Input credit of service tax - mobile phone service

[Guest]

Hi, My query relates to the credit availed on the service tax paid for mobile phone service (input service. The Dept. of Central Excise has objected to the availment of credit on service tax paid on account of mobile phone service saying that the Board's circular has clarified on this issue and the same cannot be availed as it is not a fixed line telephone service at he premises of the assessee. can anyone throw light onthis issue whether the stand of the Dept. is coorect?

[Surender Gupta]

No clarification / circular or instructions issues under Service Tax Credit Rules, 2002, is valid now to the extent the query related to Mobile phnoe is there. You can claim the Cenvat Credit on the Mobile Phone without any difficulty.

[Vijay Chitte]

Yes, you can claim the Cenvat credit on the mobile phone. In “ Bhagyanagar Metals Ltd. v. CCE 2005 (180) ELT 370 (Tri-Mumbai) = 2004 -TMI - 53535 - CESTAT, WEST ZONAL BENCH, MUMBAI it was held that the ‘Cellular phone’ would include all kinds of phones which would work on cellular technology and the term cannot be restricted as has been interpreted by the revenue only to cover hand held mobile phone [Words and phrase- Term “Cellular phone”]. Under the Service Tax Credit Rules 2002, service tax credit was allowed only in respect of telephone connection, which were installed in the premises from where output service is provided. That time, a point raised before the Govt. whether credit of service tax on telephone connection would be admissible on telephone sets installed only in business premises, the Govt. in para 2.8 of its Circular No. 59/8/2003, dated 20-6-2003 (appended as Annexure I) has clarified “The answer is in the affirmative, and credit will be allowed only on telephone sets installed in the business premises. It was also clarified that “Mobile phone are not covered”, therefore, no credit shall be available for the service tax paid in respect of mobile telephone connection even if it has been used for providing the taxable service”. However, now Service Tax Credit Rules 2002 has been repealed and in the CENVAT Credit Rules 2004, there is no such condition, which restrict the availment of credit only for telephone connection “installed in the premises”. Therefore, now above-mentioned clarification will not be applicable and credit is allowed even for the service tax on the mobile phone connection subject to other condition for availment of CENVAT Credit. Regards Vijay Chitte Officer Taxation Claris Lifesciences Ltd. Ahmedabad.

AI Summary

Claiming Input Credit for Mobile Phone Service Tax Allowed Under CENVAT Credit Rules 2004, Old Restrictions Removed A query was raised about the eligibility of claiming input credit on service tax paid for mobile phone services, with the Department of Central Excise objecting based on a Board's circular. Two responses clarified that under the current CENVAT Credit Rules 2004, credit can be claimed for mobile phone service tax. The previous restriction, which limited credit to fixed-line services installed at business premises, is no longer applicable. The responses referenced past rulings and circulars, indicating that mobile phone services now qualify for credit, provided other conditions for CENVAT Credit are met.