2008 (10) TMI 89 - AT - Service Tax

Credit of service tax paid on mobile services - Board s Circular No. 97/8/2007-ST specifically has clarified that credit can be extended to mobile phones provided it is used in or in relation to the manufacture of the final products - assessee submit that the mobile phones had been used in relation to the manufacture of the final products therefore, credit is not deniable

Summary

Issues:
1. Eligibility of credit on service tax paid on mobile services.
2. Interpretation of whether mobile phones are used in or in relation to the final products manufactured.
3. Application of Board's Circular 97/8/2007-ST dated 23.08.2007.
4. Determination of whether mobile phones were used for personal work.

Analysis:
The appeals before the Appellate Tribunal CESTAT, Bangalore involved a common issue regarding the eligibility of credit on service tax paid on mobile services. The Revenue contended that the assessees were not entitled to credit as the mobile phones were not used in or in relation to the final products manufactured and were primarily used for personal purposes. However, the assessees argued that the mobile phones were registered in the company's name and were used by employees for work-related purposes, with occasional personal use. Both parties cited various judgments to support their positions.

The Tribunal considered the arguments and referred to Board's Circular 97/8/2007-ST, which clarified that credit could be granted for mobile phones if used in relation to the manufacture of final products. The assessees and their representatives asserted that the mobile phones were indeed used in relation to the manufacturing process. On the other hand, the Revenue contended that the mobile phones were predominantly used for personal tasks, thus rendering them ineligible for credit.

In a previous judgment by the same Bench in the case of CCE, Bangalore Vs. Conzerv, the Tribunal had ruled in favor of the assessees, citing previous judgments and dismissing the Revenue's appeal. Based on this precedent and the arguments presented, the Tribunal found no merit in the Revenue's appeals and consequently rejected them.

The decision highlights the importance of demonstrating the usage of mobile phones in relation to manufacturing activities to claim credit on service tax paid. The interpretation of the term "used in or in relation to" remains crucial in determining the eligibility for such credits, as evidenced by the reliance on relevant Board circulars and legal precedents.