TMI Blog2022 (4) TMI 1361X X X X Extracts X X X X X X X X Extracts X X X X ..... rty shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth. The permanency test was examined at length by the Supreme Court in COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD VERSUS SOLID CORRECT ENGINEERING WORKS ORS. [ 2010 (4) TMI 15 - SUPREME COURT] . In this case the Supreme Court drew a distinction between machines which by their very nature are intended to be fixed permanently to the structures embedded in the earth and those machines which are fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because foundation was necessary to provide a wobble free operation to the machine. The appellant had repeatedly emphasized that the towers of the appellant were neither embedded nor permanently fixed or fastened to the earth/foundation and in fact, were merely attached to the foundation above the ground using nuts and bolts so that no damage was caused to any part of the tower on re-location. The show cause notice does not dispute that the towers were fastened on a foundation above the ground using nuts and bolts, nor does the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. C.J. MATHEW, MEMBER (TECHNICAL) Shri Rafique Dada, Senior Advocate, Shri Vipin Jain, Shri Vishal Agarwal, Shri Zuber Dada, Shri Kartik Dedhe, Advocates for the Appellant Shri Shambhu Nath and Shri Dilip Shinde, Authorised Representatives of the Department ORDER JUSTICE DILIP GUPTA: Reliance Jio Infocomm Ltd, the appellant has filed this appeal to assail the order dated 30.08.2019 passed by the Commissioner of Central Tax (Appeals), Raigarh, the Commissioner (Appeals) by which the appeal, that was filed by the appellant for setting aside the order dated 10.04.2018 passed by the Assistant Commissioner rejecting the refund claim filed by the appellant under section 11B of the Central Excise Act, 1944 as made applicable to service tax matters by section 83 of the Finance Act 1994, the Finance Act, has been dismissed. 2. The appellant is a telecom operator and claims to be offering Long Term Evolution-Fourth Generation, LTE 4G wireless telecommunications. For the purpose of rendering such telecommunication services, various monopoles, masts, poles and telecom towers which house the radio transmission and reception equipments such as antennas, routers, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not warranted in the absence of any show cause notice or determination of liability and in any event, the judgments of the Bombay High Court in Bharti Airtel Ltd. vs. Commissioner of Central Excise, Pune-III 2014 (35) S.T.R. 865 (Bom.) and Vodafone India Ltd. vs. Commissioner of Central Excise, Mumbai-II 2015 (40) S.T.R. 422 (Bom.) did not apply to the facts of the case of the appellant. Accordingly, the appellant filed a claim for refund of the credit reversed by an application dated 10.11.2017 pointing out that the telecom towers installed by it were movable in nature since they were merely fixed with nuts and bolts on a foundation and not embedded in the earth as a result of which they could be dismantled and relocated without causing any damage. 9. The Assistant Commissioner, Belapur, however, issued a show cause notice dated 17.01.2018 alleging that the goods on which CENVAT credit had been availed were neither capital goods nor inputs as defined under the 2004 Rules as they were attached to the earth , being immovable structures fixed to ground . The show cause notice also relied on the judgment of the Bombay High Court in Bharti Airtel and alleged that sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment rendered by the Delhi High Court in Vodafone Mobile Services Limited vs. Commissioner of Service Tax, Delhi 2019 (27) G.S.T.L 481 (Del.) was applicable to the case of the appellant and that the judgments of the Bombay High Court in Vodafone India and Bharti Airtel were inapplicable, as the mobile towers of the appellant were merely fixed or attached to the foundation by nuts and bolts and were not embedded into the earth. 13. The Commissioner (Appeals) did not accept the contention advanced by the appellant and upheld the order passed by the Assistant Commissioner on the grounds that: (i) The towers and parts thereof are fastened and fixed to the earth and after their erection become immovable property and therefore, cannot be considered as goods; (ii) Also, the towers and parts thereof in CKD condition are classifiable under ETH 7308 and do not satisfy the conditions stipulated in clauses (i) and (ii) of rule 2(a) (A) of the 2004 Rules so as to be eligible for credit as capital goods; (iii) The towers and their parts are also not components, spares or accessories of capital goods falling under any of the Chapter Headings specified in clause (i) of rule 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to render services based on 2G/3G technology; (iv) The towers of the appellant, being merely attached on the foundation with nuts and bolts, can be easily moved and have, in fact, been moved to the other locations without any damage, unlike the traditional towers, which on account of being embedded in the earth, suffered damage on relocation; (v) The facts of the present case are entirely different from those before the Bombay High Court in Bharti Airtel and Vodafone India, where the High Court examined the question as to whether a tower which was admittedly embedded in the earth was to be regarded as immovable property or not. In Bharti Airtel, there was a clear concession