2024-VIL-839-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax – Rule 2(k)(iv) and 2(?) – Cenvat Credit Rules, 2004 – Out roamer revenue – Tax liability – Appellant is engaged in providing Telecommunication services – During course of verification of documents by audit team, it appeared that there was short payment of service tax as well as wrongful availment of cenvat credit – Revenue issued show cause notice to Appellant proposing demand of service tax on out roamer revenue and wrongly availed cenvat credit – Adjudicating authority confirmed demands proposed in show cause notice – Whether Appellant is liable to pay service tax on out roamer revenue received from other entities as well as other circles – HELD – Appellant has maintained proper accounting of out roamer revenue received by them from other entities as well as other circles – Recharge vouchers/E-top ups are purchased by Appellant’s subscribers from other entities or from other circles while they are in roaming circle – Service tax is collected along with charges from subscribers when recharge vouchers are sold – Other Vodafone entity/other circle who has collected service tax from subscribers deposits same to Government and only the out roamer revenue excluding service tax is transferred to Appellant – Department does not have a case that while transferring out roamer revenue, other Vodafone entity had transferred service tax also to Appellant – Since service tax on out roamer revenue has already been discharged by entity who has collected it, same cannot be demanded again from Appellant – Demand of service tax on out roamer revenue cannot sustain and requires to be set aside – Appeal partly allowed - Availment of business support services – Denial of credit – Whether denial of cenvat credit on Business Support Services (BSS) is sustainable – HELD – Appellant availed input services (BSS) in nature of lease line charges, transmission charges, annual maintenance etc. and paid service tax on entire consideration for services – Services were not only used by Appellant, but also used by other circles and these other circles shared cost as per debit notes raised against them – Merely because part of consideration was reimbursed by other circles who had also used services, demand has been confirmed alleging that Appellant is eligible to avail proportionate credit only – Definition of “input services” given in Rule 2(?) of the Rules does not say that entire input services should be used only by a single output service provider – Definition merely states that input service has to be used by output service provider – In present case, services have been used by other circles who are also output service providers – Appellant having paid service tax on entire consideration and having consumed the services, department cannot deny credit alleging that services are shared with output service providers of other circles – Denial of cenvat credit on BSS is set aside - Eligibility to avail credit – Whether Appellant is eligible to avail Cenvat Credit of duty paid on HDPE ducts – HELD – Appellant has availed credit on HDPE ducts under category of ‘capital goods’ – HDPE ducts are essential to Appellant’s business, in as much as, HDPE ducts are used to provide a cover to optical fibre cables – Though Appellant had availed credit under category of capital goods, they have put forward plea before adjudicating authority that these items would fall within definition of ‘inputs’ – Credit cannot be denied if goods fall under category of inputs, even though assessee has availed it under category of capital goods – As per Rule 2(k)(iv) of the Rules, input means ‘all goods used for providing any output service’ – Since HDPE ducts are used as protective cover for optic fiber cables which are indispensable for providing output service of telecommunication service, credit availed on such item is eligible – Demand raised on this count requires to be set aside - Collection charges – Entitlement of input service tax credit – Whether denial of input service tax credit on collection charges is sustainable – HELD – Input service tax credit on collection charges has been denied alleging that these are not used for providing output services and that collection agency services do not have nexus with output service – Collection agency service is covered within main clause of Rule 2(?) of the Rules – Without collection of dues from customers, Appellant would not be able to run its business and provide output services – For these reasons, credit availed on collection agent charges is legal and proper – Denial of input service tax credit on collection charges is set aside - Quantification of credit – Whether Appellant is eligible to avail Cenvat Credit on various inputs and HDPE Conduits – HELD – Appellant has availed credit on various inputs like waste bin, paper rolls, diaries, award shields and ducts etc. under category of inputs – Appellant reversed credit availed in respect of waste bin, paper rolls, diaries, etc., however, they contested that input credit availed in respect of ducts is eligible on ground that these are used to get cover the buried HDPE conduit which helps to provide protection from corrosion and thus eliminates maintenance – Denial of credit on items like waste bin, paper rolls, diaries, award shields etc. is upheld – Denial of credit on HDPE Conduits is set aside, however, quantification of amount is required to be verified by adjudicating authority - Denial of credit – Sustainability – Whether denial of credit availed in respect of input services for which credit notes were received from vendors is sustainable – HELD – Indus Tower Ltd. (ITL) which is one of vendors of Appellant have raised credit notes pertaining to reimbursement of value of input services on account of certain disputes between them – In show cause notice, it is alleged that though Appellant has been issued credit notes by ITL so as to return part of consideration, Appellant has availed cenvat credit on full value of bill without reversing value pertaining to credit notes issued by vendors – Even though ITL issued credit notes, it was only for value of services and it did not include service tax amount – Service tax amount was already collected by ITL from Appellant on which Appellant has availed credit – ITL has issued a certificate stating that they have paid service tax collected from Appellant to Government exchequer and they have not returned service tax by issuing credit notes – Since Appellant has borne the burden of service tax, Appellant has righty availed credit – Demand raised on this count cannot sustain and requires to be set aside.
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