2023 (2) TMI 989 - AT - Service Tax

Tribunal grants CENVAT credit for telecom infrastructure equipment, rules towers as movable property.

M/s. ATC Telecom Infrastructure Private Limited Versus Commissioner, Service Tax, Delhi-II (Vice-Versa)

The Tribunal allowed the appellant's appeal, setting aside the denial of CENVAT credit on towers and shelters used in setting up telecom infrastructure. ... CENVAT Credit - inputs/input services/capital goods - towers, shelter and parts thereof - demand confirmed on the ground that the subject goods were used for fabrication/erection of towers and shelters, which being attached to earth, were immovable in nature and thus, not used for providing output services in terms of the Circular dated 26.02.2008 - extended period of limitation. Whether towers are movable property or immovable property? - HELD THAT:- This issue was examined at length by a Division Bench of the Tribunal in M/S. RELIANCE JIO INFOCOMM LTD. VERSUS ASSISTANT COMMISSIONER, CGST & CENTRAL EXCISE, BELAPUR-IV DIVISION [2022 (4) TMI 1361 - CESTAT MUMBAI] and it was held that towers and shelters would not be immovable property. The Delhi High Court in VODAFONE MOBILE SERVICES LIMITED, INDUS TOWERS LIMITED, TOWER VISION INDIA PRIVATE LIMITED, BHARTI INFRATEL LIMITED, VERSUS COMMISSIONER OF SERVICE TAX, DELHI [2018 (11) TMI 713 - DELHI HIGH COURT] had also examined this issue and held that the Tribunal clearly erred in concluding that the towers and parts thereof and the prefabricated shelters are not capital goods with the meaning of Rule 2(a) of the Credit Rules. The appellant was also entitled to take CENVAT credit since the items in dispute are ‘capital goods’. The order dated 30.09.2016 in so far as it confirms the demand for the normal period of limitation is, accordingly, set aside - as the demand has been set aside on merits, the issue of extended period of limitation also dismissed. Appeal allowed. Issues Involved:1. Denial of CENVAT credit availed and utilized on inputs, input services, and capital goods.2. Determination of whether towers are movable or immovable property.3. Eligibility of towers and shelters as 'inputs' or 'capital goods' under CENVAT Credit Rules.4. Applicability of the extended period of limitation.Detailed Analysis:1. Denial of CENVAT Credit:The appellant, engaged in setting up passive infrastructure for telecom companies, availed CENVAT credit on excise duty paid for capital goods and inputs used in this infrastructure. The Commissioner denied this credit, asserting that the goods were used for constructing immovable property, not for providing output services. The impugned order confirmed the demand for CENVAT credit and imposed penalties, but dropped the demand for the extended period of limitation.2. Movability vs. Immovability of Towers:The primary issue was whether the towers are movable or immovable property. The appellant argued that towers, assembled using nuts and bolts on a foundation, are movable as they can be dismantled and relocated. The Tribunal referred to several Supreme Court judgments, including *Solid & Correct Engineering Works* and *Triveni Engineering & Indus. Ltd.*, which distinguished between permanent fixtures and items bolted for stability. The Tribunal concluded that the towers are not permanently attached to the earth and thus are movable property.3. Towers and Shelters as 'Inputs' or 'Capital Goods':The Tribunal examined whether towers and shelters qualify as 'inputs' under Rule 2(k) of the CENVAT Credit Rules, 2004. The Delhi High Court in *Vodafone Mobile Services* held that the definition of 'inputs' includes all goods used for providing output services unless specifically excluded. The Tribunal agreed that towers and shelters, essential for telecom services, meet the 'functional utility' test and qualify as inputs.Additionally, the Tribunal considered the alternative argument that these items are 'capital goods' under Rule 2(a) of the CENVAT Credit Rules. The Delhi High Court in *Vodafone Mobile Services* determined that towers and shelters, which support the BTS equipment and enhance its efficiency, qualify as capital goods. The Tribunal concurred, stating that the appellant was entitled to CENVAT credit on these items as capital goods.4. Extended Period of Limitation:The department's appeal challenged the dropping of the demand for the extended period of limitation. Since the Tribunal set aside the demand on merits, it dismissed the department's appeal, rendering the examination of the extended period of limitation unnecessary.Conclusion:The Tribunal set aside the order dated 30.09.2016 concerning the normal period of limitation and allowed the appellant's appeal. The department's appeal regarding the extended period of limitation was dismissed. The judgment affirmed that towers and shelters are movable property and qualify as inputs or capital goods, entitling the appellant to CENVAT credit.