made by the operator that the tower was immovable. In Vodafone India, there was no such direct admission but it was contended that despite the towers being embedded in the earth , the same were to be considered as movable property since, such embedment was not for the beneficial enjoyment of land. The decision of the Delhi High Court in Vodafone Mobile Services is squarely applicable to the facts of the appellant; (vi) The judgments of the Bombay High Court in Bharti Airtel and Vodafone India have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries Ltd. vs. Union of India 2020 (374) E.L.T. 578 (Kar.); (ii) The goods, being towers and their parts, would fall under Chapter 73 of the Excise Tariff Act and, therefore, would not be capital goods under rule 2(a) of the 2004 Rules; (iii) The towers are also not accessories of the telecommunication devices fixed on the towers as the towers do not perform any function of the telecommunication equipments; (iv) The contention of the appellant that the towers enhance the effectiveness of the telecommunications system is not correct; (v) The towers are used as a structure supporting telecommunication equipment and as per definition of input in rule 2(k) of the 2004 Rules, goods used for laying of foundation or making of structures for support of capital goods are specifically excluded from the definition of input with effect from 01.07.2012; (vi) The contention of the appellant that the judgments of the Bombay High Court in Bharti Airtel and Vodafone India would not be applicable since the services provided by the appellant are based on LTE 4G technology, unlike the towers used by the other operators to render services based on 2G/3G technology, is not tenabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Each of the aforesaid four towers are described below: a. GBM Mobile Towers In case of GBM (i.e., single mast), only one concrete foundation is made on the vacant plot of land by drilling four or six anchor bolts into the ground and grouted with cement slurry. Typically, the anchor bolts are of diameter of 52 mm and length ranging from 170 mm to 950 mm and the dimensions of the pile cap foundation range from 1.5 x 1.5 x 0.75 metres up to 2.8 x 2.8 x 1.5 metres, depending on soil conditions. The tower/pole is attached to the cement concrete foundation with nuts and bolts; b. GBT Mobile Towers In case of GBT (i.e. three legged tower), for each leg of the tower, one concrete pedestal is made on the vacant plot of land, comprising of a raft type foundation and Cast In Parts made from pipes and flanges/foundation bolts. All the three legs of the tower are then fixed using nuts and bolts on the concrete pedestal. The size of such foundations depends on soil conditions and they may vary from 5 x 5 x 1.2 metres up to 10 x 10 x 3.5 metres; c. RTT/RTP Mobile Towers In case of RTT/RTP, three to six pedestals are required on the roof top of a building, comprising four bol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibers, new designs have been developed by appellant for the foundation, towers and ancillary items as compared to the older designs of other telecom players who had established their BTS/BSC/Cell sites (Base Transceiver Station) 15 to 20 years ago, when the telecom industry was still in its nascent stage. Earlier BTS/BSC/Cell sites generally had cement concrete foundations in which the base portion of the towers and parts thereof were embedded/fixed in such a manner that if and when these towers were required to be relocated, there was a possibility of substantial damage to the material thereby making the towers non usable as it is . On the other hand, to avoid damage of the material used at the e-Node B site (including towers and ancillary items) and for quick, smooth removal and relocation thereof, the appellant makes a concrete foundation on vacant plots and all the four different types of towers are fixed to the foundation simply by bolting nuts to the pedestals or the foundation bolts. The said foundation bolts are already embedded to the foundation while such foundation is being laid; (x) The transmission and reception equipment are classifiable under ETH 8517 and electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled for refund was rejected. The appeal filed by the appellant before the Commissioner (Appeals) was also dismissed. 20. In order to appreciate the contentions advanced on behalf of the appellant and the respondent, it would be useful to reproduce the definition of capital goods and input under the rule 2(a) and rule 2(k), respectively, of the 2004 Rules. 21. Capital goods have been defined in rule 2(a) and the relevant portion is as follows: 2(a) capital goods means :- (A) the following goods, namely :- (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 and wagons of sub-heading 860692 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; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; (vii) storage tank, and (viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis but including dumper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re intended to be fixed permanently to the structures embedded in the earth and those machines which are fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because foundation was necessary to provide a wobble free operation to the machine. The relevant portion of the judgment is reproduced below: 33. It is noteworthy that in none of the cases relied upon by the assessee referred to above was there any element of installation