Whether service tax credit on landline phones installed at senior officer’s residence is admissible?

PJ/Case Law/2013-14/1991

Case:- M/s SAIL (ALLOY STEEL PLANT) Vs COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BOLPUR

Citation:- 2013-TIOL-1731-CESTAT-KOL

Brief facts:-Material facts of the case are that the applicant has taken and utilized the credit of Rs.1,21,818/- for the period from June, 2008 to August, 2009 on the service tax paid on residential land line telephone services which were installed in residential area of the employees of the applicant company. The show cause notice was issued alleging that the telephone services installed at residences or the services extensively received outside the plant area and are being used for the purpose other than manufacturing of their final products and thereby had no nexus with the manufacturing therefore, the said telephone services installed at the premises of the officers of the applicant company cannot be treated as input service in terms of Rule 2 (l) of CENVAT Credit Rules, 2004. The adjudicating authority dropped the proceedings. Against the order of the adjudicating authority, Revenue preferred an appeal before the Commissioner (Appeal) who held that the order of the lower authority is not tenable.

Appellant’s contention:-The Ld. Advocate at the outset had submitted that the land line phones installed in the residences of few senior level officers were used for betterment of the company i.e. their day today manufacturing activity and also as part of the business activity of the applicant company. It is the contention that in terms of Rule 2 (l) of Cenvat Credit Rules, 2004 definition of input service covers the services used by the manufacturer in or in relation to "Activities related to business". The Ld. Advocate further submitted that the list of the activities relating to business as given in the definition is not exhaustive but illustrative. He placed his reliance on following case laws wherein it has been held that credit on telephone services installed at the residence of seniorofficers of the company are allowable.:-

i)             Commr. of Central Excise, Chennai-III Vs. Greaves Cotton Ltd. reported as 2009 (239) ELT 137 (Tri-Chennai)] = (2009-TIOL-611-CESTAT-MAD)

ii)           Keltech Energies Ltd. Vs. Commr. of C.Ex., Mangalore reported as 2008 (10) S.T.R. 280 (Tri.-Bang.)] = (2008-TIOL-419-CESTAT-BANG)

iii)          Commr. of C.Ex. Vs. Excel Crop Care Ltd. [2008 (12) S.T.R. 436 (Guj.)] = (2008-TIOL-568-HC-AHM-CX)

iv)          Indian Rayon and Industries Ltd. Vs. Commr. - 2006 (4) S.T.R. 79 (Tri-Mumbai) =(2006-TIOL-1152-CESTAT-MUM)

The Ld. Advocate clarified that no allegations had beenmade in the show cause notice that the impugned services were not used for business activitiesof the applicant.

Reasoning of judgment:-After hearing both sides, it was observed that the honorable commissioner stated that the issue in dispute is whether the credit on the telephone services installed at the residence of the Sr. level officers of the company is allowable to the applicant. It was found that the Commissioner (Appeal) has given a general observation that the telephone installed at the residence cannot be related to business activity without giving any evidence in this regard. However, it is the contention of the Ld. Advocate that the impugned telephones were used only for the business purposes and that there is no allegations or the findings contrary to this fact either in the show cause notice or in the order of the adjudicating authority.

He further stated that as per definition of input services during the relevant period under Rule 2 (I) of
Cenvat Credit Rules, 2004 the credit on input services used in the business activities are admissible and that the issue is no more res integra in view of the various judgments cited supra.

In view of these facts he found that prima facie the applicant has been able to make out a case for staying the operation of the order passed by Commr. (Appeal). Accordingly, he waived the entire dues if any, if payable in pursuance to order passed by the Commissioner (Appeal) till the disposal of the appeal.

Decision:- Stay application allowed.

Comment:-The gist of this case is that Cenvat credit is admissible on the services as per 2(l) of the Cenvat Credit Rules, 2004 on all the inputs and input services used for the production of goods or for provision of output service if the said service was used in carrying out the business activities. Hence, as the telephones at the residence of senior officials are mainly used for official purpose, credit on telephone services is primarily admissible.

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PJ/Case Law/2013-14/1991

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