2025 (8) TMI 1656 - AT - Service Tax

Major CENVAT credit claims allowed; demands on multiple input services set aside, minor packing claim technically upheld

M/s. Vodafone Idea Ltd. Versus Commissioner of GST Central Excise, Coimbatore

CESTAT, Chennai (AT) allowed most CENVAT credit claims by the appellant, setting aside demands on commission/collection-agent services, service-desk ... CENVAT Credit - input services - charges/commission paid to collection agents and service-desk payments - insurance premium paid for telecommunication equipment - services undertaken prior to tower/shelter installation - civil works, electrical, erection, installation and related services for towers/shelters/PFBs - manpower recruitment services - packing and moving of household items for employee transfers. CENVAT Credit - telecommunication services - HELD THAT:- From the Impugned Order, it is found that credit has denied in respect of some services on the grounds that the said services were ‘posterior’ in nature, i.e., the services had been received after completion of provision of output services and hence could not be directly or indirectly used in the output services. Credit availed on some other services have been denied on the ground that they do not qualify as ‘input service’ as defined under Rule 2(l) of the CENVAT Credit Rules. CENVAT Credit - various service providers to collect dues from post-paid customers as well as from customers/subscribers who use e-top up services - HELD THAT:- It is not agreed with the findings of the lower authorities that the said services are posterior in nature. I agree with the submission of the appellant that without engaging such recovery agents for timely collection of such dues from customers, they would not be able to run their business and provide output services. It is found that the collection agent services are imperative input services directly used in related to provision of their out put service namely, telecommunication services. The issue is no longer res integra, as the issue has already been decided in favour of the appellant by CESTAT, Kolkata the their own case, Vodafone Idea Ltd v. Commissioner of CGST & Central Excise, Kolkata South Commissionerate [2023 (3) TMI 575 - CESTAT KOLKATA] where it was held that 'we set aside the demand raised disallowing Cenvat Credit on Commission Agent Services and service desk payments amounting to Rs.85,44,785/-.' - the appellant is eligible for the CENVAT credit of Rs 23,81,507/availed the input services related to collection of debts. Accordingly, the demand confirmed in the impugned order set aside on this count. CENVAT credit of Rs 17,69,772/- availed on Insurance Premium for Equipments - HELD THAT:- The Appellant has availed the services of insurers for the purposes of providing insurance cover for the various active telecom equipment in operation. It is not agreed with the findings of the lower authorities that the said services are posterior in nature. It is observed that the equipments are imperative for the provision of telecommunication services, and thus the insurance for these business assets should be considered as an eligible input service. This view has been taken by the Tribunal, Chennai in the case of Sify Technologies Ltd v. Commissioner of GST & C. Ex., Chennai South [2019 (3) TMI 345 - CESTAT CHENNAI], wherein it has been held that 'These are assets of the company and are owned by the company and only for providing service, it is installed in the customers' premises. This insurance policy is taken to cover the risk of fixed assets and is eligible for credit. Hence the disallowance is unjustified. Further, in the appellant's own case, the Commissioner (Appeals) for the earlier period has allowed the credit on this insurance policy.' - the appellant is eligible for the CENVAT credit of Rs 17,69,772/- availed on Insurance Premium for Equipments. Accordingly, the demand confirmed in the impugned order set aside on this count. Denial of CENVAT credit of Rs. 59,349/- availed on Land survey - denial of credit on the ground that the services were ‘posterior’ in nature - HELD THAT:- It is found that land survey has been undertaken for the purpose of verifying and checking the land density as well signal strength in a particular area and the type of equipment to be installed at particular towers. Considering the fact that only upon completion of the land survey the installation of the tower/shelter etc can be undertaken by the Appellant, it is observed that this activity of land survey is not posterior in nature, but rather anterior in nature. Further, it is found that the land survey is directly proximate to the output services provided by the Appellant so as to ensure coverage of equipment and bring in maximum number of subscribers. Accordingly, the said service is squarely covered under the means clause of Rule 2(l), CENVAT Credit Rules - the demand confirmed in the impugned order on this count is not sustainable and hence the same is set aside. CENVAT Credit for services received by the appellant in relation to Civil works, electrical works, erection works, freight paid etc, which are in relation to construction of civil structures utilised for providing their output Services - HELD THAT:- In the impugned order, the credit has been denied by relying on the decision of the Larger Bench in the case of Vandana Global Vandana Global Ltd [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] and Bharti Airtel Ltd [2014 (9) TMI 38 - BOMBAY HIGH COURT] of Hon’ble Bombay