Input service credit for employee mobile phone services allowed where business communication and decision-making nexus was established.

Cenvat credit was considered admissible for service tax paid on mobile phone services provided to employees, because the services fell within the broad definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004. The analysis treated such communication facilities as used directly or indirectly in relation to manufacture and business operations, including effective decision-making and business communication. An earlier departmental circular cited by revenue was found incapable of overriding the statutory rule. Credit was therefore held allowable on the footing that the employee mobile services had a sufficient business nexus.

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Issues: Whether Cenvat credit of service tax paid on mobile phone services provided to employees is admissible as input service.

Analysis: The credit claim was examined under the definition of "input service" in Rule 2(l) of the CENVAT Credit Rules, 2004, which covers services used directly or indirectly in or in relation to manufacture and also services connected with business activities such as sales promotion. The availability of credit was accepted on the footing that the mobile phones were provided to employees for timely decisions and effective communication in business operations. The earlier departmental circular relied on by the revenue was treated as unable to prevail over the statutory rule.

Conclusion: Cenvat credit on the service tax paid for mobile phone services was held to be admissible, and the revenue's challenge failed.

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