TMI Blog2014 (9) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) used for providing output services can only qualify as capital goods and none other. Admittedly the goods in question namely the tower and part thereof, the PFB and the printers do not fall within the definition of capital goods and hence the appellants cannot claim the credit of duty paid on these items. Whether inputs or not - Held that:- A plain reading of the definition of input indicates that in the present context, clause (i) of Rule 2 (k) may not be of relevance as same pertains to manufacturing activity and pertains to goods used in relation to manufacture of final product or any other purpose within the factory of production. Sub- clause (ii) has been referred to as relevant by the appellant as the same pertains to goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods. Whether tower is an accessory of antenna - held that:- It would be misconceived and absurd to accept that tower is a part of antenna. An accessory or a part of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls for final hearing. The relevant facts are :- 2. The appellant is engaged in providing cellular telephone services and is paying applicable service tax on the cellular telephone services. The appellant, inter alia, availed Cenvat credit on excise duty paid on towers parts and shelters/ prefabricated buildings purchased by them and alleged to be used for providing output service. The credit so availed was utilised for payment of service tax on output service viz. Cellular Mobile Service being provided by the appellant. 3. The genesis of the issue is a show cause notice dated 25.4.2006 issued by the revenue to the appellant, inter alia, recording that the appellant had wrongly taken and utilised Cenvat credit in contravention of the provisions of Rule 2(a)(A) of Cenvat Credit Rules,2004 (hereinafter referred to as Credit Rules ). The appellant was called upon to show cause as to why (i) the Cenvat credit amounting to ₹ 2,04,39,093/- taken and utilized wrongly should not be recovered from them under the provisions of Rule 14 of the Credit Rules, read with Section 73 of the Act; (ii) penalty should not be imposed under provisions of Rule 15(1) of the Credit Rules on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods and Chapter heading under the Central Excise tariff was called for from the appellant. The same was, thereafter, furnished by the appellant vide its letter dated 8.3.2006. It was, alleged that the appellant had suppressed material facts and knowingly, willfully and wrongly had taken and utilized Cenvat credit on the said items. It was alleged that the Cenvat credit amounting to ₹ 2,04,39,100/- was taken and utilized on account of the goods which are not capital goods within the meaning of Rule 2(a)(A) of the Credit Rules and hence, the said amount was liable to be recovered from the appellant under Rule 14 of the Credit Rules read with Section 73 of the Central Excise Act. It was also alleged that on account of these acts and omissions the appellant had rendered itself liable for penalty under Rule 15(1) and (2) of the Credit Rules and the subject goods were also liable for confiscation under rule 15(1) of the Credit Rules. It was alleged that the appellant was also liable to pay interest at stipulated rates from the date of wrong availment of the Credit till the date of payment of service tax in terms of Rule 75 of the Act. 5. The appellant by its reply to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts, without which the output service cannot be provided. It was, therefore, submitted that the towers are part of the eligible capital goods viz. BTS and are used for providing output services, as also the towers were eligible for capital goods credit. The appellant placed reliance on whole architecture of BTS in a GSM network in support of this submission. That the appellant had imported number of BTS for installation at various sites and that the BTS equipments are classified under heading No.85.25 of the Central Excise Tariff Act (CETA) when they were imported. Depending on the site condition, additional peripheral equipments such as battery back up, rectifier, UPS were also purchased by the appellant. All these equipments are brought to the site and they were housed/installed in a prefabricated room or a building. Subsequently, installation of various equipments at the site is undertaken in accordance with the Radio Frequency Design Plan. It was Appellant s case that in accordance with the site lay out, report of the structural consultant, the material is ordered from various vendors. All the material is supplied by the vendors on payment of applicable duty when clearing fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of their goods as capital goods and in any case as inputs . The appellant denied that they had availed credit wrongly by practicing fraud or by making willful mis-statement, collusion or suppression of facts. It was stated that there was no willful suppression. It was, therefore, submitted that the show cause notice as issued against the appellant be dropped. 6. The Commissioner after hearing the appellant on the show cause notice passed an order- in-original dated 19.12.2006 taking into consideration the provisions of the Credit Rules,2004 and more particularly, the definition of 'capital goods' as defined under Rule 2(a)(A) and the definition of the term 'inputs' as defined under rule 2(k) of the Credit Rules, held that the appellant has wrongly availed of Cenvat Credit amount of ₹ 2,04,39,093/- under provisions of Rule 14 of the Credit Rules read with Section 73 of the Finance Act,1994. In respect of towers and parts thereof, prefabricated building, printers and office chairs, the Commissioner observed that the appellant had availed benefit of Cenvat Credit on the Base Transreceiver Station (BTS) claiming to be a single integrated system consisting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o qualified as inputs under the definition of 'input' under Credit Rules and hence, the credit availed by the appellant was valid. The appellant also challenged the order of the Commissioner pertaining to interest on penalty on the ground that Rule 15(2) of the Credit Rules is applicable to a manufacturer and hence, levying of penalty was not proper. The appellant also field a stay application alongwith the appeal. 