HC. However, it is found that the said decisions relied upon by the lower authorities have already been reversed and hence they are not applicable for the facts of the case at present - the demand confirmed on this count is not sustainable and hence the same is set aside. Denial of CENVAT credit of Rs. 8778/- availed on Man Power Recruitment Service - HELD THAT:- The said Credit was denied on the ground that the services were ‘posterior’ in nature. It is not agreed with the findings of the lower authorities that the said services are posterior in nature. In this regard, it is found that Recruitment is explicitly mentioned in the inclusive part of the definition under Rule 2(l) of the CENVAT Rules and hence the appellant is eligible for the credit of service tax paid on on erection, commission and installation services in relation to Towers/Shelters/PFBs - the demand confirmed in the impugned order on this count. CENVAT credit amounting to Rs.10,000/- availed on Packing and Moving of Household Items - HELD THAT:- The Appellant is not contesting this demand as they have already reversed the credit of Rs 10,000/- on 10.08.2015. Accordingly, the demand of Rs.10,000/- confirmed in the impugned order on this count upheld. As the appellant has already reversed the credit, no penalty imposable on this demand. Appeal disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether service charges/commission paid to collection agents and service-desk payments qualify as 'input service' under Rule 2(l) of the CENVAT Credit Rules when received after provision of output telecommunication services (i.e., posterior services). 2. Whether insurance premium paid for telecommunication equipment qualifies as 'input service' under Rule 2(l) when the equipment are business assets used to provide output services. 3. Whether land-survey services undertaken prior to tower/shelter installation qualify as 'input service' under the 'means' clause of Rule 2(l) (i.e., are anterior and directly/indirectly used in provision of output services). 4. Whether civil works, electrical, erection, installation and related services for towers/shelters/PFBs qualify as 'input service' notwithstanding earlier Tribunal/Larger Bench and High Court authority to the contrary. 5. Whether manpower recruitment services constitute an 'input service' under Rule 2(l), including by virtue of explicit inclusion of recruitment. 6. Whether packing and moving of household items for employee transfers qualify as 'input service' and whether reversal by the assessee resolves the demand and penalty consequences. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Commission/collection agent and service-desk payments (posterior services) Legal framework: Definition of 'input service' in Rule 2(l) of the CENVAT Credit Rules - main ('means') part and inclusive part; entitlement where service is 'used by a provider of output service for providing an output service' including services used directly or indirectly. Precedent treatment: Tribunal decisions holding recovery/collection/recovery-agent services to be input services (e.g., decisions of other Benches referred to in the judgment). The decision in Bajaj Finance Ltd (repossession/recovery agent) and Tribunal decisions in favour of credit on bill collection/service-desk charges were cited and followed. Relevant decisions cited have not been appealed by Revenue in the instances relied upon. Interpretation and reasoning: The Court rejects the lower authority's view that posterior receipt of the service excludes eligibility. It reasons that services which are integral to the business of providing the output service - without which provision would be impossible or commercially inexpedient - fall within the main part of Rule 2(l) even if rendered after supply. Collection services facilitate timely receipt of dues necessary to run the business and are therefore directly related to provision of telecommunication output services. Ratio vs. Obiter: Ratio - posterior timing of a service does not preclude characterization as an input service where the service is used in relation to the business of providing the output service and is necessary/linked to provision thereof. The reliance on prior Tribunal holdings is applied as determinative. Conclusions: CENVAT credit on commission/collection agent and service-desk payments is allowable; demand disallowing such credit is set aside for the amounts contested. Issue 2: Insurance premium for telecom equipment Legal framework: Rule 2(l) definition of 'input service' and the inclusive/means clauses; principle that services related to business assets used to provide output service can qualify. Precedent treatment: Tribunal Chennai decision (Sify Technologies Ltd) treating umbrella/fixed-asset insurance covering routers/equipment as eligible input service; earlier allowance by Commissioner (Appeals) on similar policy also noted. Interpretation and reasoning: The Court finds that insurance of active telecom equipment - assets imperative to provision of telecommunication services - is not posterior in character and is directly related to the output service. Insurance covers business risks of assets owned and used in rendering services; therefore it falls within Rule 2(l). Ratio vs. Obiter: Ratio - insurance premium for business assets used to provide output services is an input service eligible for CENVAT credit. Conclusions: CENVAT credit on insurance premiums for equipment allowed; demand set aside for the amount contested. Issue 3: Land-survey services (anterior services) Legal framework: Rule 2(l) - 'means' clause covers services used directly or indirectly to provide output services; distinction between excluded construction/works-contract service-portion and other services used in setting up infrastructure. Precedent treatment: Decision in Nuvoco Vistas (CESTAT Chandigarh) and High Court reasoning in Bellsonica (Punjab & Haryana High Court) treating services used to set up factory/plant as falling under means part; cited to support that land-related preparatory services are covered. Interpretation and reasoning: Land survey precedes installation and is necessary to select site, determine equipment type and ensure coverage; it is anterior and directly proximate to provision of telecommunication services. The Court holds that preparatory services not expressly excluded remain within the 'means' clause and are eligible for credit. Ratio vs. Obiter: Ratio - preparatory/anterior services such as land surveys that are necessary for installation of infrastructure used in provision of output services constitute input services under Rule 2(l). Conclusions: CENVAT credit on land-survey services allowed; demand set aside for the amount contested. Issue 4: Civil works, electrical, erection and installation services for towers/shelters/PFBs Legal framework: Rule 2(l) and the exclusion of service-portion in execution of works contracts/construction services where specifically excluded; interplay with later judicial pronouncements reversing earlier Larger Bench/High Court authority. Precedent treatment: Earlier Larger Bench and High Court decisions (relied upon by lower authority) held against credit; subsequently those decisions were reversed by higher courts (Chhattisgarh High Court in Vandana Global and ultimately the Supreme Court in Bharti Airtel affirming the Delhi High Court in Vodafone Mobile Services), establishing entitlement for credit on erection/installation services in telecom context. Tribunal's own recent order in the appellant's case also allowed credit. Interpretation and reasoning: Given reversal of earlier adverse precedents by higher courts and favourable subsequent Tribunal rulings, the Court concludes that erection/installation/commissioning and related services for towers/shelters/PFBs are directly related to provision of telecommunication services and are eligible as input services. The Court treats the line of subsequent higher-court authority as binding on the applicability of exclusions relied upon by the adjudicating authority. Ratio vs. Obiter: Ratio - where higher courts have reversed prior authority, erection/commissioning/installation services for telecom infrastructure qualify as input services; reliance on prior adverse Larger Bench/HC decisions is not appropriate. Conclusions: CENVAT credit on civil, electrical, erection and related services allowed; demand set aside for the amount contested. Issue 5: Manpower recruitment services Legal framework: Rule 2(l) inclusive part explicitly lists 'recruitment' among services considered input services; general principle that services explicitly included are allowable. Precedent treatment: Tribunal decisions cited (Saint-Gobain; Integra Software; Enmas Andritz) support that recruitment services constitute input services. Interpretation and reasoning: Recruitment services are necessary for day-to-day business operations and are explicitly included in the inclusive part of Rule 2(l); posterior timing is immaterial where service is used for provision of output services. Ratio vs. Obiter: Ratio - recruitment services are eligible input services under Rule 2(l); denial on ground of posterior nature is unsustainable. Conclusions: CENVAT credit on manpower recruitment services allowed; demand set aside for the amount contested. Issue 6: Packing and moving of household items for employee transfers (reversal and penalty) Legal framework: Rule 2(l) and general entitlement principles; remedial effect of voluntary reversal of credit by assessee. Precedent treatment: No novel precedent necessary; fact-based result where assessee reversed credit to avoid litigation. Interpretation and reasoning: The assessee voluntarily reversed the impugned credit amount and therefore does not contest the demand. Because the reversal was effected prior to adjudication, no penalty is imposable on that demand. Ratio vs. Obiter: Ratio - voluntary reversal of availed credit results in upholding of demand but negates imposition of penalty where reversal has been made. Conclusions: Demand for packing and moving amount is upheld but treated as satisfied by prior reversal; no penalty imposed. Cross-References and Overall Conclusion All issues concerning denial of CENVAT credit on services that are either preparatory/anterior to infrastructure installation or integral/necessary to the business of providing telecommunication output services were considered under Rule 2(l). The Tribunal applies and follows subsequent favourable judicial authorities (Bajaj Finance line, Sify Technologies, Nuvoco, Bharti Airtel/Supreme Court affirmations, and relevant Tribunal decisions) and rejects the lower authority's reliance on earlier adverse Larger Bench or High Court decisions which were subsequently reversed. Accordingly, credits contested for collection/commission, insurance of equipment, land-survey, civil/erection/installation, and recruitment services are held allowable and demands set aside; the small packing/moving sum was reversed by the assessee and demand is upheld but penalty avoided.