1. No one appears for the applicant. Heard the learned authorised representative for the Department and perused the record as well as the contentions raised in the appeal memo. The applicant has relied upon the provisions of Sub-rule (5) of Rule 4 of the Service Tax Credit Rules, 2002 and availed Service Tax credit on telephone bills @ 35% in accordance with Rule 3(5). The authorities below, on the basis of Sub-rule (6) of Rule 3, have held that, since telephones were not installed in the premises from where the appellant was providing services of Mandap Keeper and that the telephones were installed at the reception counter and the services were connected through EPABX system, the appellant was not entitled to Cenvat Credit of input service on telephone facilities.
2. It, prima facie, appears that, while the authorities below have taken note of Sub-rule (6) of Rule 3 of the Service Tax Credit Rules, 2002, the nature of premises from where output services were provided, has been over-looked as is evident from the definition of 'Mandap', which has defined in Sub-section (66) of Section 65 of Chapter V of the Finance Act, 1994, means, "any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixtures, light fittings and floor coverings therein let out for a consideration for organizing any official, social or business function." 'Mandap Keeper' as defined in Section 65(67) means, a person who allows temporary occupation of a mandap for a consideration for organizing any official, social or business function". For rendering output service as 'Mandap Keeper', no separate account was maintained.
In such cases, as per Rule 3(5) of the said Rules, where services chargeable to Service Tax as well as exempted services or non-taxable services, are provided, the provider is allowed to utilize Service Tax credit for payment of Service Tax on any output service only to the extent of an amount not exceeding 35% of the amount of Service Tax payable on such output services. The applicant had utilized Service Tax credit @ 35% of the amount of Service Tax payable on the output service of 'Mandap Keeper' under Rule 3(5) of the Rules. The Commissioner (Appeals) has taken note of the fact that, the telephones were installed at the reception counter and for that reason the benefit of Rule 3(5) has been denied. It would, however, appear that, Sub-rule (6) of Rule 3 speaks of, "service provided in relation to telephone connection". Therefore, even if telephone is installed at the reception counter, and if telephone connection is given to the Mandap area, that would, prima facie, satisfy the requirement of Sub-rule (6) of Rule 3, so as to attract the provisions of Rule 3(5), in cases where no separate account of input service is maintained, and there are provided output services, which are subject to payment of Service Tax, as well as those which are in the exempted or non-taxable service category.
3. Since the issue is debatable, the payment of the full amount of Service Tax and penalty as pre-deposit, is not warranted and the applicant has made out a case for partial waiver. Having regard to the facts and circumstances of the case, it is directed that, on the applicant's depositing Rs. 10,000/- (rupees ten thousand only) within six weeks from today, there shall be waiver of pre-deposit of the remaining amount of Service Tax and penalty payable under the impugned order, during the pendency of the appeal. If the amount is not so deposited, the appeal will stand dismissed. Post the matter for reporting compliance on 11^th September, 2007. This application stands disposed of accordingly.
(Dictated and pronounced in the open Court on the 24^th day of July, 2007)