2013 (6) TMI 605 - AT - Service Tax

Cenvat Credit - input service credit on telephone services which are installed at the residence of the officials - Held that - the telephones installed at the residences of the officials which are integrally connected with the business of the manufacture of final product of the appellant and the same is covered under Rule 2(l) of the CCR - Credit allowed.

Summary

Issues involved: Appeal against denial of input service credit on telephone services installed at officials' residences.

Analysis:

1. Argument for Appellant:
The appellant argued that telephone services at official residences are used for business purposes, entitling them to input service credit. They relied on the decision of the Bombay High Court in the case of CCE Nagpur vs. Ultratech Cement Ltd., emphasizing that activities must be integrally connected with the business to qualify as input services. Additionally, they cited the case of Union of India vs. HEG Ltd., where the High Court upheld the entitlement of input service credit on telephone services used for business activities at officials' residences.

2. Argument for Revenue:
The Revenue contended that telephone services at officials' residences do not have a direct nexus with the manufacturing activity, referencing the decision in Maruti Suzuki Ltd. vs. CCE Delhi III. They argued that input services must have a direct nexus with manufacturing activities to qualify for credit, as stated in the Ultratech Cement Ltd. case.

3. Judgment:
The Tribunal considered the arguments and referred to the Ultratech Cement case, where the High Court held that activities must be integrally connected with the business to qualify as input services. The Tribunal disagreed with the Revenue's interpretation, noting that the Maruti Suzuki case did not address input services under Rule 2(l) of the CENVAT Credit Rules. The Tribunal found merit in the appellant's argument that telephone services at officials' residences were integrally connected with the business of manufacturing final products, thus qualifying for input service credit. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.