Cenvat Credit of service tax on telephones installed outside factory

PJ/Case Laws/2011-12/1242

Cenvat Credit of service tax on telephones installed outside factory – admissibility of.

Case: KELTECH ENERGIES LTD. V/s COMMISSIONER OF CENTRAL EXCISE, MANGALORE

Citation: 2008 (087) RLT 0453 (CESTAT-Ban.)

Issue:- Cenvat Credit of service tax on telephones installed outside factory – admissibility of.

Brief Facts: - Appellant-manufacturer had availed Service Tax credit on Telephone Services (mobile phones and landline phones installed outside the factory i.e. in the residence of the Directors and Officers of the Company) for the period from 1-12-2004 to 30-9-2005 and another period from March, 2004 to November, 2004. Revenue alleged that such availment of credit as wrong utilization and issued Show Cause Notices for denying the credit.

The Lower Authorities held that since the appellant have used credit in respect of the mobile phones and landline phones installed outside the factory, they do not qualify as input services.

Hence, appellant is before the Tribunal.

Appellant’s Contention: - Appellant submits that the Mumbai Tribunal in the case of Indian Rayon & Industries Ltd. v. CCE, Bhavnagar [2006 (004) STR 0079 (Tri.-Mumbai)], has held that in terms of Rule 4(1) of the Cenvat Credit Rules, the assessee is eligible to avail Cenvat credit in respect of mobile phones. They submit that the same criteria would apply in respect of telephones installed in the Directors' and Officers' premises, as the telephone bills are paid by the company. The telephones are being used for business purpose only. Reference was made to the judgment of the Ahmedabad Tribunal in Excel Crop Care Limited v. CCE, Ahmedabad [2007 (007) STR 0451 (Tri.-Ahmd.)] wherein all input service credit availed on mobile phones has been held to be eligible.

Respondent’s Contention: - Revenue submits that the view expressed by the Commissioner (Appeals) is correct and they are not eligible to avail the input credit in respect of mobile phones and landline phones installed outside the factory. They submit that in the case of Indian Rayon and Industries, the period was subsequent to the amendment carried out to the concerned Rules.

Reasoning of Judgement: - The Tribunal noticed that the mobile phones and land-line phones have been installed by the Company for business purpose and the bills are paid by the company. Therefore, it has to be considered as input services and that they are eligible for the benefit of the Cenvat credit. Similar issue was decided by the Mumbai bench in the case of Indian Rayons and Industries Ltd. and the Ahmedabad Bench in the case of Excel Crop Care Ltd., wherein the benefit of input services with regard to the mobile phones have been upheld. The Tribunal held that this ratio would also apply for the land-line phones installed in the Directors' and Company Officials' residence, as the bills are paid by the company and the telephones are used for business purpose. The appellant's contention that they are eligible for the Cenvat Credit in respect of mobile/landline phones is upheld. The impugned order is set aside.

Decision: - Appeals allowed with consequential relief.

Comment:- This judgement shows the consistent view of Tribunal that mobile phones and telephones, if registered in the name of the company and used for the purpose of the business, even if they are not installed in the factory of production would be eligible for Cenvat Credit. However the definition of input services has been changed from 01.04.2011 the words activities relating to business has been deleted, whether the above view is still upheld by the court is to be seen.

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PJ/Case Laws/2011-12/1242

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