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2025 (7) TMI 842 - AT - Service TaxCENVAT Credit - inputs and input services - Tower related services i.e. services used to erect and construct towers shelters electrical and laying of optical fibre cables - Disallowance of credit on post-sale services i.e. commission paid to agents and dealers - Outdoor catering services being used by the appellant for business meetings conducted for promotion of appellant s business - Healthcare Services - Denial of credit on the insurance taken for goods such as Laptops Cell Phones etc. and also for employees personal accident benefit - Police booth maintenance done by the appellant for advertisement and brand promotion - Providing certain value-added services like Caller Tunes Ring Tones Astronomy Health Tips Cricket Scores etc. - time limitation. Tower related services i.e. services used to erect and construct towers shelters electrical and laying of optical fibre cables - HELD THAT - The issue is squarely covered by the decision of the Hon ble Tribunal in the case of Vodafone Idea Limited v. CST Mumbai 2024 (10) TMI 149 - CESTAT MUMBAI in favour of the Appellant - the Appellant is eligible for Cenvat Credit on tower related services and tower materials used for erecting towers and shelters which has been quantified to be Rs.88, 86, 165/-. Disallowance of credit on post-sale services i.e. commission paid to agents and dealers - HELD THAT - The same issue was decided against Revenue by the Tribunal Delhi in Central Goods Service Tax Jaipur vs. Bharti Hexacom India Ltd. 2023 (5) TMI 520 - CESTAT NEW DELHI wherein it was held that the respondent was entitled to avail CENVAT Credit of service tax discharged on the commission paid by the respondent to collection agents for collection of dues of post-paid plans from the subscribers. - Service Desk Payments are akin to payments to collection agents. Hence the ratio of the decision in Commissioner of Central Goods Services Tax Jaipur Vs Bharti Hexacom India Ltd. which is in favour of the appellant is applicable - the demand raised disallowing Cenvat Credit on Commission Agent Services and service desk payments amounting to Rs.85, 44, 785/- set aside. Outdoor catering services being used by the appellant for business meetings conducted for promotion of appellant s business - HELD THAT - The services are covered under sales promotion in terms of the inclusive clause of the definition of input service under CENVAT Credit Rules 2004 and so the Appellant is eligible for availing Cenvat credit amounting to Rs.7, 16, 762/-. Healthcare Services - HELD THAT - The Appellant has taken Cenvat credit of Rs.9, 368/- which was admittedly reversed by the Appellant on its own accord. No need to discuss what is not contested. Denial of credit on the insurance taken for goods such as Laptops Cell Phones etc. and also for employees personal accident benefit - HELD THAT - For the period from April 2011 to March 2013 the Appellant has availed Cenvat Credit to the tune of Rs.94, 333/- for shifting charges of the employees from one location to other. As the appellant has not contested and have agreed to reverse the credit no finding is required to be given. Such a reversal has to be done along with interest if not done by this time. Police booth maintenance done by the appellant for advertisement and brand promotion - HELD THAT - Police booth maintenance done by the appellant for advertisement and brand promotion comes under the inclusive clause of definition of input service and so credit is to be allowed amounting to Rs.1, 35, 656/-. Providing certain value-added services like Caller Tunes Ring Tones Astronomy Health Tips Cricket Scores etc. - HELD THAT - The Appellant receives the services of Living Media Ltd. which charges service tax and the same was paid and taken as credit. As such the Appellant is eligible to take Cenvat credit of Service Tax paid to provide VAS totalling to Rs.10, 363/- - Since this activity amounts to procurement of services on behalf of other their parent company discharges service tax under BAS which was availed by the Appellant. There are no irregularity in taking Cenvat credit on the debit notes raised which amounted to Rs.3, 59, 018/-. Time limitation - HELD THAT - As the issues involved arising out of this appeal are complex and interpretational in nature as proved by contradictory judicial precedents on the issue of Cenvat credit eligibility on Towers Parts and related services the invocation of extended period cannot be supported. Thus the Appellant succeeds on merits as well as on Limitation. Appeal allowed.
