Cenvat credit on mobile phones remains admissible when the department fails to disprove use for manufacturing or output services.

Cenvat credit of service tax paid on mobile phones was treated as admissible where the department failed to prove that the phones were not used in or in relation to manufacture or provision of output service. The Tribunal rejected the objection based on the Board circular on the facts and followed Gujarat High Court authority supporting admissibility of credit on mobile phones. The operative principle is that the burden lies on the department to disprove nexus with taxable activity before denying credit.

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Issues: Whether Cenvat credit of service tax paid on mobile phones was admissible.

Analysis: The Tribunal accepted that the department had the burden to establish that the mobile phones were not used in or in relation to manufacture or provision of output service. It also held that the objection based on the Board circular was not sustainable on the facts, and relied on the Gujarat High Court decision holding credit on mobile phones to be admissible.

Conclusion: Cenvat credit of service tax paid on mobile phones was held admissible, and the Revenue's appeal failed.

Ratio Decidendi: Where the department fails to disprove use of mobile phones in or in relation to manufacture or output service, service tax credit on such phones is admissible.

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