of the machine for a given period of time as is the position in the instant case. The machines in question were by their very nature intended to be fixed permanently to the structures which were embedded in the earth. The structures were also custom made for the fixing of such machines without which the same could not become functional. The machines thus becoming a part and parcel of the structures in which they were fitted were no longer movable goods. It was in those peculiar circumstances that the installation and erection of machines at site were held to be by this Court, to be immovable property that ceased to remain movable or marketable as they were at the time of their purchase. Once s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Supreme Court observed that merely because a machine is attached to earth for more efficient working and operations it would not per se become immovable property. The observations are as follows: 5 . Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a householder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of the water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper-making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the Company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. (emphasis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mage, at least to portions of the towers which were embedded in the earth. Such traditional towers were thus not usable as such on being dismantled from the existing sites. 31. A perusal of judgment of the Bombay High Court in Bharti Airtel shows that it was an admitted and undisputed position taken by the appellant before the High Court that the towers were embedded in the earth and thus, were immovable structures, non-marketable and non-excisable. In fact, the towers were similar to those towers in Commissioner vs. Hutchison Max Telecom Private Limited 2008 (224) ELT 191 and State of Andhra Pradesh vs. BSNL 2012 (25) S.T.R. 321 (A.P.), wherein the towers were embedded in the earth and relocation of the same involved damage to parts like cable tray, etc. which were embedded/ fixed to civil structure as also to the BTS microwave equipment. 32. The appellant had repeatedly emphasized that the towers of the appellant were neither embedded nor permanently fixed or fastened to the earth/foundation and in fact, were merely attached to the foundation above the ground using nuts and bolts so that no damage was caused to any part of the tower on re-location. The show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal failed to appreciate that the process of embedding the Towers and pre-fabricated buildings/shelters is not a permanent process and the same can be removed and reinstalled at another location and they are merely embedded for proper functioning and, therefore, are not immovable property? 35. As noticed above, there is neither any allegation nor finding that the towers of the appellant are embedded in the earth. In fact, the towers of the appellant are erected above the ground on a foundation using nuts and bolts. This aspect is crucial for deciding whether the telecom towers are immovable property or moveable property as was observed by the Supreme Court in Solid and Correct Engineering Works. The towers of the appellant do not satisfy any of the stipulations laid down by the Supreme Court for being regarded as immovable property. The towers are neither land nor benefits arising out of land nor are the same attached to the earth or permanently fastened to anything attached to earth. The towers are merely fastened above the ground to a foundation using nuts and bolts. The fastening is, therefore, not permanent, since the towers can be easily unfastened and in fact, acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foundation imbedded in earth. This argument has to be considered in the light of the decisions discussed above. Attachment of the towers in question with the help of nuts and bolts to a foundation (not more than one foot deep), intended to provide stability to the working of the towers and prevent vibration/wobble free operation does not per se qualify its description as attached to the earth in any one of the three clauses (of Section 3 which defines attached to the earth ) extracted above. Clearly, attachment of the towers to the foundation is not comparable or synonymous to trees and shrubs rooted in earth. It is also not equivalent to entrenching in the earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition. Imbedding of a wall in the earth is not comparable to attachment of a tower to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation. So also, attachment of the tower to the foundation on which it rests would not fall in the third cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 38. What also needs to be remembered is that the Supreme Court in Solid Correct Engineering Works particularly dealt with a machine that was bolted to a foundation with nuts and bolts and could be moved. This is precisely the situation in the present appeal, unlike the matters before the Bombay High Court in Bharti Airtel and Vodafone India wherein it was in admitted position that the towers were embedded in the earth. 