Input service credit on mobile phone bills requires factual verification of use, not denial based only on circular guidance.

Credit of service tax paid on mobile phone bills cannot be denied solely on the basis of the Board circular, because entitlement under the Cenvat credit scheme depends on whether the service was used directly or indirectly in or in relation to manufacture or clearance of the final product. The record showed that the lower authorities had not examined this factual use of the service as input service. The denial of credit was therefore not sustainable on the existing record, and the matter required fresh decision by the adjudicating authority after hearing the appellant.

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Issues: Whether credit of service tax paid on mobile phone bills could be denied merely on the basis of the Board circular, and whether the matter required reconsideration for verification of use of the service as input service.

Analysis: The claim for credit was examined in the context of the Cenvat credit scheme governing input service. The Board circular relied upon by the Revenue stated that credit would be available for phones installed in the factory, while the appellant relied on Tribunal precedent holding that mobile phone bills were not excluded from input service credit. However, entitlement to credit still depended on whether the service was used directly or indirectly in or in relation to manufacture of the final product or clearance of the final product from the place of removal. As the lower authorities had not examined this factual aspect, fresh consideration was necessary.

Conclusion: The denial of credit could not be sustained on the existing record, and the matter was required to be decided afresh by the adjudicating authority after hearing the appellant.

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