Clarification required on service tax paid Telephone bill, does it eligible for Cenvat credit ?

[RameshBabu Kari]

Clarification required on service tax paid Telephone bill, does it eligible for Cenvat credit ?

[KASTURI SETHI]

Yes. You will have to prove nexus between input service and taxable output service. It is covered under Rule 2(l) (i)(ii) of Cenvat Credit Rules, 2004:-

[(l) “input service” means any service, -

(i) used by a provider of [output service] for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal,

[Himansu Sekhar]

The view of kasturi sir is correct. The telephone needs to be in nexus with the manufacturing activities/service provided.

[Ganeshan Kalyani]

Yes, credit is eligible if nexus of input service with output service or manufacturing is established. However, it is prone to litigation. Therefore, if the amount of credit is minimal then it is better to be on safer side and do not avail credit. This is my view. Thanks

[Himansu Sekhar]

The master circular issued by the deptt. On service tax has extensively analysed the issue . credit on the strength of tel. Bills is far from ambiguity.

[KASTURI SETHI]

Dear Querist, Pl. read para 4 of the following judgement:-

2015 (39) S.T.R. 889 (Tri. - Del.) = 2015 (10) TMI 1147 - CESTAT DELHI PARADISE PLASTICS ENTERPRISES LTD. Versus COMMR. OF C. EX. & S.T., NOIDA

[Ganeshan Kalyani]

Thanks Sri Kasturi Sir for the case law.

AI Summary

Cenvat credit on telephone service allowed where nexus with taxable output or manufacturing is clearly established. Telephone bills with service tax are eligible for Cenvat credit only if a demonstrable nexus exists between the telephone input service and the taxpayer's taxable output service or manufacturing activities, as per the definition of input service in the Cenvat Credit Rules, 2004. Administrative guidance and tribunal authority support credit where nexus is shown, but claimants should consider the risk of scrutiny and potential litigation when claiming small amounts of credit.