8. After the order in original dated 19.12.2006 was passed for the period October 2004 to September 2005 three further show cause cum demand notices were issued issued covering the period October 2005 to March 2008 dated 23.4.2007, 8.2.2008 and 23.10.2008 making an aggregate demand of ₹ 15,40,63,898/- as also interest and equivalent penalty was demanded. 9. The appellant filed its reply to the demand cum penalty notice and the corrigendum dated 2.3.2009 issued by the Commissioner. The appellant now contended that the towers and the parts thereof are supporting structure for antenna which are capital goods and therefore, as antenna is qualified as 'capital goods', the towers and parts thereof would also qualify as 'capital goods'. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules,2004 as capital goods. It was held that tower and parts thereof are not directly utilised for output service as the same has been basically a structural support for certain equipment. It was further observed that it may not be necessary if suitable alternate support is available. Such towers by no stretch of imagination can be considered parts of telecom equipment or as telecom equipment by themselves and it was thus held that tower and parts thereof do not qualify as capital goods. Applying the same reasoning, credit on prefabricated building was also rejected. 11. The appellant filed therefore another appeal before the Tribunal being Appeal No.ST/145/2009 against the order in original dated 23.3.2009 passed by the Commissioner. By this order dated 23.3.2009, the Commissioner had confirmed the demand cum penalty notices issued to the appellant and sought recovery of ₹ 13,02,08,928/- for the period October,2005 to March,2008. An equivalent amount of penalty under Rule 15(1) of the Credit Rules read with Section 11AC of the Finance Act,1994 was also imposed by the said order. 12. As regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, to what extent is also remanded to the Commissioner for fresh consideration and decision; (e) The appellant shall be given a reasonable opportunity of being heard on the remanded issues. 14. We have heard Mr.V.Sridharan, learned Senior Counsel with Mr.Prakash Shah learned Advocate appearing on behalf of the appellant and Mr.Kevic Setalvad, learned A.S.G. with Mr.Pradeep Jetly and Mr.J.B.Mishra, for Respondents. 15. The appellants have brought to our notice the following details of the Cenvat Credit taken on tower, shelter, prefabricated building and other for the period in dispute :- Years Tower Shelter Others Total 2004-05 17436880 1478938 Chair 298,738 Printer 1,224,537 20,439,100 2005-06 44142943 44142943 2006-07 15919203 15384719 31303922 2007-08 26588034 28174029 54762063 Total 104087060 45037686 1523282 150648028 16. Mr.Sridharan, learned Senior Counsel on behalf of the Appellant has made the following submission in assail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Kar)); (b) CCE Vs. ICL Sugars Ltd., (2011(271) ELT 360 (Kar)); (c) CCE Vs. Sai Sahmita Storages Ltd., (2011(23) L.T.R. 341(A.P.)); (d) Bannari Amman Sugars Ltd. Vs. CCE, (2010(250) ELT 326 (Kar); (e) CCE New Delhi Vs. Hindustan Sanitaryware Industries Ltd. (2002(145) ELT (SC)); (f) Orders of the Bombay High Court dated 7.10.2008 in CCE, Mumbai Vs. N.R.C.Ltd. (VII) That the towers and shelters are used for providing telecommunication services on which service tax has been paid. That capital goods viz. Antenna and BTS are fitted into the tower and shelter to provide telecommunication services and therefore, they qualify as inputs under Rule 2(k). In support of this proposition, reliance is placed on the following judgments:- (a) Industrial Machinery Manufacturers Pvt.Ltd Vs. The State of Gujarat, (1965)16 STC 380); (b) Member, Board of Revenue, West Bengal Vs. M/s.Phelps Co.(P) Ltd., (1972) 4 Supreme Court Cases 121; (c) CC, Kolkata Vs. Rupa and Co.Ltd., (2004(170) E.L.T. 129 (S.C.)) (d) Indian Farmers Fertilisers Co-op.Ltd. Vs. C.C.E., Ahmedabad, (1996(86) E.L.T. 177(S.C.) (e) M/s.J.K.Cotton Spinning Weaving Mills Co.Ltd. Vs. Sales Tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, ((1991) 1 SCC 514); (d) Banco Products (India) Ltd. Vs. Commissioner of C.Ex., Vadodara-I, (2009(235) ELT 636 (Tri-LB)); (e) CCE, Jaipur Vs. M/s.Rajasthan Spinning and Weaving Mills Ltd., (2010(255) ELT 481 (SC)) It is submitted that these are cases in which items were held to be fall within the definition of 'input' and also 'capital goods' and hence, in any case the appellant would be entitled for availing credit of duty paid on the same. (X) In regard to the prefabricated building, it is submitted that all the aforesaid submissions are equally applicable in respect of prefabricated building/ shelter. (XI) It is submitted that green shelters are falling under Chapter heading 85.37 and qualify as capital goods under Rule 2(a)(A) of the Credit Rules. (XII) As regards the printers falling under Chapter Heading 84 and qualify as capital goods in terms of Rule 2(a)(A) of the Credit Rules,2004 it is submitted that the printers are classifiable under Chapter heading 84 of the Central Excise Tariff Act as printers are used for printing bills for subscribers and that the service of telecommunication does not come to an end once the signal is communica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfies the definition under Rule 2(a) of the Credit Rules. Hence, the credit on excise duty paid on tower and prefabricated buildings do not satisfy the definition of capital goods and hence, are certainly not covered as input service. In support of his aforesaid submissions, learned ASG relied on the following judgments.:- (I) Vandana Global Ltd Versus Comm. Of C. Ex. Raipur, (2010(253) ELT 440(Tri-LB)); (II) Quality Steel Tubes (P) Ltd) versus Collector of C.Ex., ((1995) 2 SCC 372) (III) Triveni Engineering Industries Ltd Anr Versus Comm. Of C. Ex. (2000) SCC 29 (IV) Mittal Enginnering Works (P) Ltd Vs. Collector of Central Excice (1997) 1 SCC 203 (V) Commissioner of C.Ex.Indore Versus Cethar Vessels Ltd Ors., ((2009)17 Supreme Court Cases 551) (VI) Bharti Tele Ventures Ltd vs. State of Maharashtra, ( 2007 Vol 109 (1) Bom L.R. 0585); (VII) Municipal Corporation of Greater Bombay Vs. Indian Oil Corporation, (1991 Supp (2) SCC 18.); (VIII) Cellular Operators Association of India Ors. vs. Municipal Corporation of Delhi etc., (179 (2011) DLT 381); (IX) Collector of Central Excise Vs. Hutchison Max Telecom P.Ltd.,(2008(224) ELT 191 (Bom.)); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to manufacture of final products or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any out service. Explanation 1- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacture; Rule 3 provides for credit on excise duty paid in discharging liability towards service tax payable by the manufacturer. Rule 3 of Cenvat Credit Rules provides as under:- Rule 3. CENVAT credit. --- (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of (i) (i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act; (ii) (ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act; (iii) (iii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared alongwith the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; and all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any out service. Explanation 2 to the definition of inputs is relevant which includes goods used in the manufacture of capital goods which are further used in the factory of the manufacture; 21. A plain reading of the definition of capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No.6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further in the CKD or SKD condition the tower and parts thereof would fall under the chapter heading 7308 of the Central Excise Tariff Act. Heading 7308 is not specified in clause (i) or clause (ii) of rule 2 (a) (A) of the Credit Rules so as to be capital goods. The goods in question would not be capital goods for the purpose of CENVAT credit as they are neither components, spares and accessories of goods falling under any of the chapters or headings of the Central Excise Tariff Schedule as specified in sub-clause (i) of the definition of capital goods. 24. The alternate contention of the appellant is therefore that tower is an accessory of antenna and that without towers antennas cannot be installed and as such the antennas cannot function and hence the tower should be treated as parts or components of the antenna. It is urged that antennas fall under chapter 85 of the schedule to the Central Excise Tariff Act and hence being capital goods used for providing cellular service falling under rule 2(a)(A)(iii) as part of capital goods falling under rule 2(a)(A)(i) towers become accessories of antenna and should be held as capital goods for availing of credit of duty paid. 25. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty had granted credit in respect of water storage tank on the ground that water is an essential raw material of sugar after conversion into steam. The water storage tank is a component of main machinery viz. boiler and the excise duty paid on the inputs in the construction of water storage tanks were held eligible for availing Modvat credit. However, Modvat credit was disallowed, in respect of syrup and molasses storage tank MS staging of tank and shell plates/ bottom plates/ roof plates used for constructing non-excisable final molasses storage tank and shell of final molasses storage tank. This was on the ground that molasses tank is constructed on the floor with a concrete foundation and the shell of the final molasses storage tank will be placed over the concrete to hold about 2500 tons, and that since the final molasses storage tank is erected to the earth, it becomes non-excisable. It was, therefore, held by Assessing Officer that any component used in the nonexcisable molasses final storage tanks are ineligible for Modvat credit. The Commissioner had set aside the order disallowing credit to the Assesse and further the same was upheld by the Tribunal. In the background of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd penalty thereon. The Assessing authority passed an order in original confirming the show cause notice and demanding service tax and interest thereon. The Assessee had preferred an appeal before the Commissioner of Central Excise which came to be dismissed. Before the High Court, it was contended by the Revenue that the cement used for making foundation and TMT bars used for reinforcement, cannot be treated as capital goods as defined in Rule 2(a) of the Rules and that the assessee had wrongly claimed credit when the items were outside the definition of input under Rule 2(k).That the assessee had suppressed this fact and filed returns adjusting the credit to which the assessee was not entitled to. In the context of the definition of storage and warehousing' as falling under Section 65(102) of the Finance Act, the Court considered the definition of 'input' and 'input service' under the Credit Rules and in that context it was observed in paragraph (7) that the definition of 'input' and 'input services' would show that, unless excluded, all goods used in relation to manufacture of final product or for any other purpose used by a provider of taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being used in or in relation to the manufacture stands complied with. In our view, one has to therefore read the definition in its entirety. The reliance on this judgment may not be helpful to the appellants inasmuch as the definition of storage and warehousing as contained in Section 65(102) of the Finance Act itself stand on a different footing. In that context the Division Bench of Andhra Pradesh High Court has held that use of cement and TMT bars by the assessee for providing storage facility has become integral part of storage and warehousing and without the use of cement and TMT bars, storage and housing could not have been provided. However, in the present case the facts are distinct. The towers are admittedly immovable structures and non marketable and non excisable. We therefore, of the clear opinion that this judgment of the Division Bench of Andhra Pradesh High Court is inapplicable in the facts of the present case. (d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration the contents of the Notification no.82/87 which showed that the description of inputs given in column (2) under Chapter 25, would be plaster of paris' and the final product given in column (3) under Chapter 69 would be 'ceramic goods' held as under:- 9. The proviso postulates a situation where the final product itself is exempted in which case alone the exemption of plaster of paris under Notification No.217/86 cannot be availed. It is nobody's case that the sanitaryware falling under Chapter 69 has been exempted by the Central Government. What is exempted is plastic moulds but they are only inputs and not final product in this case. This fact is further clarified by the Central Government in Notification No.221/96, as amended by Notification No.89/89. Item 6 thereof clearly mentions that plaster of paris moulds are input for ceramic products. 