2009 (12) TMI 209 - AT - Service Tax

Cenvat Credit- CBEC Circular No. 59/8/2003, dated 20-6-2003- The assessee had availed Cenvat Credit on Mobile phone services. The revenue was of the view that as per CBEC Circular No. 59/8 of 2003, dated 20.6.2003, credit of service tax paid on mobile phone services would not be allowed as input service credit and issued a show cause notice to the assessee for contravention of rule 2(I). The adjudicating authority on finding that the mobile phone had been used both for personal and business purpose denied credit. The Commissioner (Appeals) upheld the adjudication order. Held that- it was found for what purposes the mobile phones were being used and there was no finding by the adjudicating authority except from the bills that mobile phones were not used by the employees for business purpose only. Thus it was found that the assessee had proved that the mobile phones were being given to the employees for the use of business purpose and not for any other purpose. Thus, the Cenvat credit availed by the assessee on mobile phone services was too be allowed and the impugned order was to be set aside. Thus the appeal is allowed.

Summary

Issues:
Appeal against denial of Cenvat credit on Mobile Phone Services.

Analysis:
1. The appellant availed Cenvat credit on mobile phone services, which was denied based on CBEC Circular No. 59/8/2003, stating that Service Tax paid on mobile phones services shall not be allowed. A show-cause notice was issued for contravention of Cenvat Credit Rules, 2002. The adjudicating authority held that mobile phones were used for both personal and business purposes, with no control over employee usage. Lack of evidence led to denial of credit.

2. The lower appellate authority confirmed the denial, considering mobile phones as a perquisite treated as a 'fringe benefit' like staff car or laptop, not an 'input service'. The appellant contended that mobile phones were in the company's name, bills paid by the company, used exclusively for business by officials, supported by bills. The burden of proof was on the appellant to establish business use, which was not adequately proven.

3. The SDR argued that multifarious use of mobile phone services was possible, citing a previous Tribunal decision. Despite potential business use, the appellant failed to demonstrate dedicated business use, leading to denial of Cenvat credit. The Tribunal's decision emphasized the need for clear evidence of business-related mobile phone use.

4. The Judicial Member examined submissions and records, finding that the denial was based on lack of control over employee usage. However, after reviewing the bills and lack of employee statements, it was concluded that the appellant had indeed provided mobile phones for business purposes. The appellant successfully proved that the mobile phones were intended for business use, leading to the allowance of Cenvat credit and setting aside the impugned order.

In conclusion, the judgment allowed the appeal, overturning the denial of Cenvat credit on mobile phone services due to the appellant's successful demonstration of the intended business use of the mobile phones provided to employees.