Set Top Boxes Satisfy Definition Of 'Inputs', Dish TV Entitled To 100% Credit: CESTAT

The Allahabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Dish TV is entitled to 100% credit as the set top boxes satisfy the definition of 'Inputs'.

The bench of P. K. Choudhary (Judicial Member) and Sanjiv Srivastava (Technical Member) has observed that the set top boxes satisfy the definition of inputs as they are goods used by the output service provider for the provision of the output services. There cannot be any fallacy in the stands taken by the appellant in taking the entire credit at the time of receipt of these set top boxes as inputs.

The appellant or assessee is engaged in providing output services under the category of broadcasting services. He is availing of the facility of Cenvat credit.

During the course of the audit, it was observed that the appellant has been taking credit for the set-top boxes provided by them to their customers for receiving the signals, and credit was taken by the appellant for treating them as input. The goods being classifiable under Chapter 85 were covered by the definition of capital goods, and thus the act of taking 100% credit immediately upon receipt of the goods was not proper, and only 50% of the credit should have been taken during that financial year, and the next 50% should have been gone to the next financial year.

The assessee contended that the appellant has taken credit for the set top boxes by treating them as inputs, as there is no restriction in the definition as per Rule 2(k) of the Cenvat Credit Rules, 2004, which excludes the set top boxes from the definition of inputs. The set top boxes have been used by the appellant for providing the output services and are hence correctly covered under the definition of input.

The Department wanted to put the goods under the category of capital goods only for the reason that these goods have been capitalized in their book of accounts and depreciation claimed for the purpose of income tax. It is a settled preposition in law that accounting practices should not govern the interpretation of legal provisions.

The term “input” is defined under Rule 2(k) of the CENVAT Credit Rules, 2004. Input has been defined for an output service provider. Input has been defined to mean goods used for providing any output services except certain goods, which have been specifically excluded.

The tribunal held that there are no reasons why the goods could not have been treated as input for the provision of the output services by the appellant. It is a well-settled principle in the law that the taxing statute needs to be construed strictly according to the words and phrases used in the statute. There can be no other interpretation when the literal interpretation is unambiguous.

Counsel For Appellant: A. R. Madhav Rao

Counsel For Respondent: Santosh Kumar

Case Title: M/s Dish TV India Ltd. Versus Commissioner of CGST, Noida

Case No.: Service Tax Appeal No.70317 of 2018

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