10. From the above discussion, it follows that plaster of paris which is used as inputs in relation to the manufacture of sanitaryware (final product), is exempt under Notification No.217/86, dated April 2, 1986, as amended. This decision therefore cannot be applied to the case in hand. (f) In so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Bench of Gujarat High Court, to be used in manufacturing of the goods, the towers and parts thereof and PFB are also to be construed to be used in providing output services and hence, credit ought to be granted. This decision, however, would not be applicable to the towers and PFB in view of the fact that they are not directly used for the output services namely telecommunication services and further as they are non excisable and hence, not falling within the definition of 'input' as defined under Rule 2(k) of the Credit Rules. (b) The decision of the Supreme Court in the case of Member, Board of Revenue, West Bengal Vs. M/s.Phelps Co.(P) Ltd., (1972) 4 Supreme Court Cases 121 concerned the issue in regard to the gloves used by workmen engaged in hot jobs and handling corrosive substances to qualify as goods used in the course of manufacture of the goods for sale. The issue which fell for consideration was under the Bengal Finance (Sales Tax) Act,1941. The Supreme Court considered as to what should be meant by the wording for use by him in the manufacture of goods for sale as appearing in Section 5(2) of Bengal Finance (Sales Tax) Act,1941, making a reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00% exemption on the ground that the machines imported by them were not required for the purposes of manufacture of textile garments. In this context, the Supreme Court in paragraphs 8 and 9 has observed as under:- 8. Further, in our view, this Notification is very clear. The 100% exemption is given to capital goods required for manufacture of, amongst others, textile garments . The term capital goods has been defined in the Notification. The term capital goods means goods which are used in the manufacture of that product and also goods which would be required for manufacture or production of other goods including packaging machinery and equipments. The term also includes instruments for testing, research and development. The term includes machines for pollution control, refrigeration, power generating sets etc. Thus, the example, if after manufacturing of textile garments the same have to be packed, the machinery required for packing would be capital goods required for manufacture of textile garments. Similarly, refrigeration machinery for refrigerating the plant would also fall within the term capital goods required for manufacture of textile garments. If such sort of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 187/61- C.E. was issued under the provisions of Rule 8 of the Central Excise Rules whereby the Central Government exempted raw naphtha falling under item no.6 of the First Schedule to the Central Excises and Salt Act,1944, from the payment of excise duty in excess of ₹ 4.36 per kilolitre at 15 degrees centigrade. The exemption Notification applied in respect of such raw naphtha as is used in the manufacture of Ammonia provided such Ammonia is used elsewhere in the manufacture of fertilisers and the procedure set out in Chapter -X of the said Rules was followed. The appellant-assessee was in the manufacture of urea which was a fertilizer and utilised for the purpose raw naphtha. The raw naphtha was obtained at the concessional rate of duty and was used for producing ammonia which in turn was used partly, directly in the urea plant and partly, directly, in the production of urea by being employed in off-site plants viz. the water treatment plant, steam generation plant, inert gas generation plant and effluent treatment plant, all of which were part of the integral process of the manufacture of urea. Show cause notices were issued to the appellant assessee for the period fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular end product is part and parcel of the manufacturing process of that end product. It was held that the ammonia used in the treatment of effluents from the urea plant of the assessee was therefore, required to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia would be entitled for exemption. This conclusion was reached on the basis of the observations that the exemption Notification did not require that the ammonia should be used directly in the manufacture of fertilisers and that it requires only that the ammonia should be used in the manufacture of fertilisers. It was observed that exemption notification must be so construed as to give due weight to the liberal language it uses. From perusal of the facts and the observations of the Supreme Court in this decision as relied upon by the appellants, it is clear that the Supreme Court had construed the provisions of the notification by which exemption was granted. As the notification did not bar use of Ammonia from any indirect use in the factor of the assessee, the Supreme Court held that the water treatment plant, steam generation plant and inert gas generation p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, as tools, as stores, as spare parts, as accessories, as fuel or as lubricants. It is in this context, it was held that the expression in the manufacture of goods should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods and where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression in the manufacture of goods . The aforesaid observations of the Supreme Court were clearly in the context of Section 8(3)(b) of the Central Sales Tax Act and Rule 13 as relevant in the said decision. However, the context in the present case as falling under the definition of 'input' as defined under Rule 2(k) would not permit the interpretation as it became possible under the Central Sales Tax Act as in this decision of the Supreme Court, as the towers and PFB cannot be considered to be an integral part of the output services viz. telecommunication services, inasmuch as the telecommunication services become viable on account of antenna, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the effective control and possession of such equipment continues with the passive service provider; is not parted to the other service providers who are merely permitted use of this equipment; and levying tax on the proceeds received by the passive infrastructure provider from sharing of their infrastructure with other service providers, treating it as a sale under Explanation IV to sub-section (28) of Section 2 of the APVAT Act,2005, is without jurisdiction and illegal. 