2009 (9) TMI 290 - AT - Service Tax

Cenvat Credit-Input Services- The assessee was served with a show cause notice alleging that it had wrongly availed Cenvat Credit of service tax on mobile phone services which was not available in terms of CBEC Circular No. 59/2003-ST, dated 20.06.2003 in terms of which, credit will be allowed only on telephone sets installed in the business premises but the mobile phones were not installed in the business premises. On that basis, Cenvat Credit was denied and the said denial was also confirmed by the Commissioner (Appeals). Held that- there was no allegation against the assessee that those mobile phones were not being used in or in relation to the manufacture of the final product. Thus the service tax paid on mobile phone is available as cenvat credit.

Summary

Issues: Admissibility of Cenvat credit of service tax paid on mobile phone services

Analysis:
The main issue in this case revolves around the admissibility of the Cenvat credit of service tax paid on mobile phone services. The appellant was served a show-cause notice alleging wrongful availment of Cenvat credit on Service Tax paid on mobile phone services. The denial of Cenvat credit was based on Circular No. 59/2003-ST, which specified that credit would only be allowed on telephone sets installed in the business premises, excluding mobile phones. The denial of credit was confirmed by the Commissioner (Appeals), leading to the appellant's appeal before the tribunal.

The appellant argued that the denial of credit based on the old Circular from 2003 was not valid under the new Cenvat Credit Rules of 2004. They cited precedents where it was held that service tax paid on mobile phones is eligible for credit under certain conditions. The appellant emphasized that the old Circular could not be applied against them under the new rules. Additionally, they relied on judgments that supported the presumption that mobile phones procured by a company and paid for were intended for business use, unless proven otherwise by the revenue authority.

On the other hand, the revenue authority contended that the show-cause notice should be interpreted liberally and highlighted the requirement for mobile phones to be used directly or indirectly in the manufacture of final products. They argued that this aspect had not been adequately addressed by the appellant before the lower authorities.

After considering the arguments from both sides and the relevant references, the tribunal found that the main allegation against the appellant was the lack of telephone sets installed in the business premises, not the absence of mobile phone use in relation to manufacturing activities. The tribunal rejected the revenue authority's argument and sided with the appellant, citing previous cases where service tax paid on mobile phone services was deemed eligible for Cenvat credit. Consequently, the tribunal set aside the impugned order, allowing the appeal with any consequential relief deemed necessary.