CESTAT Allows BSNL Cenvat Credit on Housekeeping Services Used for Telecom Output Service [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal held that housekeeping services used for telecom premises and exchange equipment qualify as input services for providing telecom output service.

Bharat Sanchar Nigam Ltd., the appellant, is a provider of telecommunications service and had availed Cenvat credit on input services. During verification, the department found that it had taken credit on rent-a-cab service, annual maintenance contract for air conditioners and housekeeping service for September 2011 to March 2012.

The department issued a show cause notice demanding Rs. 12,14,020 as alleged ineligible credit with interest and penalty. The adjudicating authority allowed credit on annual maintenance contract for air conditioners but denied credit on rent-a-cab and housekeeping services. The Commissioner (Appeals) upheld the denial.

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The appellant’s counsel argued that housekeeping services were used for daily cleaning of tables, chairs, computers, printers, file racks, walls, ceiling, terrace and office open space. It also included arranging files, handling furniture and stationery, garden maintenance, watering plants and cutting wild bushes.

The appellant’s counsel said these services were required for maintaining administrative offices and telecom premises at Cuddalore, Chidambaram, Neyveli, Vridhachalam, Villupuram and Tindivanam. It argued that such services were used for providing output telecom service.

The revenue counsel argued that housekeeping service was mainly general conservancy work and did not qualify as input service. It also argued that rent-a-cab credit was specifically barred under the exclusion clause of Rule 2(l) of the Cenvat Credit Rules, 2004.

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The bench of M. Ajit Kumar (Technical Member) and Ajayan T.V. (Judicial Member) examined Rule 2(l) and observed that the rule has a main part, an inclusive part and specific exclusions. On housekeeping service, the tribunal found that the service was used for cleaning exchange equipment such as batteries, power plant, engine alternator, computer peripherals, fire extinguishers and telecom instruments. It observed that these services were essential for providing telecom output service.

The tribunal also observed that the inclusive part of Rule 2(l) covers services used in relation to premises of the output service provider or office relating to such premises. It held that housekeeping services for upkeep and cleanliness of telecom premises cannot be treated as ineligible.

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