2008 (10) TMI 89 - AT - Service Tax

Appellate Tribunal rules in favor of assessees on service tax credit for mobile phones

The Appellate Tribunal CESTAT, Bangalore ruled in favor of the assessees in a case concerning the eligibility of credit on service tax paid on mobile ... CENVAT credit of service tax on mobile phone services - use in or in relation to manufacture of final products - personal use and eligibility for credit - interpretation of Board's Circular No.97/8/2007 para 8.3 - precedent reliance in support of creditCENVAT credit of service tax on mobile phone services - use in or in relation to manufacture of final products - personal use and eligibility for credit - interpretation of Board's Circular No.97/8/2007 para 8.3 - Assessees are eligible to claim CENVAT credit of service tax paid on mobile phone services where the phones are in the name of the company and used in relation to manufacture of final products, notwithstanding incidental personal use. - HELD THAT: - The Bench observed that Board's Circular No.97/8/2007 (para 8.3) permits extension of credit for mobile phone services if they are used in or in relation to the manufacture of final products. The assessees led evidence that the mobile phones stood in the name of the company and were used by employees in relation to work; incidental personal use was not treated as disentitling. The Bench relied on earlier decisions including Indian Rayon Industries Ltd. and its own earlier order in Final Order No. 1041/2008 dated 02.09.2008, which applied the Board's Circular to allow credit. The Revenue's contention that personal use precludes credit was not accepted and no merit was found in the appeals.Revenue's appeals are rejected and the assessees' entitlement to credit in respect of service tax on mobile phone services is upheld.Final Conclusion: Appeals by the Revenue dismissed; credit of service tax on mobile phone services allowed where phones are companyowned and used in or in relation to manufacture of final products, in view of Board's Circular and controlling precedents. Issues:1. Eligibility of credit on service tax paid on mobile services.2. Interpretation of whether mobile phones are used in or in relation to the final products manufactured.3. Application of Board's Circular 97/8/2007-ST dated 23.08.2007.4. Determination of whether mobile phones were used for personal work.Analysis:The appeals before the Appellate Tribunal CESTAT, Bangalore involved a common issue regarding the eligibility of credit on service tax paid on mobile services. The Revenue contended that the assessees were not entitled to credit as the mobile phones were not used in or in relation to the final products manufactured and were primarily used for personal purposes. However, the assessees argued that the mobile phones were registered in the company's name and were used by employees for work-related purposes, with occasional personal use. Both parties cited various judgments to support their positions.The Tribunal considered the arguments and referred to Board's Circular 97/8/2007-ST, which clarified that credit could be granted for mobile phones if used in relation to the manufacture of final products. The assessees and their representatives asserted that the mobile phones were indeed used in relation to the manufacturing process. On the other hand, the Revenue contended that the mobile phones were predominantly used for personal tasks, thus rendering them ineligible for credit.In a previous judgment by the same Bench in the case of CCE, Bangalore Vs. Conzerv, the Tribunal had ruled in favor of the assessees, citing previous judgments and dismissing the Revenue's appeal. Based on this precedent and the arguments presented, the Tribunal found no merit in the Revenue's appeals and consequently rejected them.The decision highlights the importance of demonstrating the usage of mobile phones in relation to manufacturing activities to claim credit on service tax paid. The interpretation of the term 'used in or in relation to' remains crucial in determining the eligibility for such credits, as evidenced by the reliance on relevant Board circulars and legal precedents.