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TMI Blog2021 (9) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Centre (MSC) * Base Station Control (BSC) * Base Transceiver Station (BTS) * Microwave Radio Station * Tower & Shelters * Computer/Software printer. 3. The appellant claims that for the purpose of setting up, operation and maintenance of the telecom network throughout the country, it set up Mobile Towers and Shelters. The GSM network is basically composed of three broad systems namely, the network subsystem, the radio subsystem, and the operation support subsystem. GSM provides not only air interface, but also the main interfaces that identify different systems. The operation and transmission system requires radio antennas to transmit and receive radio signals. The radio signals have to be beamed at a particular height so that the waves can travel without any hindrance from the high rise buildings, big trees and mountains. The cellular operators, therefore, have to install a cell site for catering to its cellular coverage inside public areas. This cell site comprises of a tower, shelter, electrical setup and other electronic related equipments. Microwave antennas and radio antennas are mounted on the towers. A tower consists of iron angles, bars and beams and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng under Chapter 72 and 73 and Tower/Tower materials cannot be considered as components/spares and accessories of the capital goods; that the angles, channels and beams, prima facie, cannot be treated as inputs; that the angles, channels, beams etc., are used to fabricate the tower and the activity of erection of towers does not amount to manufacture as the tower is in the nature of immovable fixture; and that the tower in itself is not treated as excisable goods and hence not entitled to be treated as input for the purpose of availing CENVAT credit. 8. The appellant filed a detailed reply to the show cause notice on 22.07.2008 rebutting the allegations levelled against it on the grounds that the proposal to disallow CENVAT credit on capital goods for the period September 2004 to April 2007 is time barred; that the audit was conducted in the company by the audit team and the appellant was not informed that it was not eligible to take credit on capital goods; that a cell site of a cellular operator consists of antennae which receives and transmits signals so as to facilitate the output service of the assessee; that the towers are structures installed to support GSM and Microwave A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and shelters have always been a subject matter of dispute/ litigation and accordingly, the extended period of limitation cannot be made applicable in cases of such interpretational nature. There was a conflict of opinion on the said issue which was ultimately addressed by a Larger Bench of the Tribunal in Tower Vision India Pvt. Ltd. vs. Commissioner of Central Excise, Delhi [2016 (42) S.T.R. 249 (Tri. - LB)]. It is a settled position that when a matter is referred to a Larger Bench to resolve conflict of opinion, extended period of limitation is not invokable; vi. Since the demand itself is not sustainable, no interest will be payable in the instant case; and vii. Since no mens-rea or suppression can be associated with availment of credit in the instant case, penalty is to be set aside. 11. Shri P. Rama Holla learned Authorized Representative appearing for the Department however, supported the impugned order and made the following submissions: i. Availment of CENVAT credit claimed on the items is not allowed, either its 'inputs' or 'capital goods' and in support of this submission, placed reliance on the following decisions: a. Vodafone Essar South Ltd. vs. CST, Bangal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary to reproduce rule 2(a) of the Credit Rules that defines 'capital goods'. It is as follows: "Rule 2. Definitions. - In these rules, unless the context otherwise requires, - (a) "capital goods" means :- (A) the following goods, namely :- (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Excise Tariff Act; (ii) pollution control equipment; (iii) components, spares and accessories of the goods specified at (i) and (ii); (iv) moulds and dies, jigs and fixtures; 9 (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; and (vii) storage tank, used- (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service; (B) motor vehicle registered in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act;" (emphasis supplied) 17. The contention of the appellant is that tower/tower materials and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... steam used in or in 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 output 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 manufacturer; (emphasis supplied) 20. Learned counsel also submitted that towers/shelters and parts thereof, at the time of their receipts were movable goods and, therefore, the appellant can take CENVAT credit on the same. According to the appellant, the entitlement of CENVAT credit is to be determined at the time of receipt of the goods and the fact that they are later fixed/ fastened to the earth for use would not make them a non-excisable commodity when received. 21. In support of the aforesaid contentions, learned counsel for the appellant placed reliance on a decision of the Delhi High Court in Vodafon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises of service provider. In the present case, towers and shelters are received in the premises of service providers. Later, when the towers are embedded in earth, the eligibility of credit will not change. It was argued that credit of input services cannot be denied on the ground of immovability which is an irrelevant factor, because the character of the goods, and the purpose for which they are procured does not change; they remain goods. It was submitted that besides the duty paid, the documents clearly indicated the classification and, as such, the credit cannot be denied at the recipients' end. 14. It was argued that towers and shelters, ipso facto, qualify as 'inputs'. Rule 2(k)(ii) defines inputs as "all goods used for providing output services". There is no bar to indicate that goods which do not fall under the category of capital goods would not also qualify as inputs. It was submitted that furthermore, towers, shelters MS Angles, etc. are to be considered as 'accessories' of capital goods. For an item to fall under the category of 'components', 'spares' and 'accessories', it must be either a component or a spare or an accessory and the classification of such item is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re used for providing telecommunication service. It is the immovable tower which is used for providing telecommunication service or business support service. 