39. In the facts and circumstances of this lis (adverted to supra), in view of the ratio deducible from the judgments of the Supreme Court in Rajasthan Electricity Board (1997) 104 STC 89(SC); (1997)10 SCC 330 and in J.K.Cotton Spinning Weaving Mills Co.Ltd. (1965)16 STC 563 (SC), we are of the considered view that the purchase of goods by the petitioners from outside the State, comprising goods specified in the certificates of registration under the CST Act granted to them, against issue of C forms and where the goods have been employed in erection and maintenance of cell phone towers which are integral to telecommunication network, fall within the ambit of section 8(1) read with section 8(3)(b) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. It is in this context that the Division Bench had come to the conclusion that the cell phone towers are integral to telecommunication network. Secondly, the expression telecommunication network was being considered in the context of Section 8(1) read with section 8(3)(b) of the Central Sales Tax Act. It was also observed that in the case of State of Andhra Pradesh Vs. Bharat Sanchar Nigam Ltd. (supra) ruling of the Division Bench of Andhra Pradesh High Court, it was held that telecommunication tower is immovable property and that it being a immovable property must have direct relevance to the issue as arising for adjudication in the said case. In the present case the issue is one which falls under the Credit Rules and as to whether towers and parts thereof fall within the scope and ambit of the specific definition of Capital goods and the definition of inputs under the Credit Rules,2004. Any issue falling for interpretation under the provisions of Section 8(1) and Section 8(3)(b) and 8(1) of the Central Sales Tax Act cannot ipso facto be made applicable in the context of the Credit Rules as arising in the present appeals and more particularly, when the definition as falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Taloja. The Cenvat Credit in respect of the services of consulting engineers, technical inspection and certification, construction, erection, commissioning and installation services for the installation of the ammonia storage tanks was claimed. The facts of this case can no manner apply to towers and parts thereof, prefabricated building/shelter which are immovable property and not excisable goods and hence, reliance on this judgment is misconceived. 26. The appellants in support of their alternate contention that the towers are the accessories of antenna and therefore, qualify as capital goods' falling under Chapter Heading 85 and that PFB is also an accessory of BTS equipment falling under Chapter 85 on the basis of definition of 'capital goods' as defined under rule 2(a)(A) of the Credit Rules, relied on the following decisions:- (a) In the case of M/s.Annapurna Carbon Industries Co. Vs. State of Andhra Pradesh, ((1976) 2 Supreme Court Cases 273) the issue which fell for consideration of the Supreme Court was in respect of A.P.General Sales Tax Act,1957, in regard to the interpretation of Entry 4 of Schedule I concerning cinematographic equipment etc. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Andhra Pradesh (supra), and has observed as under:- Thus, an accessory is considered as something that is an extra or additional item, an adjunct to the main item. It may add to the performance of the main items but it can also be for more convenient use of the main item. It fact, there can be various types of accessories and whether an item constitutes an accessory or not will depend upon how the item is considered in common parlance more than in terms of its dictionary meaning. For example, the leather case in which a transistor radio is kept is an accessory though it does not add to the performance of the transistor radio. At the highest, it protects the transistor radio and makes for its easy carriage. 7. In the case of Annapurna Carbon Industries Co. v. State of Andhra Pradesh the Supreme Court was required to consider whether are carbons known as cinema arc carbons were accessories required for use along with cinematographic equipment or projectors. In deciding this question, the Supreme Court cited with approval the meaning of the term accessory given in Webster's Third New International Dictionary and observed 'Accessories' are not necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue which is considered was 'whether the plastic crates can be considered as accessories as falling under clause (iii) of the goods specified in Clause (I) of the definition of capital goods as defined under 2(b) of Cenvat Credit Rules,2002. The observations in paragraphs 14 and 19 are relevant they read as under:- 14. Reference to all the above decisions was necessary to understand the scope of the term accessory . If the plastic crates are held to be an accessory to the main machine, appearing against Sr.no.(i) of the definition of the capital goods, as contained in Rule 2(b) of the Cenvat Credit Rules,2002, they would earn the status of the eligible capital goods for the purposes of Modvat. The appreciation of the various judgments on expression accessory as discussed above, leads us to observe that an accessory may or may not be required for essential working of the main unit, but is an object which is used for the convenience and effectiveness of that unit. It may also not be necessary that such accessory must be designed to be used in a particular machine. The same may be of a kind, which is capable of being used as a common object, with number of machines. