2012 (10) TMI 945 - AT - Central Excise

Appeal granted for cenvat credit on telephone services used for business purposes

The Tribunal allowed the appeal, finding that the cenvat credit for service tax on telephone services utilized outside specific locations was admissible. ... Denial of CENVAT Credit - Services were utilised outside the factory and outside Ankleshwar - Held that:- credit is admissible even for the mobile phones installed outside the factory and utilisation can be outside the factory. Therefore, as submitted, the decision in the case of Excel Crop Care Limited [2008 (7) TMI 160 - HIGH COURT GUJARAT] clearly cover the issue before me. In the case of BASP Industries [2011 (6) TMI 389 - CESTAT, MUMBAI], the Tribunal took the view that credit is admissible in respect of service tax paid on telephone installed at the residence of one of the partners. The Tribunal held that department could not produce any evidence that telephone was not used for business purpose. This decision would show that it is for the department to show that service was not used for business purpose. In this case, neither there is any allegation in the show cause notice that telephone was not used nor there is any evidence put-forth - Decided in favour of assessee. Issues:Denial of cenvat credit for service tax towards telephone services utilized outside the plant and outside Ankleshwar.Analysis:The judgment pertains to the denial of cenvat credit for service tax towards telephone services utilized outside the plant and outside Ankleshwar. The audit report during EA 2000 highlighted that the assessee had taken credit for service tax on telephone services not directly or indirectly related to the manufacture of the final product. Proceedings were initiated to deny and demand cenvat credit amounting to Rs. 7,95,012/- with interest for the period August 2007 to June 2009. The demand was confirmed with interest and an equal amount of penalty imposed.In the show cause notice, it was mentioned that the appellant was required to provide details of telephone services utilized outside the factory and Ankleshwar. The basis for denying the cenvat credit was that services were used outside these locations. The argument presented by the appellant was that there was no evidence to prove the services were related to business activities. However, the show cause notice did not allege that the services were not used for business purposes. Citing the case of Excel Crop Care Limited, the judgment highlighted that credit cannot be disallowed solely because phones were not installed within the factory premises. The decision in the case of BASP Industries further emphasized that the burden lies on the department to prove that the services were not used for business purposes.Consequently, the Tribunal found that the credit availed was correct, as there was no evidence or allegation that the telephone services were not used for business purposes. The appeal was allowed, providing consequential relief to the appellant. The judgment underscores the importance of establishing a direct link between the services availed and their utilization for business purposes to determine the admissibility of cenvat credit for service tax on telephone services utilized outside specific locations.