UCO Bank Eligible For Cenvat Credit Of Service Tax Paid On Telephone Bills In Respect Of Telephones Installed At Employees' Residence: CESTAT

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that UCO Bank is eligible for the Cenvat Credit of service tax paid on telephone bills in respect of the telephones installed at the residence of employees.

The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the telephone has been installed to the residence of employees for use of their business purposes in order to stay connected 24 X 7 with the employees of the Bank. Any Service which has nexus with the business activity of the appellant, whether it is manufacturing or rendering service, has to be treated as “input service” coming within the purview of Rule 2(I) of the CENVAT Credit Rules, 2004.

The appellant/assessee, UCO Bank has challenged the disallowance of CENVAT credit of service tax, the appellant submited that the credit is related to service tax paid for the residential telephones provided to its employees.

The appellant submited that the definition of 'input service', relevant for the material period, has two parts. 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'. The legislation has consciously used the word 'and includes' in the second part of the definition thereby expanding the meaning of 'input service' beyond the restrictive first part. Therefore, this part should be construed and interpreted liberally. The second part itself has two parts. The first sub-part gives some illustrations of 'input service' while the second sub-part covers all services used in relation to 'activities relating to business such as ...'. Some illustrations are given in the second sub-part which were preceded by the term 'such as' which signifies that these are only illustrative in nature. Specifically what are the services which fall within the definition of 'input service' has been clearly set out in this part. An omnibus phrase with the words 'activities relating to business' has been used to expand the meaning of 'input service'. This signifies that 'services' which even have only remote or prima facie no nexus with output service provided, should also qualify as 'input service'. Moreover, the definition does not qualify the word 'activities' which signifies that all activities relating to business should qualify as 'input service' within the meaning of the definition as it stood during the material period.

The assessee contended that from the definition of 'input services' it is clear that Cenvat credit is allowable on telephones installed in the premises of the employees as an activity relating to business though such services have no direct relation to output services provided.

The assessee relied on the decision of the tribunal, Kolkata in the case of M/s. Indian Bank vs. Commissioner of Service Tax Kolkata in which the Tribunal has allowed the Cenvat Credit on telephone bills in respect of the telephones which were installed at the residence of employees.

The tribunal by relying on the definition of 'input services' and the decision of the Tribunal Kolkata held that the appellant is eligible for the Cenvat Credit of service tax paid on telephone bills in respect of the telephones installed at the residence of employees.

Counsel For Appellant: Pulak Kr. Saha

Counsel For Respondent: K.Chowdhury

Case Title: M/s. UCO Bank Versus Commissioner of Service Tax

Case No.: Service Tax Appeal No.70556 of 2013

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