2008 (12) TMI 144 - AT - Service Tax

In Commissioner of Central Excise Vs. Excel Crop Care Ltd. the Hon ble High Court of Gujarat held that the fact that the phones were not installed in the factory premises was not a ground germane to the provisions of the relevant rules. The above finding of the Hon ble High Court applies equally to the credit in respect of land line phones. In the absence of a contrary finding in the orders of the lower authorities, it has to be held that telephone service in relation to the phones involved is covered by the definition of input service contained in the CCR, 2004 in view of the Tribunal order and the judgement of the High Court referred. It is accordingly held that the impugned credit was admissible to the respondents. The appeal filed by the Revenue is dismissed.

Summary

Issues:
- Admissibility of service tax credit for mobile phones and telephones installed outside the factory premises.

Analysis:

1. The appeal filed by the Revenue challenged the demand for service tax credit amounting to Rs.11,970/- availed by the respondents for the use of mobile phones and telephones installed in the managers' residences. The original authority had demanded the amount and applicable interest, but the Commissioner (Appeals) set aside the order based on a Tribunal decision in the case of Indian Rayon & Industries Ltd. The Commissioner found that the CENVAT Credit Rules, 2004 did not require telephones to be installed in the premises of the service provider for credit eligibility.

2. The Revenue contended that as per Board's Circular, credit could only be allowed for telephones installed in business premises, not for phones outside the factory, including mobile phones. However, the respondents relied on the Indian Rayon & Industries Ltd. case to support their claim that the credit was admissible under CCR, 2004 as long as the phones were used for providing output service or in relation to manufacturing final products.

3. The Judge considered the facts and submissions, noting that the original authority denied credit for mobile phones not installed in business premises. Referring to the Indian Rayon & Industries Ltd. case and a High Court judgment, it was held that the location of phones outside the factory premises was not a relevant ground for credit denial. The Judge concluded that the impugned credit was admissible to the respondents based on the Tribunal order and the High Court judgment, dismissing the Revenue's appeal.

This judgment clarifies the admissibility of service tax credit for mobile phones and telephones installed outside the factory premises, emphasizing that the location of the phones does not affect credit eligibility under the CENVAT Credit Rules, 2004. The decision highlights the importance of considering the purpose of phone usage in providing output services or in relation to manufacturing activities rather than focusing solely on their physical location.