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us decisions and by Tribunal, it has to be held that the plastic crates are eligible capital goods for the purposes of Modvat credit. We answer accordingly. The insistence on behalf of the appellants that the analogy as applied by the Larger Bench be applied in the facts of the present case is not acceptable. The argument of the appellants is that the antenna is being classified as capital goods and being held eligible for availing credit of duty paid, tower and PFB become its accessories. To reach to this conclusion on the lines on which the larger Bench of the Tribunal in this decision has held, it would be required to be held that it is impossible for cellular antenna to function in the absence of a tower or a prefabricated building. It is not a case of the appellants that the antenna becomes non functional in the absence of tower and prefabricated building. On the basis of technical material it is clear that an antenna can function irrespective of tower and the prefabricated building and hence, it would be an absurdity to hold that tower is an accessory of antenna. Perusal of the observations in the decisions in the case of L.D.Bhave (supra), Mehra Brothers (supra) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of capital goods would depend upon the user it is put to. 13. Applying the user test on the facts in hand, we have no hesitation in holding that the steel plates and M.S.channels, used in the fabrication of chimney would fall within the ambit of capital goods as contemplated in Rule 57Q, it is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be treated as an accessory in terms of Serial no.5 of the goods described in column (20 of the Table below Rule 57Q. From the observations of the Supreme Court in the aforesaid paragraphs, it is clear that it was an un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking of the liquid metal from the furnace and to reduce the erosion of the refractory lining of the furnace. The items lose their identity and are consumed in the process. Some part of the items remains in the liquid metal which forms the ingot and the balance forms part of the residue or slug. It is on the basis of the aforesaid observations, the Court in paragraph 23 concluded as under:- 23. The respondents then argued that steel ingots could be manufactured even without the items. That may be so, but that is immaterial. The definition of inputs is not dependent upon what ought to be used but what is in fact used. There is no dispute that the petitioner No. 1 had in fact, used and uses the items in the manufacturing of ingots. The Supreme Court has also held that manufacture would include a process which was commercially expedient in the production of goods [See : Collector of Central Excise v. Eastend Paper Industries - ; Collector of Central Exise, Jaipur v. Rajasthan State Chemical Works : AIR 1991 SCC 2222] . That the process in question is commercially expedient has not been doubted. The contention of the appellants that the test in this judgment is the test of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k note of the fact that in the existing structure of indirect taxation, the tax regime resulted in a cascading tax burden where inputs are first taxed and after a commodity is produced with an input tax the output is taxed again. VAT was considered as a preferred alternative to rationalize the overall tax burden so as to obviate the cascading effects of indirect taxation. Moreover, VAT was to replace existing systems of inspection by a system of built in self assessment by dealers and auditing, which would make the system simple and transparent. Improved tax compliance and the augmentation of revenue were important policy objectives of the system of value added taxation. 16. As an economic concept, translated into State legislation VAT sub-serves two important fiscal goals. First a system of taxation based on VAT obviates a cascading effect of tax burdens. This is achieved inter alia by the grant of a set off for input taxation and in respect of taxes paid on previous purchases. Second the VAT regime is also and no less important, an instrument in promoting compliance and for broad basing the tax base. Both aspects of the regime have to be harmonized. This aspect merits importan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which go into fabrication of such structures and plant. It was the case of the assessee that structural support should be considered as a part of capital goods and that the definition of capital goods' under the Credit rules includes goods falling under Chapters 82, 84, 85 and 90, as well as specified goods such as pollution control equipment, storage tanks etc. and the only condition laid down in the definition is that these should be used in the factory of the manufacturer of the final products. It was further contended by the Assessee that the definition of capital goods' does not stipulate that same should be in movable condition and there is no bar to avail credit if a plant and machinery item is embedded to earth. The Assessee also contended that capital goods' cannot be made functional unless structural support is provided and such machineries are erected and installed in the factory and that further the capital goods becoming immovable property is irrelevant. The only requirement is that the capital goods should be used for manufacture of excisable goods in the factory. The Assessee also urged that phrase 'capital goods' should be read together and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments on behalf of the assessee that the term 'capital goods' included plants, structures embedded to earth was negatived. It was further held that the foundation and supporting structures are neither machinery items nor components, spares and accessories of machinery, nor that those items have been listed for special inclusion in the definition. The observations of the Larger Bench in paragraphs 41, 42 and 43 of this decision are relevant which read as under:- 41. Keeping in view the scheme of the Act and the Cenvat Credit Rules, we are of the opinion that the phrases capital assets' and 'capital goods' cannot be held to be synonymous. The phrase capital goods has been defined in the Cenvat Credit Rules enumerating a number of goods. Obviously, the said definition of 'capital goods' has to be adopted while interpreting the rules for the purposes of granting and denying of credit. The phrase capital assets' has a wider meaning and it would certainly include capital goods and other assets' such as immovable property in the form of building etc. Once this distinction is appreciated, it is easy to see that foundations and supporting structure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition of 'capital goods' in the Cenvat Credit Rules which reads as the following goods supplemented with a list of goods that follows. 