2014 (2) TMI 870 - AT - Central Excise

Availment of CENVAT Credit - appellant had taken cenvat credit of service tax paid on telephone services, courier services and insurance services for insurance of the company s employees & vehicles - Held that - As regards the mobile telephone services, the same is in respect of the landline phone installed in the factory and phone provided to the appellant company to their employees. Obviously, no manufacturer would provide mobile phones to his employees purely for their personal use. Mobile phones are provided by a company to its employees for the company s work. Therefore, just because some calls may have been made by the employees for their person work, it cannot be presumed that mobile phones have been used by the employers for their personal work only - telephone services availed in respect of the mobile phones supplied to their employees are admissible for cenvat credit. In view of this, the impugned order disallowing the cenvat credit in respect of telephone services is not sustainable - insurance is the requirement of Section 38 of the Employees State Insurance Act, 1948 mandating that all the employees be insured in the manner provided in this Act. In view of this, it has to be held that providing of insurance cover to the employees for compliance with the provisions of Employees State Insurance Act, 1948 has to be treated as service used in or in relation to the manufacture of final product - As regards the insurance of the company s vehicles, since the vehicles have been used for the company s work, the same would also have to be treated as covered by input service would be eligible for cenvat credit - Decided in favour of assessee.

Summary

Issues:
Manufacturers claiming cenvat credit for service tax on telephone, courier, and insurance services. Dispute regarding admissibility of cenvat credit for these services.

Analysis:
The appellants, manufacturers of Monoblock, Prestressed Sleepers, sought cenvat credit for service tax on telephone, courier, and insurance services from December 2005 to February 2010. The department issued show cause notices challenging the admissibility of these credits, which were initially allowed by the Assistant Commissioner but later reversed by the Commissioner (Appeals). The appellants appealed against this decision.

The appellant's counsel argued that the services in question were essential for business operations and fell within the definition of "input service" as per the Cenvat Credit Rules. They cited relevant judgments supporting the admissibility of cenvat credit for courier, insurance, and telephone services used for business purposes.

The Departmental Representative defended the Commissioner (Appeals) decision, contending that the services lacked a direct nexus with manufacturing activities. They referred to judgments suggesting restrictions on cenvat credit for certain services.

Upon review, the Tribunal found that courier services used for business correspondence were integral to manufacturing operations and therefore eligible for cenvat credit. Similarly, mobile telephone services provided to employees for official purposes were deemed admissible based on precedents from the Gujarat and Bombay High Courts.

Regarding insurance services, the Tribunal determined that group insurance for employees and vehicle insurance were necessary for compliance with legal requirements and business operations, thus qualifying for cenvat credit. The Tribunal set aside the Commissioner (Appeals) decision and allowed the appeals, concluding that the denial of cenvat credit for the services in question was not justified.

In summary, the Tribunal upheld the appellants' claim for cenvat credit on telephone, courier, and insurance services, emphasizing the essential nature of these services for business activities and compliance with legal obligations.