2008 (2) TMI 180 - AT - Service Tax

Service Tax on Mobile Phones: Eligible for Cenvat Credit

The Tribunal allowed the appeal, holding that service tax paid on mobile phones is eligible for Cenvat credit for service providers and manufacturers. It ... Service tax credit on mobile phone charges - Cenvat Credit Rules, 2004 - definition of input service - Use 'in or in relation to' manufacture requirement for input service - Business-related activities as qualifying input servicesService tax credit on mobile phone charges - Cenvat Credit Rules, 2004 - definition of input service - Business-related activities as qualifying input services - Use 'in or in relation to' manufacture requirement for input service - Whether service tax paid on mobile phones during February, 2005 to September, 2005 was admissible as Cenvat credit to the appellant - HELD THAT: - The Tribunal examined precedent where service tax on mobile phones was held eligible for Cenvat credit. The Revenue relied on a remand in Rajasthan Textile Mills for verification whether mobile phones were used directly or indirectly 'in or in relation to' manufacture. The Tribunal applied the definition of 'input service' in clause (L) of Rule 2 of the Cenvat Credit Rules, 2004, which expressly includes services relating to business activities (for example accounting, auditing, financing, recruitment, quality control, computer networking, inward/outward transportation etc.). There was no allegation in the show cause notice that the mobile phones were not used in the appellant's business activities, and the bench in Rajasthan Textile Mills had not been addressed with the specific contention that mobile phones were used for business activities falling within the definition of input service. On that basis and respectfully following Indian Rayon & Industries Ltd. (which held service tax on mobile phones admissible as Cenvat credit), the Tribunal concluded that denial of credit was unsustainable and ordered relief to the appellant.The impugned order denying Cenvat credit on service tax paid for mobile phones is set aside and the appeal is allowed with consequential relief.Final Conclusion: Appeal allowed; impugned order set aside and Cenvat credit on service tax paid on mobile phones for the period February, 2005 to September, 2005 granted with consequential relief. Issues: Denial of credit on service tax paid on mobile phones from February 2005 to September 2005.In this case, the appellants appealed against the denial of credit on service tax paid on mobile phones during a specific period. The learned Advocate argued citing precedents like Indian Rayon & Industries Ltd., CCE Jaipur-II v. M/s. Agarwal Trading Co., and Maini Precision Products Pvt. Ltd. The learned DR, however, supported the Commissioner (Appeals) findings and referred to the case of Rajasthan Textile Mills v. CCE Jaipur, which had remanded a similar matter for further verification. The Tribunal, after considering both sides and examining the records, found that service tax paid on mobile phones is indeed eligible for Cenvat credit for service providers and manufacturers. The learned DR emphasized the necessity of verifying the use of mobile phones in relation to the manufacture of final products, as per the definition of 'input service' under Rule 2 of the Cenvat Credit Rules, 2004. It was argued that activities like accounting, auditing, financing, and others fall under the definition of input service, and the use of mobile phones in business activities should be considered eligible. The Tribunal noted that the show cause notice did not allege any misuse of mobile phones in business activities and highlighted that the argument presented by the DR was not sustainable. Relying on the decision of Indian Rayon & Industries Ltd., the Tribunal set aside the impugned order and allowed the appeal with consequential relief.