43. Since the foundation and the supporting structures cannot be considered as capital goods, nor as parts or accessories of capital goods, nor the same have been specifically listed in the definition of capital goods; (as tubes and pipes and storage tank etc. have been specifically listed), the question of treating cement and steel items as inputs for capital goods cannot arise. Hence, Explanation 2 to Rule 2(k) cannot be held to cover cement and steel items used for laying foundation and for building structural support even during the period prior to the 2009 amendment. (b) In the case of Quality Steel Tubes (P) Ltd. Vs. Collector of Central Excise, U.P., ((1995)2 Supreme Court Cases 372) the question which fell for consideration of the Supreme Court was ' whether the tube mill and welding head erected and installed by the appellant for manufacture of tubes and pipes out of duty-paid raw material was assessable to duty under residuary Tariff Item no.68 of the Schedule being excisable goods within the meaning of Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Triveni Engineering Industries Ltd. Anr. Vs. Commissioner of Central Excise Anr., ((2002) 7 Supreme Court Cases 29) . the assessee dealt with the turbo alternator which had two components viz. (I) steam turbine and (ii) complete alternator also called as generator. The assessee manufactured steam turbine in their factories and paid excise duty on them. The assessee however, purchased duty-paid complete alternators which were delivered at the customer's site. By the combination of 'steam turbine' and 'alternator' a turbo alternator emerged at the customer's site. The Excise Authorities and CEGAT held that turbo alternators were liable to excise duty under Heading 85.02 of the Central Excise Tariff Act,1985. In this context the Supreme Court in paragraph 14 held as under:- There can be no doubt that if an article is an immovable property, it cannot be termed as excisable goods for purposes of the Act. From a combined reading of the definition of immovable property in Section 3 of the Transfer of Property Act, Section 3(25) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have remembered that the record showed that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event, marketable as they were. (e) The decision of the Supreme Court in the case of Commissioner of Central Excise, Indore Vs. Cethar Vessels Ltd. Ors., ((2009)17 Supreme Court Cases 551) , concerned an issue as to whether the erection of boiler at site by assembling various components and parts has brought into existence immovable property or not, fell for consideration, The Revenue had contended that fabrication of such plants out of duty-paid bought out items amounts to manufacture of a new marketable commodity and therefore, excise duty is payable. The Tribunal had held that no excise duty is leviable and thus these plants are not subject to excisability. While accepting the stand of the assessee that these plants are basically systems comprising of various components and are thus in the nature of systems and not machines as a whole, and hence, were not excisable goods. Taking into consideration it's earlier decision in regard to excisability of plants and machinery assembled at si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods.......... (f) In the Division Bench's judgment of this Court in the case of Bharti Tele-Ventures Ltd. and Sunil Bharti Mittal Vs. State of Maharashtra, (2007 Vol.109(1) Bom.L.R. 0595) the issue was whether the construction of cell sites and erection of towers is included in building and/or development within the meaning of Maharashtra Regional and Town Planning Act,1966 (for short 'MRTP Act') or other Corporations Act. The issue arose in the context of a Notification dated 4.7.2005 issued by the Government of Maharashtra under Section 154 of the MRTP Act by which the Government of Maharashtra had sought to amend its earlier order dated 9.10.1996 thereby authorising various Municipal Corporations in the State to charge retrospectively from 9.10.1996 a premium at the rate of land value as per the ready reckoner for the area occupied by the cabin, the tower for granting permission under Section 45 of the MRTP Act to the petitioners for installing the semi permanent structur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifted, as a fact the tanks were never shifted from the places of erection. By scientific process, the tanks stand on their own weight on the earth at the place of erection as a permanent structure. 33. The petroleum products are being stored through pipes and are taken out by mechanical process. The operational mechanisation also though relevant, is not conclusive. The rateable value is based on the rent, which the building or land is capable to fetch. Due to erection of the tanks whether the value of the demised property had appreciated or not, is also yet another consideration. Undoubtedly, when the tanks are erected and used for commercial purposes, the value of the demised property would get appreciated. The annual letting value is capable of increase. However, the rate of increase is a question of fact but the fact remains that the value of the land gets increased by virtue of erection of the storage tanks. Considering from this perspective we have no hesitation to hold that the the petroleum storage tanks are structures or things attached to the land within the definition of Sections 3(s) and 3(r) of the Act. Thereby they are exigible to property tax. (emphasis supplied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can it be at this stage said that such installation will fall in the said category. The reliance on Section 430 is misconceived without showing that licence or written permission is needed for such licence. I am thus W.P.(C) 3267, 3423, 439/10, 13476, 13863, 14178, 14199/ 09, 2382, 4084/10 Page 56 of 68 unable to hold that the Commissioner under the Act is empowered to prevent installation of such towers without a licence. 40. I am however firmly of the view that the said towers definitely fall within the definition of building which includes within its ambit a structure of metal or other materials. What else is a tower but a metallic structure. The contention of the senior counsels for the petitioners that a building has to be necessarily a house/habitable cannot be accepted. (i) In the decision of the Division Bench of this Court in the case of Commissioner of C.Ex., Mumbai-IV Vs. Hutchison Max Telecom P.Ltd., (2008(224) E.L.T. 191 (Bom.) , the issue which fell for consideration of the Division Bench inter alia was pertaining to transmission tower set up by the assessee and whether the setting up of the towers amounted to manufacture as the towers being a new product with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of BTS of cell site it becomes immovable properly was rejected. The statement of Narayan in his statement dated 28/1/2004 was partly relied upon to hold it was not immovable property. 