2012 (4) TMI 362 - AT - Service Tax

Tribunal ruling: CENVAT credit denied on towers, PFBs, printers, office chairs. Antennas eligible. Limitation period and penalties under review.

M/s BHARTI AIRTEL LTD Versus COMMISSIONER OF CENTRAL EXCISE, PUNE

M/s BHARTI AIRTEL LTD Versus COMMISSIONER OF CENTRAL EXCISE, PUNE - [2012] 34 STT 592 (MUM - CESTAT), 2013 (29) S.T.R. 401 (Tri. - Mumbai), [2012] 49 VST ... Issues Involved:1. Denial of CENVAT Credit on Towers, Prefabricated Buildings (PFB), Printers, and Office Chairs.2. Classification and eligibility of Antenna as capital goods.3. Classification and eligibility of Towers and PFB as capital goods or inputs.4. Limitation period for the demand.5. Imposition of penalties under Rule 15 of the CENVAT Credit Rules, 2004.Issue-wise Detailed Analysis:1. Denial of CENVAT Credit on Towers, Prefabricated Buildings (PFB), Printers, and Office Chairs:The appellant, engaged in providing cellular telephone service, received four show-cause notices (SCNs) from the department denying CENVAT credit on items such as towers, PFB, printers, and office chairs used for providing output service. The Commissioner confirmed the denial of credit on these items, except for antennas, which were allowed credit as they fell under Chapter 85 and were directly used for providing output service.2. Classification and Eligibility of Antenna as Capital Goods:The Commissioner allowed CENVAT credit on antennas, noting that they fell under Chapter 85 of the Central Excise Tariff Act and were directly used by the appellant for providing output service, thus qualifying as 'capital goods' under Rule 2(a)(A) of the CENVAT Credit Rules. The department accepted this decision.3. Classification and Eligibility of Towers and PFB as Capital Goods or Inputs:The Commissioner disallowed credit on towers and parts thereof, holding that they became immovable upon erection and could not be classified as 'goods.' Even in CKD or SKD condition, towers and parts would fall under Heading 73.08, not specified under Rule 2(a)(A). Similarly, PFBs, classified under Chapter 94, were not considered telecom equipment or used directly for providing output service. The appellant argued that towers and PFBs were essential for providing cellular service, but the Tribunal upheld the Commissioner's view that these items did not qualify as capital goods or inputs under the CENVAT Credit Rules.4. Limitation Period for the Demand:The appellant claimed that the demands for certain periods were barred by limitation, arguing that they did not willfully suppress any facts. The Tribunal noted that the Commissioner did not address the limitation plea adequately and remanded the issue for reconsideration.5. Imposition of Penalties Under Rule 15 of the CENVAT Credit Rules, 2004:The penalties were challenged on the grounds that the appellant did not intend to evade duty and that divergent legal views existed. The Tribunal remanded the penalty issue to the Commissioner for fresh consideration, emphasizing the need to determine whether the appellant's conduct warranted penalties under Rule 15.Conclusion:The Tribunal concluded that the subject items (towers, PFBs, printers, and office chairs) were neither 'capital goods' nor 'inputs' under the CENVAT Credit Rules, 2004, and thus, CENVAT credit was not admissible. The credit taken was recoverable, subject to the limitation issue, which was remanded for fresh consideration. The penalty issue was also remanded for a decision based on the appellant's conduct. The Tribunal appreciated the erudite arguments presented by both parties.