CESTAT Chennai allows BSNL to claim credit for duty on capital goods

The Appellate Tribunal CESTAT, CHENNAI ruled in favor of M/s. BSNL, allowing the company to claim credit for duty paid on capital goods procured by the Dy. General Manager (Projects) at Salem for secondary switching areas at Trichy, Coimbatore, and Kumbakonam. The Tribunal held that BSNL, as a service tax assessee with registrations at multiple locations, could distribute credit among them. Recognizing BSNL's unified status, the Tribunal found merit in consolidating the credit centrally at Salem. Consequently, the Tribunal waived the predeposit requirement, indicating a strong case on merit for the appellants.

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Issues: Jurisdiction of Dy. General Manager (Projects) over secondary switching areas; Eligibility of BSNL to claim credit for duty paid on capital goods.

In the judgment delivered by the Appellate Tribunal CESTAT, CHENNAI, the case involved M/s. BSNL, a public sector undertaking providing telephone services with installations nationwide. The dispute centered around the jurisdiction of the Dy. General Manager (Projects) at Salem over secondary switching areas at Salem, Trichy, Coimbatore, and Kumbakonam. The impugned capital goods were procured by the DGM (Projects) at Salem, with duty credit claimed there. The department contested this credit claiming it was not valid as the goods were directly supplied to the secondary switching areas at Trichy, Coimbatore, and Kumbakonam. The Tribunal analyzed the Cenvat Credit Rules, emphasizing that capital goods must be used for providing output services and received at the service provider's premises. It noted that a service tax assessee like BSNL, with registrations at multiple locations, could distribute credit among them. Considering BSNL's unified status as a service tax assessee despite different units' registrations, the Tribunal found prima facie merit in allowing credit for capital goods received at secondary switching areas under the DGM's jurisdiction in Salem, consolidating it centrally at Salem. Consequently, the Tribunal waived the predeposit requirement pending the appeal, deeming the appellants to have a strong case on merit. The operative part of the order was pronounced on 27-9-2010.

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