The core legal questions considered in this appeal pertain to the eligibility of Cenvat credit claimed by the appellant on various inputs and input services under the CENVAT Credit Rules, 2004. Specifically, the issues include:
Issue-wise Detailed Analysis: 1. Eligibility of Cenvat Credit on Tower-Related Services and Tower Materials The legal framework involves Rule 2(l) of the CENVAT Credit Rules, 2004, which defines 'input service' and includes exclusion clauses for certain services related to civil structures. Earlier decisions by a Larger Bench of the Tribunal and the Bombay High Court had held towers and related structures as immovable property, thus disallowing credit. However, this position was challenged by the appellant relying on recent authoritative judgments. The Tribunal in Vodafone Idea Limited v. CST, Mumbai (2024) examined whether services used for erection and commissioning of telecom towers qualify as input services. The Larger Bench clarified that the Supreme Court's decision in Bharti Airtel Ltd. was limited to the classification of 'inputs' and did not affect the eligibility of 'input services' credit. It held there is no break in the CENVAT chain for input services, and the credit should be allowed. The Delhi High Court further held that towers and prefabricated shelters are not immovable property, emphasizing that entitlement to credit is determined at the time of receipt of goods, which qualify as inputs or capital goods. The Supreme Court in Bharti Airtel Ltd. (2024) conclusively ruled that towers and prefabricated buildings are goods, not immovable property, and thus qualify as inputs under Rule 2(k) for credit purposes. Applying these principles, the Tribunal allowed the appellant's credit claim of Rs.88,86,165/- on tower-related services and tower materials, overruling the earlier exclusion based on immovability. 2. Eligibility of Credit on Post-Sale Services (Commission to Agents and Dealers) and Service Desk Payments The appellant contended that commission paid to collection agents and service desk payments are integral to providing telecommunication services, as these services enable recovery of dues essential for business operations. The Tribunal relied on the decision in Central Goods & Service Tax, Jaipur vs. Bharti Hexacom India Ltd. (2023), which held that input services must be used for providing output services, and services related to recovery of dues post provision of output service qualify as input services if indispensable for the business. The Tribunal also referred to Bajaj Finance Ltd. v. Commissioner, which recognized recovery agent services as input services in a similar context. Consequently, the Tribunal set aside the demand disallowing credit on commission agent services and service desk payments amounting to Rs.85,44,785/-. 3. Eligibility of Credit on Other Input Services: Outdoor Catering, Insurance, Healthcare, Police and Traffic Booth Maintenance, Shifting Services Regarding outdoor catering, the appellant argued that such services were used for business meetings promoting their products, falling within the definition of 'sales promotion' under the inclusive clause of input services. The Tribunal accepted this argument, allowing credit of Rs.7,16,762/- on outdoor catering. On healthcare services, the appellant voluntarily reversed credit of Rs.9,368/-, which was not contested. For insurance services, the appellant distinguished between personal use and business support services, contending that insurance on laptops, cell phones, and employee accident benefits are business-related and not excluded under the definition of input service. The Tribunal agreed, allowing credit of Rs.2,77,999/-. The appellant reversed credit on shifting services (Rs.94,333/-), which was accepted without further adjudication. Regarding police and traffic booth maintenance, the appellant argued these were for advertisement and brand promotion, thus qualifying as input services. The Tribunal concurred, allowing credit of Rs.1,35,656/-. 4. Value Added Services and Discounts on International Roaming The appellant claimed credit on service tax paid for value-added services (caller tunes, ring tones, etc.) and discounts related to international roaming services. The Tribunal found no irregularity and allowed credits of Rs.10,363/- and Rs.3,59,018/- respectively. 5. Limitation and Invocation of Extended Period The appellant challenged the invocation of the extended period for recovery of credit, arguing that the department had prior knowledge of facts and had issued earlier show cause notices on similar issues. The appellant relied on Supreme Court decisions in Anand Nishikawa Co. Ltd. v. Commissioner, Chemphar Drugs & Liniments, and Nizam Sugar Factory, which collectively hold that extended period cannot be invoked when facts are within departmental knowledge or when the issue is interpretative in nature. The Tribunal agreed that the issues were complex and interpretative, with contradictory judicial precedents, and thus the extended period was not invocable. This conclusion supported the appellant's claim on limitation grounds. Treatment of Competing Arguments The department relied on exclusion clauses under Rule 2(l) of the CENVAT Credit Rules, 2004, arguing that tower-related services pertain to civil structures and are thus excluded; that post-sale services like collection and service desk payments are after-sales and not input services; and that services such as outdoor catering, healthcare, insurance, shifting, and police booth maintenance fall under exclusion clauses or personal use and are not eligible. The Tribunal carefully analyzed these contentions against the backdrop of recent authoritative judgments, particularly the Supreme Court's ruling in Bharti Airtel Ltd., and found the department's reliance on earlier precedents and exclusion clauses misplaced or superseded. The Tribunal emphasized the need to interpret the definition of input service in light of the actual nexus with output services and the commercial realities of the telecom sector. Significant Holdings: "The Larger Bench on the aforesaid issues/doubts raised by the referral Bench, while answering the reference, has observed that the decision in Bharti Airtel is limited to 'input' as source of credit consequent on finding of ineligibility for claim as 'capital goods' and, therefore, not relevant in dispute over entitlement of 'input service' as credit. There is no break in CENVAT chain insofar as 'input service' is concerned. The decision of the coordinate benches survives as precedent to the extent appropriate to the facts of the present dispute." "The towers and the prefabricated shelters, are not immovable property. It is a settled principle of law that entitlement of Cenvat credit is to be determined at the time of receipt of the goods. If the goods that are received qualify as inputs or capital goods, the fact that they are later fixed/fastened to the earth for use would not make them a non-excisable commodity when received." "Services having relation with the business of providing of output service would be covered by the definition of input service. The provider of output service, therefore, shall be eligible to avail CENVAT Credit on all those services which are used for providing output services without which the provision of the said output service would become impossible or commercially inexpedient." "When the facts are within the knowledge of the Department and when SCN on the same issue was issued for the earlier period, the Department cannot invoke the extended period of limitation." Core principles established include:
Final determinations on each issue are as follows:
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