18. Counsel argued that the C.B.E. & C. by its Circular dated 4-1-2008 clarified that input of credit of service tax can be taken only if the output is a service liable to Service Tax or goods liable to excise duty. Since immovable property is neither service nor goods, no credit can be taken. Learned Counsel relied on the decision of the Supreme Court in Triveni Engineering & Indus. Ltd. v Commissioner of Central Excise - 2000 (120) E.L.T. 273 (S.C.) and submitted that the applicable test to determine if the asset was movable or immovable was marketability. It was submitted that Triveni (supra), highlighted the marketability of the goods: whether they can be taken to the market and sold. Applied properly, to the facts of this case, it was apparent that once the goods were fixed, there was no question of their marketability; they attained the character of immovable property. Consequently, the question of granting input credit did not arise. 19. It was argued that attachment of the towers to the foundation though not compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. 38. A machine or apparatus annexed to the earth without its assimilation by fixing with nuts and bolts on a foundation to provide for stability and wobble free operation cannot be said to be one permanently attached to the earth and therefore, would not constitute an immovable property. Thus, the Tribunal erred in relying on the Bombay High Court in Bharti Airtel Ltd. (supra). It is also important to understand that when the matter was carried out in the Bombay High Court and the judgment was delivered, the whole case proceeded on the presumption that these are immovable properties. The Tribunal failed to appreciate the 'permanency test' as laid down by the Supreme Court in Solid and Correct Engineering (supra)." (emphasis supplied) 27. The Delhi High Court, thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated system and each component in the BTS, have to work in tandem to provide cellular connectivity to phone users and to provide efficient services. In the facts of the present case, it is evident that the towers form part of the active infrastructure as the antennae cannot be placed at that altitude to generate uninterrupted frequency. Further, these shelters are accessories for the placement of various BTS equipment and other items for it to remain in a dust-free, ambient temperature. 47. From the foregoing discussion, clearly towers and shelters support the BTS in effective transmission of the mobile signals and therefore, enhance their efficiency. The towers and shelters plainly act as components/parts and in alternative as accessory to the BTS and would are covered by the definition of "capital goods". 48. In the present cases, the Tribunal, in this Court's view erred in interpreting the definition of "capital goods". It merely adopted the ratio laid down by the Bombay High Court in the case of the Bharti Airtel (supra) and Vodafone India (supra). Both those are subject matter of appeals before the Supreme Court. This Court is of the opinion, with due respect to the Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated shelters are inputs, in accordance with the provisions of Rule 2(k) of the Credit Rules. The CESTAT has erred in holding that there is no nexus between the inputs and the output service. The CESTAT also failed to consider the decision of the AP High Court in case of M/s. Indus Towers Ltd. v. CTO, Hyderabad - (2012) 52 VSR 447, which clearly ruled that the towers and shelters are indeed used and are integrally connected to the rendition of the telecommunication services." (emphasis supplied) Bharti Airtel Ltd. - Bombay High Court 29. After referring the definition of 'capital goods' and 'inputs', the Bombay High Court observed as follows: "23. In the context of these definitions the contentions as raised by the appellant are required to be examined. The position of the goods in question vis-a-vis the plain application of the rules is that the tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods. 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 (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, generator sets, feeder cables etc. and that these systems are to be treated as "composite system" classified under Chapter 85.25 of the Tariff Act and be treated as 'capital goods' and credit be allowed, also is not acceptable. It is clear that each of the component had independent functions and hence, they cannot be treated and classified as single unit. It is clear that all capital goods are not eligible for credit and only those relatable to the output services would be eligible for credit. The goods in question in any case cannot be held to 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. Hence a combined reading of sub-clauses (a)(A) (i) and (iii) and sub-rule (2) indicates that only the category of goods in Rule 2(a)(A) falling under clause (i) and (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 definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as parts and 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. The argument at the first blush appeared to be attractive however a deeper scrutiny shows that the same is without substance. It would be misconceived and absurd to accept that tower is a part of antenna. An accessory or a part of any goods would necessarily mean such accessory or part which would be utilized to make the goods a finished product or such articles which would go into the composition of another article. The towers are structures fastened to the earth on which the antennas are installed and hence cannot be considered to be an accessory or part of