2023 (9) TMI 358 - AT - Service Tax

Appellant wins appeal for CENVAT credit on telecom infrastructure materials

Tower Vision India Private Limited Versus Commissioner of Service Tax-Delhi

The Tribunal allowed the appellant's appeal, granting them the eligibility to claim CENVAT credit on towers, tower materials, and telecom shelters. The ... Wrong availment of CENVAT Credit - input services - Pre-fabricated Building (telecom shelter) and Towers/Tower materials/Tower structures falling under CETH 94060091 & 730820190 by declaring these items as capital goods - HELD THAT:- This issue of Cenvat Credit on input/input services on the impugned items and capital goods has been decided in favour of the appellant by the Hon’ble High Court of Delhi in the case of Vodafone Mobile Services Ltd. cited [2018 (11) TMI 713 - DELHI HIGH COURT] - By relying upon the decision of Hon’ble Delhi High Court in appellant’s own case, this Tribunal in the case of Bharti Infratel Ltd. and Indus Towers Limited cited have allowed the cenvat credit on tower, tower material and telecom shelter etc. The division bench of CESTAT Principle Bench at New Delhi in identical facts has examined the issues in the case of BHARTI HEXACOM LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, CENTRAL GOODS AND SERVICE TAX JAIPUR-I [2021 (5) TMI 834 - CESTAT NEW DELHI] wherein the division bench has noted all the five questions framed by the Hon’ble Delhi High Court and answered each questions with a detailed reasons and after following the decision of the Hon’ble Delhi High Court has allowed the appeal of the assessee by holding that the appellant is eligible to claim cenvat credit on tower, tower material and telecom shelter etc. Thus, the impugned order denying the cenvat credit on input and input services, capital goods on tower, tower material and shelter etc. are not sustainable in law - appeal allowed. Issues Involved:1. Eligibility of the appellant to claim CENVAT credit on tower, tower material, shelters, etc.2. Classification of towers and shelters as movable or immovable property.3. Applicability of the 'functional utility' test for determining inputs used in providing output services.4. Timing and conditions for claiming CENVAT credit on received goods.5. Impact of intermediate immovable structures on CENVAT credit eligibility.Summary:Issue 1: Eligibility to Claim CENVAT CreditThe primary issue in this appeal was the eligibility of the appellant to claim CENVAT credit on tower, tower material, shelters, etc. The appellant argued that this issue had already been decided in their favor by the Hon'ble Delhi High Court on 31 October 2018, and similar decisions were made in related cases by CESTAT Chandigarh. The Tribunal found that the appellant was eligible to claim CENVAT credit based on these precedents.Issue 2: Classification of Towers and SheltersThe Tribunal examined whether towers and shelters should be classified as movable or immovable property. The Delhi High Court had previously determined that towers and shelters, when annexed to the earth without permanent assimilation, do not constitute immovable property. The Tribunal agreed with this finding, noting that the 'permanency test' was not met, and thus, these items were movable.Issue 3: Functional Utility TestThe Tribunal applied the 'functional utility' test, which evaluates if an item is required for providing output services on a commercial scale. The Delhi High Court had ruled that towers and pre-fabricated shelters are essential for telecommunication services and thus qualify as 'inputs' under Rule 2(k) of the CENVAT Rules. The Tribunal upheld this view, emphasizing the integral role of these items in providing the output service.Issue 4: Timing and Conditions for Claiming CENVAT CreditThe Tribunal addressed whether the appellant was justified in claiming CENVAT credit at the time of receipt of goods. The Delhi High Court had clarified that the entitlement to CENVAT credit is determined at the time of receipt, regardless of subsequent fixation to the earth. The Tribunal concurred, stating that the goods' eligibility for credit is established upon receipt.Issue 5: Impact of Intermediate Immovable StructuresThe Tribunal considered whether the emergence of immovable structures at an intermediate stage affects CENVAT credit eligibility. The Delhi High Court had concluded that intermediate immovable structures do not impact the entitlement to CENVAT credit, as the goods were initially received as movable. The Tribunal agreed, noting that the temporary immovable state does not alter the goods' excisable nature upon receipt.Conclusion:The Tribunal, following the Delhi High Court's decision and various coordinated bench decisions, allowed the appellant's appeal, setting aside the impugned order and granting consequential relief. The Tribunal emphasized that the appellant is eligible to claim CENVAT credit on tower, tower material, and telecom shelters, aligning with the established legal precedents.