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TMI Blog2025 (2) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... utiny of record of the Appellant it was observed that the Appellant had taken credit in respect of various goods namely 'Tower', 'Shelter', 'Electric Setup', other electronic items and prefabricated shelters. 2.2 Revenue was of the view that the Cenvat credit in respect of these items would not be admissible. Accordingly, proceedings were initiated against the Appellant by issuance of Show Cause Notices dated 16.09.2009 & 23.04.2010 both the SCNs were adjudicated by the orders as detailed in Para 1 above. 2.3 Aggrieved Appellant have filed two appeals as detailed in para 1 above. 2.4 Revenue has filed one Appeal only for the reason of non-imposition of the penalty under Section 78 of the Act in respect of certain amount reversed by the Appellant prior to the issuance of Show Cause Notice. 3.1 Have heard Shri Atul Gupta learned Advocate appearing on behalf of the Assessee and Shri Manish Raj, learned Authorized Representative appearing on behalf of the Revenue. 3.2 Learned counsel for the Appellant submits that the * issue involved in the present case is no longer res integra and have been decided by the Hon'ble Supreme Court in the case of Bharti Airtel Ltd. V/s CCE, Pune SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed above, every "good" is not "capital good" within the scope of the CENVAT Rules, but only such goods which come within meaning of sub-Clause (i) of Rule 2(a)(A) i.e. goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90 Heading no. 68.2 and the sub-Heading no. 6801, 6801.1 and 6801.10 of the First Schedule to the Central Excise Tariff Act, which are used for providing output service will be considered as "capital goods" and eligible for CENVAT credit. Sub-clause (ii) of Rule 2(a)(A) provides that pollution control equipment used for providing output service can also be capital goods with which we are not concerned. 11.10.1 However, it may be noted that neither tower nor prefabricated shelter/building (PFB) finds mention under any of the Chapters/Heading specified under sub-clause (i), nor these are pollution control equipment to fall within sub-clause (ii). Hence, these items on their own cannot be said to be "capital goods" within the meaning of sub-clause (i) and (ii) of Rule 2(a)(A). 11.11 However, it is to be noted that it has been provided under subclause (iii) that components, spares and accessories of goods specified in sub-clause (i) and sub-clause (ii) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more perfect, or which accompanies it, or is connected with it as an incident, or as subordinate to it, or which belongs to or with it, adjunct or accompaniment. A thing to subordinate importance. Aiding or contributing in secondary way of assisting in or contributing to as a subordinate." Similarly, Oxford Dictionary defines "accessory" as: "an extra piece of equipment that is useful but not essential or that can be added to something else as a decoration." 11.11.5 What comes out from the above dictionary meaning of "accessory" is that any such item which adds to the beauty, convenience or effectiveness of some other items can be said to be accessory of that other thing and it may or may not be essential for functioning of main machinery. Seen from the above perspective what is evident is that the tower is a structure fixed to the earth or building on which microwave antenna is fastened to provide the necessary height and stability to the antenna by making it steady and wobble free. The function of antenna as part of the BTS is to receive and transmit radio signal and is used for providing mobile telecom service to the subscribers. The tower itself is not an electrical componen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls. There are no sharp borders between neighbouring cells. Most of the time they overlap. In urban areas, a mobile device can hear a set of around 10 base stations simultaneously, and then it selects from this set of base station within the strongest signal. The number of cells a network is made up of is basically a function of the size of area to be covered and the user penetration. When building up a new network, operators first concentrate on establishing a coverage in congested urban areas before establishing base stations in rural areas. If a network runs the risk of becoming overloaded in a certain region, the operators can increase the capacity by increasing the base stations density. A cellular network not only consists of base stations but also comprises a network infrastructure for interconnecting base stations, mobility support, service provisioning and connection to other networks like internet. Therefore, a cellular network consists of several access networks, which include the radio equipment which is necessary to interconnect a terminal to the network. The access networks are interconnected by the core network. For example, in GSM, the access network is referred to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be treated as accessories of antennas. The CESTAT did not find the said contention of Assessee acceptable on the ground that tower cannot be considered to be a part of antenna, since a component or part of any goods means something which is required to make such goods a finished item. The CESTAT held that only those articles which would go into the composition of another article can be considered to