the antenna. The position in this regard stands fortified from the decision of the Supreme Court in the case of "Saraswati Sugar Mills v. CCE, Delhi [2011 (270) E.L.T. 465]". From the definition of the term 'input' as defined in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excise, Chandigarh reported in l984 (17) E.L.T. 331 wherein the Larger Bench consisting of five Members held that, in view of its All India jurisdiction and peculiar features, the Tribunal cannot be held bound to the view of any one of the High Courts, but has the judicial freedom, to consider the conflicting views, reflected by different High Courts, and adopt the one considered more appropriate to the facts of a given case before the Tribunal. The Tribunal also indicated that this should be so, irrespective of the fact whether one particular assessee was within the jurisdiction of a specified High Court or the original adjudicating authority was located there. ****** 10.2 In a recent decision of the Tribunal in the case of Madura Coats v. CCE, Bangalore reported in 1996 (82) E.L.T. 512, it has been held that the decision of a particular High Court should certainly be followed by all authorities within the territorial jurisdiction of that High Court and that the authorities in another State are not bound to follow the views taken by a particular High Court in the absence of a decision by the jurisdictional High Court with regard to constitutionality of a provisions. The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay High Court rendered in Bharti Airtel was considered by the Delhi High Court in Vodafone Mobile Services and it was distinguished as is clear from paragraph 48 of the judgment that has been reproduced above. In this connection the Delhi High Court had also placed reliance upon a later decision on the Supreme Court in Solid and Correct Engineering Works [2010 -TIOL - 25 - SC - CX]. 35. It is, therefore, considerd appropriate to follow the decision of the Delhi High Court in Vodafone Mobile Services. The appellant would, therefore, be entitled to claim CENVAT credit on tower/tower materials and pre-fabricated buildings/shelters. 36. This decision of the Delhi High Court has also been followed by the Tribunal in following decisions: i. Bharti Hexacom Limited vs. Commissioner of Central Excise and Customs, Central Goods and Service Tax, Jaipur-I [ST Appeal No. 50835 of 2017 decided on 25.05.2021] ii. Bharti Airtel Limited vs. CCE & ST - Gurgaon-II [ST Appeal No. 55383 of 2013 decided on 03.09.2019] iii. CCE Gurgaon-II vs. Bharti Infratel Ltd. [ST Appeal No. 52951, 52377-52378 of 2015 decided on 21.02.2019] iv. Bharti Infratel Limited vs. Commissioner of Service Tax, Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have not upheld the action of the assessee in availing 100% of the credit in the initial year but have held that by the time the appeal was heard the initial financial year being over in addition to the 50% credit of the initial year, the assessee became entitled to the remaining 50% of the credit available in the following financial year and thus the assessee was entitled to 100% credit on the date of the appellate order. It is not the case of the Revenue that the credit wrongly availed by the assessee has been utilized in the initial financial year. If the credit of the subsequent financial year wrongfully taken in the initial financial year if not utilized till the commencement of the subsequent financial year, then no prejudice is caused to the Revenue and the decision of the Tribunal deserves acceptance." (emphasis supplied) 42. In Bill Forge Pvt. Ltd., the Karnataka High Court observed as follows: "19. Rule 14 of the CENVAT Credit Rules, 2004 reads as under: Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded. - Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not been levied or paid or has been short levied or short paid or erroneously refunded, the person liable to pay duty, shall in addition to the duty is liable to pay interest. Section do not stipulate interest is payable from the date of book entry, showing entitlement of Cenvat credit. Interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is taken or utilized wrongly. 22. In the instant case, the facts are not in dispute. The assessee had availed wrongly the Cenvat credit on capital goods. Before the credit was taken or utilized, the mistake was brought to its notice. The assessee accepted the mistake and immediately reversed the entry. Thus the assessee did not take the benefit of the wrong entry in the account books. As he had taken credit in a sum of Rs. 11,691-00, a sum of Rs. 154-00 was the interest payable from the date the duty was payable, which they promptly paid. The claim of the Revenue was, though the assessee has not taken or utilized this Cenvat credit, because they admitted the mistake, the assessee is liable to pay interest from the date the entry was made in the regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 73(1) of the Finance Act. The Commissioner held that the extended period was correctly invoked by the Department since there was suppression of facts with intent to avoid payment of service tax for the reason that the appellant had failed to furnish full details of the CENVAT credit taken during the period. 45. Learned counsel for the appellant submitted that since the availability of credit on tower, angels, channels, beams and shelters was a subject matter of litigation, the extended period of limitation could not have been invoked as the appellant entertained a bonefide belief that it was entitled to take CENVAT credit. In support of this submission learned counsel pointed out that conflict of opinion on the said issue was ultimately resolved by a Larger Bench of the Tribunal in Tower Vision India. In support of this contention learned counsel also placed reliance upon decisions of the Tribunal. 46. In the instant case, the period of dispute is from September 2004 to December 2007. The show cause notice was issued on 14.05.2008. The period from April 2007 to December 2007 would fall within the normal period, while that from September 2004 to March 2007 would fall beyond th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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