2009 (8) TMI 505 - AT - Service Tax

Cenvat Credit- The issue involved in this case is as to whether service tax credit is correctly being availed by the appellants in respect of leased lines provided by BSNL under Rules 3 and 5 of Service Tax Credit Rules 2002 during the period from 1-10-2002 to 31-3-2004. In the light of the decision of CCE v. Data Infosys Ltd. 2006 -TMI - 664 - Appellate Tribunal New Delhi held that- impugned order is set aside. Appeal filed by the appellants is allowed with consequential relief.

Summary

Issues involved:
1. Availment of service tax credit for leased lines provided by BSNL under Service Tax Credit Rules, 2002 from 1-10-2002 to 31-3-2004.

Analysis:
The main issue in this case was whether the appellants correctly availed service tax credit for leased lines provided by BSNL under Rules 3 and 5 of the Service Tax Credit Rules, 2002 during the period from 1-10-2002 to 31-3-2004. The contention raised was that the input service of leased line provided by BSNL did not fall under the same category of output service as per rule 3(2) of the Service Tax Credit Rules, 2002. The original authority had dropped the proceedings, but the Commissioner revised the adjudication order disallowing the service tax credit for a specific period. However, the appellants argued that a previous Tribunal decision in their own case supported their claim for availing the credit, emphasizing that the definition of "input service" under the rules allowed for the credit of service tax paid on input services consumed in relation to rendering output services.

The Tribunal referred to the relevant rules and definitions under the Service Tax Credit Rules, highlighting that the intention of the Government was to grant the benefit of input stage service tax paid by the service provider. The definition of "input service" clarified that it meant any taxable service received and consumed by a service provider in relation to rendering output service. The Tribunal emphasized that denying the credit based on a narrow interpretation of the rules would go against the intention of providing input stage credit of service tax to the service provider. The Tribunal found that the appellants, as internet service providers relying on leased lines provided by BSNL, were eligible for the service tax credit on the input services consumed for rendering output services. Based on the interpretation of the rules and the previous decision in the appellants' own case, the Tribunal set aside the impugned order and allowed the appeal filed by the appellants, providing them with consequential relief.

In conclusion, the Tribunal's decision in this case clarified the eligibility of the appellants to avail service tax credit for leased lines provided by BSNL under the Service Tax Credit Rules, 2002. The analysis focused on the definitions and rules governing input services and output services, emphasizing the intention of the Government to allow service providers to claim credit for service tax paid on input services consumed in relation to rendering output services. The decision was based on a thorough examination of the legal provisions and previous judicial interpretations, ultimately granting relief to the appellants based on the principles of the law.