2014 (1) TMI 770 - AT - Service Tax

Disallowance of Cenvat credit - Expenses incurred in use of mobile phone and also landlines - Held that - There were no observations about inadmissibility of Cenvat credit in the impugned order. Nowhere it has been brought out in the show cause notice or in the orders of the authorities below that appellant bank was not provider of output service. RBI guidelines displayed at the branch premises disclose the phone numbers to which the customers can make a call. That includes landline phone proving that the phones were used to provide output service - Decided ion favour of assessee.

Summary

Issues: Disallowance of Cenvat credit on Service Tax paid for mobile phone and landline expenses.

In this judgment by the Appellate Tribunal CESTAT NEW DELHI, the issue revolved around the disallowance of Cenvat credit on Service Tax paid for expenses related to the use of mobile phones and landlines. The appellant contended that since these expenses were connected with providing output services, the Cenvat credit should not be denied. The Revenue argued that the Appellate authority correctly disallowed the credit. The Tribunal noted that the impugned order did not provide any observations on the inadmissibility of Cenvat credit, and there was no evidence to show that the appellant bank was not a provider of output services. The RBI guidelines displayed at the branch premises indicated phone numbers for customer calls, including landline numbers, which supported the use of phones to provide output services. As there was no evidence to establish otherwise, the Tribunal allowed the appeal of the assessee.

The judgment highlighted the importance of evidence in determining the eligibility of Cenvat credit on Service Tax paid for mobile phone and landline expenses. The Tribunal emphasized that without concrete evidence to show that the appellant bank was not providing output services, the denial of Cenvat credit was not justified. The reference to RBI guidelines displaying phone numbers for customer calls, including landline numbers, served as crucial evidence supporting the use of phones in providing output services. The absence of any evidence to the contrary led the Tribunal to allow the appeal, underscoring the significance of substantiating claims with concrete proof.

Furthermore, the judgment criticized the pre-determined stance of the first Appellate authority in disallowing the Cenvat credit without clear observations on the inadmissibility of the credit. The Tribunal noted that the authority had expressed uncertainty by stating, "I have half a mind to treat them as input service and allow credit," indicating a lack of definitive reasoning for disallowance. This lack of clear justification, coupled with the absence of evidence against the appellant bank's provision of output services, contributed to the Tribunal's decision to allow the appeal. The judgment underscored the importance of reasoned decisions based on evidence in matters concerning the disallowance of Cenvat credit, highlighting the need for a thorough and substantiated approach in such determinations.