Input service credit on mobile phone bills may be admissible, but actual use in manufacture must still be proved.

Credit of service tax paid on mobile phone bills was treated as potentially admissible as input service under the Cenvat Credit Rules, 2004 because the rule allows credit for services used directly or indirectly in or in relation to manufacture and clearance of final products, and prior precedent had held that such credit is not barred. However, the assessee still had to prove before the adjudicating authority that the mobile phone service was actually used in the course of manufacture or clearance, and that factual issue had not been examined below. The denial of credit was therefore not finally sustained on merits, and the matter was remanded for fresh decision after hearing the assessee.

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Issues: Whether credit of service tax paid on mobile phone bills was admissible as input service under the Cenvat Credit Rules, 2004, and whether the matter required reconsideration on the factual aspect of use of the service in relation to manufacture.

Analysis: The claim for credit was rejected below primarily on the basis of a Board circular, but the governing rule permits credit on services used, directly or indirectly, in or in relation to manufacture and clearance of final products. The Tribunal noted that prior precedent had held that mobile phone service tax credit is not barred under the rules. At the same time, the assessee had to establish before the adjudicating authority that the service was actually used in the course of manufacture or clearance, and that factual aspect had not been examined by the lower authorities.

Conclusion: The denial of credit was not finally sustained on merits, and the matter was remanded to the adjudicating authority for fresh decision after hearing the assessee.

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