2025 (2) TMI 214 - AT - Service Tax

Tribunal Grants Cenvat Credit for Transmission Towers as Inputs Under Rule 2(k) of CENVAT Credit Rules

M/s. Bharat Sanchar Nigam Limited Versus The Commissioner of Central Tax East Commissionerate, Bengaluru.

M/s. Bharat Sanchar Nigam Limited Versus The Commissioner of Central Tax East Commissionerate, Bengaluru. - TMI ISSUES PRESENTED and CONSIDEREDThe core legal question considered was whether the appellant was eligible to avail cenvat credit on inputs, specifically angles, channels, beams, etc., used in the erection of transmission towers for providing output services. The adjudicating authority had previously disallowed this credit, leading to the appeal.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The primary legal framework involved the interpretation of the term 'input' under Rule 2(k) of the CENVAT Credit Rules. The appellant relied on the precedent set by the Supreme Court in the case of Bharti Airtel Ltd. vs. CCE, Pune, where similar issues were adjudicated. The Supreme Court's interpretation of 'input' in the context of providing output services was central to the appeal.Court's interpretation and reasoning:The Tribunal referred extensively to the Supreme Court's reasoning in Bharti Airtel Ltd., which emphasized that the definition of 'input' should not be given a restrictive meaning when related to providing output services. The Supreme Court had noted that while the definition of 'input' for manufacturing tangible products was more detailed, the same expansive interpretation should apply to inputs used for output services, as both serve essential roles in their respective contexts.Key evidence and findings:The Tribunal highlighted the Supreme Court's observation that transmission towers, though not directly involved in signal transmission, are essential for the effective functioning of antennas, which are crucial for mobile telecommunication services. The Supreme Court had concluded that the relationship between the antenna and the tower is proximate and inseparable, thereby qualifying the towers as 'inputs.'Application of law to facts:Applying the Supreme Court's reasoning, the Tribunal found that the towers and associated structures used by the appellant were indeed 'inputs' under Rule 2(k)(ii) since they were indispensable for providing the output service of mobile telephony. The Tribunal rejected the lower authority's view that these structures were immovable and non-excisable, as the Supreme Court had clarified that such structures, when used for service provision, qualify as goods and thus as inputs.Treatment of competing arguments:The Tribunal acknowledged the Revenue's argument, which reiterated the lower authority's findings that the towers were immovable structures and not directly involved in service provision. However, it dismissed these arguments by aligning with the Supreme Court's broader interpretation of 'inputs' and the essential role of towers in service provision.Conclusions:The Tribunal concluded that the appellant was eligible for cenvat credit on the inputs used for erecting transmission towers, as these were essential for providing mobile telecommunication services. The appeals were allowed based on the Supreme Court's precedent.SIGNIFICANT HOLDINGSThe Tribunal's decision preserved crucial legal reasoning from the Supreme Court, emphasizing the non-restrictive interpretation of 'input' under Rule 2(k) for output services. The core principle established was that structures essential for service provision, even if not directly involved in the service, qualify as inputs. The Tribunal's final determination was to allow the appellant's claim for cenvat credit, reversing the lower authority's disallowance.In conclusion, the Tribunal's judgment relied heavily on the Supreme Court's interpretation, aligning with the view that transmission towers and related structures are integral to providing output services and thus qualify for cenvat credit as inputs.