2008 (9) TMI 190 - AT - Service Tax

Eligibility to avail Cenvat credit of Service Tax paid on mobile phone services - Circular No. 97/8/2007-ST.has clarified that credit can be extended to mobile phones provided it is used in or in relation to the mfg. of the final products - appellants have strongly submitted that the mobile phones are all standing in the name of the company and used by the employees in relation to the work only and incidentally it can be used for personal work but that by itself is no ground to deny the credit

Summary

Issues:
1. Eligibility for availing Cenvat credit on Service Tax paid on mobile phone services.

Analysis:
The appellate tribunal examined the issue of whether the appellant is entitled to avail Cenvat credit on Service Tax paid on mobile phone services. The Commissioner had previously ruled in favor of the appellant, stating that the mobile phones were used for official purposes by various personnel within the company. The tribunal noted that the department failed to provide evidence to the contrary, and there were no findings in the original order against the appellant's contentions. Referring to a previous case, the tribunal highlighted that under the Cenvat Credit Rules 2004, there was no explicit prohibition on claiming credit for service tax paid on mobile phones. Therefore, following the precedent set by the earlier decision, the tribunal concluded that the appellant was indeed eligible for Cenvat credit on mobile phone services, overturning the lower authority's decision.

The Revenue challenged the tribunal's decision, arguing that mobile phones were not used in or in relation to the manufacture of final products, making them ineligible for Service Tax credit. The Revenue contended that mobile phones could also be used for personal purposes outside business premises, thus questioning the admissibility of credit. However, the tribunal referred to a clarification circular stating that credit for service tax paid on mobile phone services was permissible if the phones were used for providing output services or in relation to the manufacture of finished goods. The tribunal emphasized that the mobile phones were registered under the company's name and strictly used for work-related purposes by employees involved in manufacturing final products. Citing various tribunal judgments, the tribunal reiterated that the issue had been extensively examined, and credit had been consistently allowed for mobile phones. Consequently, the tribunal dismissed the Revenue's appeal, upholding the admissibility of Cenvat credit for mobile phone services.

In conclusion, the tribunal's detailed analysis and reliance on legal provisions, circulars, and precedent judgments established the eligibility of the appellant for Cenvat credit on service tax paid on mobile phone services. The tribunal's decision was based on the specific usage of mobile phones for official purposes within the company, in alignment with the relevant rules and clarifications provided by the Board. By emphasizing the consistent application of credit for mobile phones in previous tribunal decisions, the tribunal reaffirmed the admissibility of Cenvat credit in this case, ultimately rejecting the Revenue's appeal and upholding the appellant's entitlement to the credit.