IDEA CELLULAR LTD. Vs. CCE

JUDGEMENT

(1.) THE appellant are engaged in providing cellular mobile telephone service to their clients, which during the period of dispute, was taxable under the heading "service provided by telegraph authority in relation to a telephone connection", as defined under Section 65(105)(b) of the Finance Act, 1994. The appellant have set up Base Trans -receiver Station Towers (BTS Towers) at various locations in the circle which emit and receive wireless signals to and fro between a person availing cellular mobile telephone service through his SIM card which is installed in the handset. As soon as the person dials a particular number, the same is transmitted to such towers. From there the number gets transmitted to Base Station Controller (BSC) and from there it is transferred to Main Switching Centre (MSC) of the company. If the Appellant's subscriber dials the number of another telephone service provider, the MSC instrument of the Appellant through wireless signals requests the MSC of that telephone service provider to connect to his subscriber. The Appellant have taken credit of Central excise duty Addl. custom duty paid on various capital goods (sic) mentioned above and also the credit of service tax paid on various input services used for providing the output services. The Revenue by invoking Rule 6(3)(c) of the Cenvat Credit Rules, 2004 has restricted the utilization of Cenvat credit for payment of service tax on the output service to 20% of the amount of service tax payable on the ground that the Appellant, in addition to the taxable - "Service in relation to telephone connection", are also providing the "exempted services" (as defined under Rule 2(e) of the Cenvat Credit Rules, 2004) of "network access to other telephone service providers (inter connectivity services)" for which the concerned telephone service providers are charged "IUC charges", "Tap out charges" and "Mobile terminating charge" and of "permitting the use of their infrastructure like BTS towers etc. by other mobile telephone service provides" for which they are charged "Infrastructure user charge" by the Appellant. Since the Appellant have utilized the Cenvat credit for payment of service tax on the taxable output service without keeping in mind the restriction provided in Rule 6(3)(c), the Commissioner vide the impugned orders -in -original No. 12/Commr/SU/08/ST dated 24/03/08 and No. 14/Commr/SU/08/ST dated 02/04/08 has -

(2.) HEARD both the sides.

(3.) SECOND plea of the Appellants is that even if the provisions of Rule 6(3)(c) are attracted, the limit of '20% of the service tax payable' on utilization of tax credit for payment of service tax on telephone service is not applicable in respect of capital goods Cenvat credit and service tax credit in respect of 17 input services specified in Rule 6(5). We agree with this plea of the appellant as -