39. The contention of the revenue is that the towers may not per se be immovable property but they become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electrical utility items, towers and ancillary items. The towers at such e-Node B sites could either be located on vacant plots of land or on roof tops of buildings for efficient and smooth transmission and reception of telecommunication signals over a maximum area around towers. Transmission and reception equipments of each e-Node B sites are fixed with nuts and bolts on the tower at a specified height in a specified direction and the other accessories are placed inside the cabinets of the hollow portion of the mast. The LTE 4G technology deployed by the appellant and the spectrum of 2200 Ghz, which the appellant was allotted for the purpose of providing telecommunication services, also required a much higher density of telecom towers within a geographical area. The architecture of e-Node B sites was accordingly designed by the engineers of the appellant by reducing the weight, height and dimensions of telecom towers to enable quick and smooth removal for the purpose of relocation thereof, as and when required, without any damage either to the tower or to any of its components. 43. Since these equipments and goods had suffered central excise duties, the appellant availed CENVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack 9403 50,34,207 To house/ stack utilities, electronics other equipment like SMPS, Routers, battery banks etc. in firm condition 12. Insulation Material 7308 20,47,961 To maintain internal temperature of GBM lesser than Ambient temperature 13. Bolts 7318 12,74,411 To securely assemble/fasten mating parts of mast/poles/pipes Sub-total of inputs 2,44,03,60,834 Serial No. Description of Goods installed at e-Node B sites Tariff Chapter Heading CENVAT Credit initially claimed Rs. Primary Function Part-II (Capital Goods) 1. Cabinet 8517 4,19,98,921 To house utilities telecom electronic equipment like battery bank, power source, equipments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods are immovable in nature, as was held by the Bombay High Court in Bharti Airtel. In respect of these goods, the show cause notice does not dispute that the same are classifiable under specific headings for which CENVAT credit could be availed as capital goods in terms of rule 2(a)(A) of the 2004 Rules. 46. On a perusal of the allegations made in the show cause notice as also the findings of the Commissioner (Appeals), it is evident that there is no dispute that the goods on which credit had been availed, either as inputs or as capital goods have been used for providing output service, which is a pre-requisite for being eligible to avail CENVAT credit. Thus, it would not be necessary to examine this aspect of nexus with the provision of output service. 47. Insofar as credit to the tune of ₹ 9,49,69,651/- availed as capital goods is concerned, there is no dispute that the said goods are classifiable under Chapters 84 and 85 of the Excise Tariff Act and that the same are specified headings in the definition of capital goods under rule 2(a)(A)(i) of the 2004 Rules. There is absolutely no ground for denying credit in respect of these goods, save and except for the allegat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant that these items could also be covered under the definition of capital goods. 52. Learned authorized representatives of the department also pointed out that the show cause notice had sought to reject the claim for refund on the ground that the issue of admissibility to credit on towers and part thereof had been decided by the Bombay High Court in Bharti Airtel and Vodafone India, but an appeal against the same is pending before the Supreme Court where the appellant had filed an Intervention Application. The contention advanced is that since the issue as to whether the appellant is entitled to avail credit on merits is pending determination in the show cause notice dated 12.3.2019 issued by the Commissioner to the appellant, the Tribunal should not decide the matter on merits. 53. A show cause notice had been issued seeking to reject the claim for refund alleging that the appellant was not entitled to avail credit on the telecom towers. The Assistant Commissioner as also the Commissioner (Appeals) adjudicated upon the claim of the appellant for entitlement to avail credit on the telecom towers. These orders have not been reviewed and no appeals have been prefer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation where refund was claimed of the amounts deposited in the course of investigation and there was a dispute, as in the present case between the two parties on the question whether such payments had been made voluntarily or under duress. The High Court held that the question whether the payment was voluntary or under coercion was irrelevant and that as long as there was an assessment and demand, the amount deposited could not be appropriated. The relevant paragraph of this judgment is extracted below: 13. As far as the amount deposited by the petitioners is concerned, case of the petitioners is that the same was deposited under coercion. Case of the respondents was that the same was deposited voluntarily. Whatever be the position, unless there is assessment and demand, the amount deposited by the petitioners cannot be appropriated. No justification has been shown for retaining the amount deposited, except saying that since it was voluntarily deposited. In view of this admitted position, the petitioners are entitled to be returned the amount paid. A division bench of the Madras High Court in the case of Sanmar Foundaries Ltd. v. Commissioner reported in 2015 (325) E.L.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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