Relief to UCO Bank: CESTAT upholds eligibility for Cenvat Credit of Service Tax Paid on Telephone Bills for Telephones Installed at Employees' Residence [Read Order]

In a major relief to UCO Bank, the Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) upheld the eligibility for cenvat credit of service tax paid on telephone bills for telephones installed at employees' residence.

The present appeal has been filed against the impugned order passed by Commissioner of Central Excise, Kolkata-I. Aggrieved against the confirmation of the demands of duty interest and penalty, the appellant has filed the present appeal.

Regarding disallowance of CENVAT credit of service tax amounting to Rs. 15,95,552/-, the appellant submitted that this credit is related to service tax paid for the residential telephones provided to its employees and that the definition of ‘input service’, relevant for the material period, has two parts.

The appellant contended that the first part uses the word ‘means’ while the second part uses the word ‘includes’. The first part of the definition defines ‘input service’ as any service used by a provider of taxable service for providing an output service. With the use of the word ‘means’, this part of the definition has to be interpreted in a restrictive manner which means that there should be a direct nexus between ‘input service’ and provision of ‘output service’.

Accordingly, the Appellant submitted that the service tax paid with regard to telephones installed at the residence of the executives of the bank for official purposes, being an activity related to business, is eligible for Cenvat credit.

A Two-Member Bench of Ashok Jindal, Judicial Member and K Anpazhakan, Technical Member observed that “The Appellant has availed and utilized the Cenvat credit of Rs.15,95,552/- availed on residential telephone provided to employees. The department considered this credit amounting to Rs. 15,95,552/- as irregular credit. Thus, in the impugned order, the service tax paid by the Appellant by utilizing this credit has been considered as non-payment and the demand has been confirmed. However, this credit has been held as eligible. Thus, the payment of service tax by utilizing this credit automatically becomes appropriate payment and the demand confirmed on this count is not sustainable and liable to be set aside.”

To Read the full text of the Order CLICK HERE

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