show cause notice issued to the appellants for the denial of Cenvat credit on mobile phone bills and commission paid to their selling agents. The initial demand of &8377; 82,503/- was confirmed, including interest and an equivalent penalty. Upon appeal, the Commissioner (Appeals) set aside the demand related to service tax on commission paid to the commission agents but upheld the demand on service tax paid on mobile phone bills.

The appellant contended that the Department did not dispute the procurement of mobile connections by the company, which was reflected in the company's expenditure in its books of accounts. The only reason for rejection by the Commissioner (Appeals) was the lack of a breakdown of the bill for private and business purposes, which the appellant argued was unreasonable.

During the hearing, the Advocate for the appellant highlighted that the Commissioner (Appeals) accepted that service tax credit is available on mobile phones if used for business purposes but was rejected due to the absence of a breakdown of charges for private and business use. The phones were registered in the name of the appellant firm, and the payment of bills, inclusive of service tax, was made by the appellant, with expenses duly reflected in their books of accounts. The Tribunal found the breakup of telephone bills into private and official calls to be irrelevant, and the denial of credit on that basis was deemed untenable.

The Tribunal concluded that the order of the Commissioner (Appeals) could not be sustained and was set aside, resulting in the appeal being allowed. The judgment emphasized that denial of credit based on the breakdown of telephone bills was unreasonable, especially when the phones were registered in the appellant firm's name, and expenses were properly recorded in their accounts.