Court rules mobile phone expenses eligible for cenvat credit under Cenvat Credit Rules, 2004.

The court upheld the lower courts' decisions, ruling against the appellant on the eligibility of service tax paid on mobile phones for cenvat credit under the Cenvat Credit Rules, 2004. The court found that mobile phone expenses were connected to the manufacturing process of the respondent, making them eligible for credit as "Input Services" under Rule 2(l) of the 2004 Rules. Consequently, the court rejected the appeal, emphasizing that the circular of 2003 was not applicable in this case.

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Issues:
1. Eligibility of service tax paid on mobile phones for cenvat credit under Cenvat Credit Rules, 2004.
2. Applicability of Circular No.59/8/2003-ST on service tax paid on mobile phones for cenvat credit under Cenvat Credit Rules, 2004.

Analysis:
1. The appellant argued that mobile phones were not covered under the circular dated 20.6.2003 and, therefore, not eligible for cenvat credit under the Rules of 2004. The appellant contended that mobile phones were not considered input services as per Rule 2(l) and were not included in the definition of "Output Services" under Rule 2(p) of 2004. The appellant emphasized that mobile phones were not installed on the premises of the respondent, hence not eligible for credit. The appellant highlighted that the authorities failed to consider the saving clause and requested the substantial questions of law to be answered in their favor.

2. The respondent supported the impugned order, stating that the circular of 2003 was not applicable to defeat the credit availed by the respondent. The respondent argued that the input services were not defined under the 2002 Rules, making the claim of corresponding rules in 2004 irrelevant. The respondent contended that every activity related to manufacturing goods was entitled to credit as per the Rules of 2004. The respondent relied on the order of the CESTAT to support their claim that mobile phones were included for credit, urging the court to reject the appeal.

3. The court examined Rule 16 of the 2004 Rules, which stated that circulars issued under the 2002 Rules would be deemed valid under the corresponding provisions of the 2004 Rules if consistent and relevant. The court noted that since "Input Services" were not defined in the 2002 Rules, there was no corresponding rule saved in the 2004 Rules. The court upheld the findings of the Commissioner (Appeals) and the Appellate Tribunal, concluding that the circular of 2003 was not applicable to the case, and there was no reason to interfere with the lower courts' decisions.

4. Considering the definition of "Input Services" in Rule 2(l) of the 2004 Rules, the court determined that any expenditure related to the manufacturing activity would be eligible for credit. Since mobile phone expenses were connected to the manufacturing process of the respondent, the court ruled against the appellant on both substantial questions of law. The court found no merit in the appeal and rejected it accordingly.

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