be component or part of the latter and that tower does not enter into the composition of the antenna and hence it is not a component/part of the antenna, relying on the decision of this Court in Saraswati Sugar Mills v. Commissioner of Central Excise, Delhi-III, (2014) 15 SCC 625). In the aforesaid case of Saraswati Sugar Mills (supra) it was held by this Court that anything required to make the goods a finished item can be described as component or part of the finished item. It was held that 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. Thus, structures in question in the said case did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted by the Revenue, tower is needed to keep the antenna at an appropriate height and keep it stable. Without the tower, it is not possible to hoist the antenna at the requisite height and without it being securely fastened to the tower, antenna cannot be kept firm and steady for proper receipt and transmission of radio signals. Thus, there cannot be any doubt that a mobile tower can be treated to be an accessory of antenna and BTS. Accordingly, since in terms of subclause (iii) of Rule 2(a)(A), all components, spares and accessories of such capital goods falling under sub-clause (i) would also be treated as capital goods, a mobile tower can also be treated as "capital good". 11.11.12 We, therefore, agree with the conclusion arrived at by the Delhi High Court that towers and shelters (PFBs) support the BTS/antenna for effective transmission of mobile signals and thus enhance their efficiency and since these articles are components/accessories of BTS/antenna which are admittedly "capital goods" falling under Chapter 85 within sub-clause (i) of Rule 2(a)(A) of CENVAT Rules, these items consequently are covered by the definition of "capital goods" within the meaning of sub-clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CENVAT Rules. 11.12.1 "Input" has been defined under Rule 2(k) to mean all goods used for providing any output service. We have already held that tower and the prefabricated buildings (PFBs) are not immovable property but are "goods"/ "capital goods" within the meaning of Rule 2(a)(A)(iii) and since these are used for providing output service, i.e. mobile service, these can be considered to be "inputs" within the meaning of Rule 2(k) and CENVAT credit can be availed in respect of these goods for payment of service tax. The aforesaid definition clause under Rule 2(k) neither puts any condition on it nor any qualifying words have been added to the word "input", except to mean goods used for providing any output service. Hence, it would mean any "good" which is used as "input" for providing taxable output service. Thus, any item so long it qualifies as a "good" and is "used" for providing output service, would come within the purview of "input" under Rule 2(k) and excise duty paid on such items can be claimed as CENVAT credit which may in turn be used for payment of service tax for the output service provided by the MSPs. 11.12.2 It may be also noted that there must be "use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly known as petrol and the motor vehicles used for providing any output service. However, when the word "input" is defined relating to manufacture of product, it has been defined in a broad and expensive manner to mean all goods except light diesel oil, high speed diesel oil and motor vehicle spirit commonly as petrol, (i) used in or in relation to the manufacture of final products, (ii) whether directly or indirectly, (iii) whether contained in the final product or not, (iv) and includes lubricating oils, greases, cutting oils, coolants, accessories of the final product cleared along with the final products, (v) 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, (vi) or for any other purpose, within the factory of production. Thus, "input" in relation to manufacturing of final product would mean not only those which are directly used but also indirectly used not only for manufacture of final product whether contained in the final product or not but also used in relation to manufacture of final product or for any of other purpose. However, as mentioned above wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng by the Gujarat High Court was based on the essentiality of the humidifiers. By applying the same principle in the present case, towers and PFBs though themselves are not electrical equipment, are essential for proper functioning of antenna. Thus tower being essential to rendering of output service of mobile telephony, these items certainly can be considered to be "inputs" akin to antenna. Without the towers and the PFBs, there cannot be proper service of mobile telecommunication. Hence, these certainly would come within the definition of "input" under Rule 2(k)(ii). 11.12.5 What we have noted also is that the CESTAT rejected the plea of the Assessee that towers and parts thereof are inputs under Rule 2(k) by observing that the towers are admittedly immovable structures and hence ipso facto non-marketable and non-excisable and these do not lead to manufacture of goods and that towers and PFBs certainly are not used for providing mobile services. By relying on Explanation-2 to Rule 2(k) which provides that input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer, the CESTAT held that these items are not inputs. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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