This is a ring tone which the industry would enjoy. Companies can now claim the service tax they pay on cellphones as Central value-added tax (Cenvat) credit. The Mumbai Customs, Excise and Service Tax Appellate Tribunal has ruled that service tax paid on mobile phones is available as credit to eligible service providers of output service and manufacturers.
The tribunal held that the term cellular phone would include all kinds of phones which work on cellular technology. The revenue department has been insisting that the credit was applicable only on fixed line phone. Industry can claim credit against the Cenvat it pays and use the credit to offset against the tax it is liable to pay on its inputs. Giving its judgement on a case between Indian Rayon and the commissioner of customs and excise, Bhavnagar, the tribunal made it clear that the department could not rely on the old Central Board of Excise and Customs circular of 03 to deny the credit of service tax. The tribunal said the old circular was relevant under old service tax credit rules, 02, which required the telephones to be installed in the business premises of the service provider. And, since there was no such stipulation in the new Cenvat credit rules, 04, the department could not press the old circular into service. Also, the tribunal pointed out that there was no provision anywhere in the rules disallowing the credit of service tax paid on mobile phones, which in any case was fast replacing fixed line phones in many establishments. It was held that the term cellular phone would include all kinds of phones which would work on cellular technology.
Cenvat credit on mobile phones was never intended to be disallowed under the present Cenvat credit rules. It was under the service tax rules 02 that credit was allowed only for fixed line connections. Therefore, clarification issued on the basis of services credit rules 02, that credit of services on the mobile phones will not be allowed as credit has no applicability. Therefore, the judgement delivered by the Mumbai bench will give great relief to assesses for availment of Cenvat credit, service tax expert J K Mittal said.
The period involved in the case is from December 04 to February 05.