Input credit of service tax - mobile phone service

[Asked by 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 However, now Service Tax Credit Rules 2002 has been repealed and in the CENVAT Credit Rules 2004, there is no such condition, which restrict the availment of credit only for telephone connection “installed in the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

Cenvat credit for mobile phone services permitted under CENVAT Credit Rules, subject to standard conditions for input service credit.
The query concerns admissibility of Cenvat credit for service tax on mobile phone services. Earlier administrative guidance under Service Tax Credit Rules, 2002 restricted credit to telephone sets installed in business premises and excluded mobile phones, but a tribunal decision broadly construed "cellular phone." With repeal of the 2002 rules and introduction of the CENVAT Credit Rules, 2004, there is no premises-installation restriction; consequently, mobile phone service tax is treatable as eligible for Cenvat credit subject to the standard statutory conditions for input service credit.