TaxTMI 
TaxTMI 
2009 (2) TMI 91
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....same is transmitted to such towers. From there the number gets transmitted to Base Station Controller (BSC) and from there it is transferred to Main Switching Centre (MSC) of the company. If the appellant's subscriber dials the number of another telephone service provider, the MSC instrument of the appellant through wireless signals requests the MSC of that telephone service provider to connect to his subscriber. The appellant have taken credit of Central Excise duty Addl. customs duty paid on various capital goods including those mentioned above and also the credit of service tax paid on various input services used for providing the output services. The revenue by invoking rule 6(3)(c) of the Cenvat Credit Rules, 2004 has restricted the utilization of Cenvat credit for payment of service tax on the output service to 20 per cent of the amount of service tax payable on the ground that the appellant, in addition to the taxable - "Service in relation to telephone connection", are also providing the "exempted services" (as defined under rule 2(e) of the Cenvat Credit Rules, 2004) of "network access to other telephone service providers (inter-connectivity services)" for which the co....
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....charges collected by them are shared with the appellants as per the formula prescribed by the TRAI. Thus the inter-connectivity charges being received by the appellant from other telephone service providers are nothing but their share of the call charges collected by other service providers in respect of the calls originated from their network and terminated in the appellant's network. (3) Even if the inter-connectivity and infrastructure use services are treated as 'exempted services', as defined under rule 2(e) of the Cenvat Credit Rules, 2004, as per the provisions of rule 6(4), capital goods Cenvat credit is available, as the capital goods are not used by the appellant exclusively for providing exempted service and as per the provisions of rule 6(5), the provisions of sub-rules (1), (2) and (3) of rule 6 of Cenvat Credit Rules, 2004 are not applicable in respect of 17 input taxable services specified in clauses (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd) (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of section 65(105) of the Finance Act, 1994 unless these services are exclusively used for providing exempted services and credit of whole of service ta....
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.... Rules, 1994 is half yearly and not monthly and therefore excess tax paid in one month can be adjusted against short payment in other month within the same half year period. (5) Since there was dispute as to whether "inter-connectivity service" provided by one telephone service provider to another is taxable or not under heading "Service provided by Telegraph authority to its clients in relation to telephone connection" and since this issue was finally settled vide Board's letter No. 149/2/04-CX-4, dated 13-6-2004 to BSNL, the appellant cannot be accused of suppressing from the Department the fact that they are providing some services like inter-connectivity which are not taxable. Therefore only normal limitation period for demand of allegedly wrongly taken Cenvat credit is available and bulk of demand raised vide show-cause notices dated 14-5-2007 and 23-8-2007 is time barred. 2.2 Shri V. Choudhary, the learned Departmental Representative made the following submissions- (1) Since the definition of "exempted service" in rule 2(e) of Cenvat Credit Rules, 2004 includes non-taxable service also, the "inter-connectivity service" and "infrastructure use service" being provi....
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....telephone service providers, all the telephone service providers, whether landline or mobile, have to have inter-connection with each other and they bill each other for the inter-connectivity i.e., providing access to their network to the calls originating from network of other telephone services providers - the telephone service provider from whose network the call originates, collects the full charges for the call from its subscriber, and pays the service tax on that amount, and if the call has terminated in the network of some other service provider, the call charges are shared with that service provider as per a formula prescribed by TRAI. The charges for such inter-connectivity are called ICU charges/Mobile terminating charges. "Tap out charges" are the charges for providing connectivity to the subscriber of other mobile telephone service provider who is roaming i.e., has moved out of home network. "Infrastructure charges" being received by the appellant are for permitting the use of their infrastructure like BTS Towers etc., by other cellular mobile telephone service providers. There is no dispute about the fact that, the 'inter connectivity services', 'roaming se....
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....d, therefore, the provisions of rule 6(3)(c) would get attracted. 4. Second plea of the appellants is that even if the provisions of rule 6(3)(c) are attracted, the limit of '20 per cent of the service tax payable' on utilization of tax credit for payment of service tax on telephone service is not applicable in respect of capital goods Cenvat credit and service tax credit in respect of 17 input services specified in rule 6(5). We agree with this plea of the appellant as - (a) In terms of the provisions of sub-rule (4) of rule 6 of the Cenvat Credit Rules, 2004, capital goods Cenvat credit is not permissible only when the capital goods are exclusively used for manufacture of 'exempted goods' or for providing 'exempted service', implying that in a situation where the capital goods are used for providing non-exempt taxable service as well as "exempted service' or for manufacture of non-exempt dutiable goods as well as 'exempted goods', the capital goods Cenvat credit shall be available; (b) In terms of the provisions of sub-rule(5) of rule 6 of Cenvat Credit Rules, 2004, service tax credit in respect of 17 input services specified in this s....
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....he intention of the Government is not to restrict the utilization of the credit of 17 services specified in sub-rule (5) of rule 6 to the 20 per cent limit specified in rule 6(3)(c) and this will apply with equal force to capital goods Cenvat credit for which a similar provision has been made in sub-rule (4) of rule 6 and which are also part of fixed assets that cannot be apportioned for maintaining separate records. As per Hon'ble Supreme Court's judgment in case of CCE v. Ratan Melting & Wire Industries [2008] 231 ELT 22/17 STT 103, the Board's instructions are binding on the Departmental officers unless contrary view has been expressed by Hon'ble Supreme Court or any High Court. In this case neither any such judgment of Hon'ble Supreme Court or High Court has been produced, nor the Department has shown as to how the Board's instructions, which are its own instructions, are contrary to statutory provisions. We, therefore, have no hesitation in holding that the word "credit" in the expression - "the provider of output service shall utilize credit only to the extent of...." in sub-rule (3)(c) of rule 6 does not include the 'capital goods credit' and ....
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....oadlines Ltd. (supra) the appellant during June, 2003 to December, 2003 period, as against service tax credit utilization quota of 35 per cent of the total service tax payable, had paid entire service tax through PLA and they utilized the unutilized quota of payment through duty credit for January, 2003 - December, 2003 period, during January, 2004 - March, 2004 period and the Tribunal held that there is no time frame fixed in rule 3(5) of the Service tax Credit Rules, 2002 for utilization of the credit to the extent of 35 per cent of the tax liability. Applying the ratio of the Tribunal's judgment in Vijayanand Roadlines Ltd. s case (supra) to this case, if during certain months, the credit utilization for payment of service tax was less than the 20 per cent ceiling specified in rule 6(3)(c) of Cenvat Credit Rules, 2002, the unutilized credit of those months has to be adjusted against utilization in excess of the 20 per cent ceiling, in other months. 4.3 The demand for excess utilized credit is, therefore, required to be quantified as per our findings in paras 4.1 and 4.2 above. 5. Another plea of the appellant is that longer limitation period of five years under prov....