2009 (1) TMI 192 - AT - Service Tax

CESTAT Chennai: Service Tax Credit Allowed for Telephones at Executives' Homes

The Appellate Tribunal CESTAT, Chennai allowed the appeal filed by M/s. ITC Ltd. regarding the availment of service tax credit for mobile phones and ... CENVAT credit of service tax on mobile phones and telephones at residential premises - input service - CENVAT Credit Rules, 2004 - absence of express prohibition to claim credit - business use versus perquisiteCENVAT credit of service tax on mobile phones and telephones at residential premises - input service - absence of express prohibition to claim credit - Admissibility of CENVAT credit of service tax paid on mobile phones and telephones installed at residential premises of executives under the CENVAT Credit Rules, 2004. - HELD THAT: - The Tribunal examined decisions of coordinate authorities and the High Court which held that service tax paid for mobile and landline telephone services used by staff at their residences is admissible as input service where such services facilitate the business of the assessee and there is no express prohibition under the CENVAT Credit Rules. The impugned finding that such phones were not installed in business premises and were perquisites was held to be inconsistent with the legal provisions and the ratio of earlier decisions which allowed credit in comparable facts. In view of the binding precedents and the absence in the CCR, 2004 of an express bar to such credit, the Tribunal concluded that the credit availed by the appellant for the period in dispute was permissible.The credit of service tax paid on mobile phones and telephones used by executives at their residences for the period Jan.-Sept.'05 is admissible under the CENVAT Credit Rules, 2004; the impugned order disallowing the credit is vacated and the appeal is allowed.CENVAT Credit Rules, 2004 - absence of express prohibition to claim credit - Circular No. 59/08/2003-S.T. - Whether Circular No. 59/08/2003-S.T. operated to prohibit CENVAT credit of service tax on such telephone services under the CCR, 2004. - HELD THAT: - The Tribunal noted the appellant's contention regarding temporal applicability of the Circular and the Commissioner(A)'s reliance on the Circular to deny credit. Relying on judicial authorities, the Tribunal held that where the CCR, 2004 does not expressly prohibit credit, a departmental circular issued earlier cannot be used to negate the statutory entitlement conferred by the Rules. The consistent holdings of the Tribunal and High Court affirmed that the absence of an express prohibition in the Rules governs the admissibility of credit, rendering the Circular inapplicable to sustain denial of credit in these facts.Circular No. 59/08/2003-S.T. does not preclude admissibility of CENVAT credit under the CCR, 2004 in the circumstances of this case; denial of credit on that basis is unsustainable.Final Conclusion: The Tribunal allowed the appeal, holding that service tax paid on mobile and landline telephone services used by executives at their residences for Jan.-Sept.'05 is admissible as CENVAT credit under the CCR, 2004; the impugned denial was vacated in view of the absence of express prohibition in the Rules and relevant judicial precedents. Issues:1. Availment of service tax credit for mobile phones and telephones installed at residential premises.2. Contravention of Rules 3 and 4 of CENVAT Credit Rules, 2004.3. Applicability of Circular No. 59/08/2003-S.T.4. Admissibility of service tax credit for telephone services used by executives.Analysis:1. The issue in this case revolves around the availment of service tax credit by M/s. ITC Ltd. for mobile phones and telephones installed at the residential premises of its executives during a specific period. The Circular No. 59/08/2003-S.T. clarified that credit of service tax was allowed only on telephone sets installed in business premises, not for mobile phones. The original authority alleged contravention of Rules 3 and 4 of CENVAT Credit Rules, 2004, demanding a specific amount and imposing penalties.2. The Commissioner (A) affirmed the original authority's decision, except for the penalty, stating that the telephones used by executives were not input services related to manufacturing excisable goods. Despite the potential business facilitation, the phones were considered perquisites by the management. The argument regarding the circular's applicability during the currency of CCR, 2002, which was superseded by CCR, 2004, was rejected.3. The learned counsel for the appellants cited various case laws to support their argument, emphasizing the approval of service tax credit for mobile and landline phones used for business purposes at executives' residences. The impugned order was found inconsistent with legal provisions based on the case laws presented, leading to the appeal being allowed.4. The judgment highlighted the decisions in previous cases, such as Excel Crop Care Ltd., Indian Rayon & Industries Ltd., Grasim Industries, Keltech Energies Ltd., and Brakes India Ltd., where service tax credit for telephone services used by staff at their residences was deemed admissible. The Tribunal's decisions supported the admissibility of such credits as input services, ultimately leading to the vacating of the impugned order and allowing the appeal.This detailed analysis of the judgment provides a comprehensive understanding of the legal issues, arguments presented, and the final decision reached by the Appellate Tribunal CESTAT, Chennai.