Denial of credit on cables situated outside premises of service provider.

PJ/CASE LAW/2014-15/2316

Case:- BSNL VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI

Citation:- 2014 (33) S.T.R. 407 (Tri. - Chennai)

Brief facts:- The issue involved in both these appeals was similar. The main demand had been made against M/s. BSNL, a Public Sector Telephone Company, on the ground of violation of 2nd proviso to Rule 3(5) of the Cenvat Credit Rules, 2004, as it stood prior to amendment of the said Rule on 1-4-2008, for the reason that the telephone cables in respect of which credit had been taken by the appellants were removed outside the premises and not brought back within 180 days.

Appellant’s contentions:- The ld. Advocate appearing for the appellants stated that these telephone cables were not removed outside as such but, they were laid underground between telephone exchanges and between telephone exchange and the premises of the customers. There was no dispute regarding the actual position that these cables were laid underground which was essential for providing the output service viz., telephone services. There could not be any question of bringing back these cables to the premises of M/s. BSNL, as such a step would disrupt telephone services.

Respondent’ contentions:- The respondent reiterated the findings of lower authority.

Reasoning of judgment:- In view of the foregoing we were of the view that there had been no contravention of the 2nd proviso to Rule 3(5) as it existed at the material time. In any case, the amended Rule 3(5) provides that if any inputs or capital goods were removed outside the premises of the provider of output service for providing such service, there was no requirement for any demand of duty or reversal of credit. Hence, the impugned order was set aside and the appeals were allowed. Both the stay petitions also stand disposed off.

Decision:- Appeal was allowed.

Comment:- The substance of the case is that if the capital goods are removed outside the premises of the provider of output service for providing such service, there is no requirement for any demand of duty or reversal of credit. Therefore, the credit taken on the cables situated outside the premises for providing telephone services by BSNL was held to be correct and proper.

Prepared by: Ranu Dhoot

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PJ/CASE LAW/2014-15/2316

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