8. The Learned Tribunal re-examining the various aspects of what is described as determination of levy of duty of base station, noted that the appellant is engaged in providing Mobile Telecommunication Service (MTS) and is based on global system for mobile communication (GSM). The infrastructure for GSM is similar to other networks. The Tribunal then set out the various infrastructure required for GSM and noted that GSM Architecture consists of Radio Station Sub Systems (constitution of MS, BTS, BSCs) which are networked with the operation support subsystem (constitued MSCs) which networked with the Public network. The entire sub systems of BTSs and BSCs or MSCs and the number of constituents would depend on the Geographical area covered by the Cellular Network and there is no fixed designation numbers to constitute a component of transmission apparatus. It is not necessary to set out the other facts in detail considering the the Tribunal has in extenso set out the facts. The Tribunal relying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce is required from the Department of Telecommunication, Government of India. The facts on record would indicate that the equipments erected are embedded in the earth or on a building. The Tribunal noted that revenue does not contest or dispute the fact that whenever BTS/BSC site has to be relocated, all the equipments like BTS/BSC, Microwave Equipment, batteries, control panels, air conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reassembled at new site. This involves damages to certain parts like cable trays, etc. which are embedded/fixed to the Civil structure as also the BTS microwave equipment itself. All the components of the new product cannot be shifted as an illustration the room housing the equipment. This act of dismantling from the permanent site would render such goods not marketable. Apart from that the goods cannot be re-erected as in the previous place as the requirement of each place is different. Further, from the statement of Narayan as set out in the order of the Commissioner, it may be noted that he had stated that regarding installation of BTS the designing team a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturing of iron and steel structures, after purchasing excise duty paid iron and steel sheets, angels, nuts and bolts etc. for the installation of the said machineries. Thus, iron and steel structures were classified under sub-heading 7308.90 of Chapter 73 as capital goods and claimed exemption under Notification date 16.3.1995 which exempts capital goods as defined in Rule 57Q of the Rules, manufactured and used within the factory from the excise duty leviable on such goods. The Assistant Commissioner, Central Excise had issued a show cause notice to the assessee for short payment of excise duty claiming that the notification is not applicable to iron and steel structures and hence, exemption was not available to the assessee. After considering the reply as filed by the Assessee, the Assistant Commissioner confirmed the duty demand as also imposed a penalty on the ground that notification was not applicable to the iron and steel structures as they are neither inputs used in relation to manufacture of final products nor capital goods as defined in column 2 of the table given below sub-rule (1) of Rule 57Q of the Rules. In appeal, the Commissioner (Appeals) confirmed the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exempted under the Notification are capital goods as defined in Rule 57Q. Rule 57Q specifies five categories of items as capital goods. It is not the case of the assessee or its learned counsel that the exemption claimed was on Items 1 to 4 of the Table to Rule 57Q but as components which would fall under item No.5 of the Table to Rule 57Q. Therefore, in order to get the benefit of non excise duty on Iron and Steel Structures, it had to be established by the assessee that Iron and Steel Structures are utilized as component parts for the finished products, viz. vacuum pan, crystallizers, sugar grader, elevator, cooling tower etc. Our Analysis And Conclusion : 19. It appears to us, in the light of the meaning of the expression `component parts' that the iron and steel structures are not essential requirements in the sugar manufacturing unit. Anything required to make the goods a finished item can be described as component parts. Iron and Steel structures would not go into the composition of vacuum pans, crystallizers etc. If an article is an element in the composition of another article made out of it, such an article may be described as a component of another article. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely the cellular service. We may observe that a plain reading of the definition of capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No.6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specified at sub clauses (i) and (ii) which are used either in the factory for manufacture of final products but does not include any equipment or appliance used in the office and those used for providing output service. Further in the CKD or SKD condition the tower and parts thereof would fall under the chapter heading 7308 of the Central Excise Tariff Act. Heading 7308 is not specified in clause (i) or clause (ii) of rule 2 (a)(A) of the Credit Rules so as to be capital goods. Further the Appellants contention that they were entitled for credit of the duty paid as the Base Transreceiver Station (BTS) is a single integrated system consisting of tower, GSM or Microwave Antennas, Prefabricated building, isolation transformers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Explanation (2) of sub-rule (k) is also which provides that input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. A plain reading of the definition of input indicates that in the present context, clause (i) of Rule 2 (k) may not be of relevance as same pertains to manufacturing activity and pertains to goods used in relation to manufacture of final product or any other purpose within the factory of production. Sub- clause (ii) has been referred to as relevant by the appellant as the same pertains to goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods. 33. The alternative contention of the appellant is that tower is an accessory of antenna and that without towers antennas cannot be installed and as such the antennas cannot function and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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