2008 (1) TMI 96 - AT - Service Tax

Business phones outside factory eligible for Cenvat credit

The judgment clarified that mobile and landline phones installed outside the factory for business purposes are eligible for Cenvat credit if used for ... Cenvat credit - input services - eligibility to avail Cenvat credit for telecommunication services - wrong utilisation of service tax creditCenvat credit - input services - eligibility to avail Cenvat credit for telecommunication services - Whether Cenvat credit/input service credit availed on mobile phones and landline telephones installed at directors' and officers' residences and paid for by the company qualifies as input services eligible for Cenvat credit - HELD THAT: - The appellants had availed service-tax credit on mobile phones and landline telephones installed outside the factory premises (in residences of directors and officers) for the stated periods and the Revenue treated such availment as wrongful utilisation and denied credit. The Tribunal noted that the telephones were installed for business purposes and the bills were paid by the company. Reliance was placed on precedents of coordinate benches (Indian Rayon & Industries Ltd. (Tri.-Mumbai) and Excel Crop Care Ltd. (Tri.-Ahmedabad)) which had upheld availability of input service credit in respect of mobile phones. Applying that reasoning, the Tribunal held that telecommunication services for phones installed at the residences of directors and company officials, when paid for by the company and used for business purposes, constitute input services and are eligible for Cenvat credit. The impugned orders denying credit were therefore set aside. [Paras 4]Cenvat credit availed on mobile phones and landline telephones installed in directors' and officers' residences and paid by the company is input service credit eligible for Cenvat credit; impugned orders denying such credit set aside.Final Conclusion: Appeals allowed; availability of Cenvat credit in respect of mobile and landline telecommunication services installed at directors' and officers' residences and paid for by the company upheld, with consequential relief. Issues:1. Eligibility of availing Cenvat credit on mobile and landline phones installed outside the factory for business purposes.Analysis:The appeals raised a common question regarding the utilization of Service Tax credit for duty payment on final products, specifically concerning availing credit on Telephone Services for certain periods. The Revenue contended that such credit utilization was incorrect as the phones did not qualify as input services, leading to Show Cause Notices and denial of credit. The learned Counsel referenced judgments from the Mumbai and Ahmedabad Benches supporting the eligibility of availing Cenvat credit on mobile phones used for business purposes, arguing that the same criteria should apply to telephones installed in Directors' and Officers' premises. On the other hand, the learned JDR defended the order, stating that the appellants were not eligible for input credit on phones installed outside the factory. However, upon careful consideration, the Member (J) observed that since the phones were installed by the Company for business purposes and the bills were paid by the company, they should be considered as input services eligible for Cenvat credit. The Member (J) cited precedents from the Mumbai and Ahmedabad Benches supporting the eligibility of input services related to mobile phones, concluding that the same rationale should apply to landline phones in Directors' and Company Officials' residences. Consequently, the impugned order was set aside, and the appeals were allowed with any consequential relief.This judgment clarifies the eligibility of availing Cenvat credit on mobile and landline phones installed outside the factory for business purposes. It emphasizes that if such phones are used for business activities and the bills are paid by the company, they qualify as input services eligible for Cenvat credit. The decision is supported by precedents from the Mumbai and Ahmedabad Benches, ensuring consistency in interpreting the relevant rules and providing relief to the appellants in this case.