CENVAT credit for employee mobile phone services was allowable under the broader input service definition in the 2004 rules.

CENVAT credit on service tax paid for employee mobile phone services was admissible under the CENVAT Credit Rules, 2004 because the later rules contained a broader definition of input service covering direct or indirect use in manufacture and business activities. The restriction found in Rule 3(6) of the Service Tax Credit Rules, 2002, limited to telephone connections installed at the premises of output service, did not carry over into the 2004 regime. Rule 16 could not be used to import a repealed limitation, and the 23 August 2007 circular supported credit availability on mobile phones under the 2004 Rules. The denial of credit on the basis of the earlier circular and the 2002 Rules was therefore unsustainable.

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Issues: Whether CENVAT credit of service tax paid on mobile phone services used by employees was admissible under the CENVAT Credit Rules, 2004, and whether the earlier circular issued under the Service Tax Credit Rules, 2002 could be applied to deny such credit.

Analysis: The period in question was governed by the CENVAT Credit Rules, 2004, not the Service Tax Credit Rules, 2002. The restriction contained in Rule 3(6) of the 2002 Rules, which limited credit to telephone connections installed in the premises from where output service was provided, did not find place in the 2004 Rules. Under Rule 2(l) of the 2004 Rules, credit was available on input services used directly or indirectly in or in relation to manufacture and also for activities relating to business. Rule 16 could not revive a restriction from the repealed regime because there was no corresponding provision in the 2004 Rules. The later circular of 23 August 2007 also supported availability of credit on mobile phones under the 2004 Rules.

Conclusion: CENVAT credit on mobile phone services was allowable, and the denial based on the earlier circular and the 2002 Rules was unsustainable.

Final Conclusion: The appeal failed as the assessee was entitled to the credit claimed under the 2004 Rules.

Ratio Decidendi: Credit under the CENVAT Credit Rules, 2004 cannot be denied by importing a restriction from the superseded 2002 regime where the later rules contain a broader definition of input service and no corresponding limitation.

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