TaxTMI 
TaxTMI 
2014 (9) TMI 38
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....stified in holding that the Appellant was not entitled to credit of duty paid on tower parts, green shelter, printers and office chairs ? 2. Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that the Appellant was not entitled to credit of duty paid on tower parts, green shelter on the ground that tower/green shelter is "immovable property" and hence, do not qualify as "capital goods" or "inputs" as defined under the Cenvat Credit Rules,2004 ? 3. Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that tower would not qualify as "part" or "component" or "accessory" of the capital goods i.e. antenna ?" The appeal is admitted on the above substantial questions of law. By consent of the Learned Counsel for the parties and at their request we have taken up these appeals for final hearing. The relevant facts are :- 2. The appellant is engaged in providing cellular telephone services and is paying applicable service tax on the cellular telephone services. The appellant, inter alia, availed Cenvat credit on excise duty paid on towers parts and shelters/ ....
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....he requirement of Rule 2(a)(A) of the Credit Rules stipulates satisfaction of following two conditions:- "(a) The goods should fall under particular CSH or description specified for the purpose; (b) That in case of the service provider, the goods should be used for providing output service." It was stated that the Cenvat Credit availed by the appellant during the period October,2004 to September,2005 in respect of the following items was in contravention of Rule 2(a)(A) of the Credit Rules:- "(i) Tower and Parts of tower, (ii) Prefabricated building, (iii) Printer, (iv) Office chairs." It was stated that from the Cenvat Credit returns filed by the appellant for the said period it was found that the appellant had failed to give any 'chapter heading' under Central Excise Tariff nor the use of said goods in providing output service. Subsequently, information about use of the goods and Chapter heading under the Central Excise tariff was called for from the appellant. The same was, thereafter, furnished by the appellant vide its letter dated 8.3.2006. It was, alleged that the appellant had suppressed material facts and knowingly, willfully and wrongly had taken a....
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....that under the said clause all goods except LDO, HSD and motor spirit are inputs provided they are used for providing output service. The appellant also placed reliance on Rule 4 of the Credit Rules to contend that the credit in respect of "inputs" can be availed of immediately on receipt of the goods in the premises of the service provider. It was stated that credit of "inputs" can be taken in time and in any manner and non availment of whole or part of input credit immediately on receipt of inputs in the factory will not vitiate the right of the manufacturer or output service provider to take un-availed credit later. Further case of the Appellant was that the tower is part of the 'Base Transceiver Station (BTS)', which is an integrated system. It was stated that the BTS was classifiable under heading 85.25 of Central Excise Tariff Act which comprises of the tower also as one of its parts, without which the output service cannot be provided. It was, therefore, submitted that the towers are part of the eligible capital goods viz. BTS and are used for providing output services, as also the towers were eligible for capital goods credit. The appellant placed reliance on whole architec....
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....ated that in any case credit is admissible on towers and parts of towers as inputs as falling within the ambit of Rule 2(k) of the Credit Rules which defines "input". It was stated that as per the definition of term "input" irrespective of classification of the said goods under the Central Excise Tariff Act, they will qualify as "inputs" and will be eligible for input credit if they are used for providing output service. In regard to the prefabricated building, the appellant contended that they are eligible for capital goods credit as they were part of the integrated BTS and in any case they were eligible to input credit. As also, the same contention was raised in respect of office chairs and printers. As regards the penalty as proposed to be levied under rule 15(1) and (2) of the Credit Rules, the appellant submitted that the penalty provision is not attracted in view of classification of their goods as capital goods and in any case as "inputs". The appellant denied that they had availed credit wrongly by practicing fraud or by making willful mis-statement, collusion or suppression of facts. It was stated that there was no willful suppression. It was, therefore, submitted that the....
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....e. The Commissioner while confirming the rejection of the Credit availed by the appellant, imposed a penalty of an amount of Rs. 2,04,39,093/- for wrongly availing credit under Rule 15(2) read with Section 11 AC of the Central Excise Act,1944. Further, payment of interest under Section 75 of the Central Excise Act at the rates applicable from time to time was also ordered. 7. The appellant being aggrieved by the order in original dated 19.12.2006 filed an appeal before the Tribunal being Appeal no.ST/49/2007. In the appeal, the principal ground of challenge to the order passed by the Commissioner disallowing Cenvat Credit was that the tower and parts thereof, prefabricated building, office chairs and printers were capital goods as falling under the definition of Rule 2(a)(A) of the Credit Rules, as also it was contended that in the alternative in any case the said goods also qualified as inputs under the definition of 'input' under Credit Rules and hence, the credit availed by the appellant was valid. The appellant also challenged the order of the Commissioner pertaining to interest on penalty on the ground that Rule 15(2) of the Credit Rules is applicable to a manufactu....
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....09. By this order, the Commissioner disallowed the Appellant's claim for credit amounting to Rs. 13,02,08,928/- under the provisions of Rule 14 of the Credit Rules. However, Cenvat credit on antenna amounting to Rs. 2,38,54,970/- was allowed and the demand in that regard was dropped. The demand in respect of other items viz. the tower and parts thereof and the prefabricated building was confirmed. A penalty of Rs. 13,02,08,928/- was also imposed under Rule 15(1) of the Credit Rules, 2004. In confirming the demand in respect of tower and parts thereof, it was observed by the Commissioner that tower is fixed to the earth and after its installation becomes immovable and therefore, cannot be goods. It was also observed that even in CKD or SKD condition, the Tower and parts thereof would fall under Chapter heading 7308 of the Central Excise Tariff Act which is not specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules,2004 as capital goods. It was held that tower and parts thereof are not directly utilised for output service as the same has been basically a structural support for certain equipment. It was further observed that it may not be necessary if suitable ....
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.... as also the alternate plea of the appellant that the said goods are inputs falling under Rule 2(k) of the Credit Rules are also rejected. The Tribunal in dismissing appeals filed by the appellants ordered as under:- "(a) The subject items are neither 'capital goods' under Rule 2(a) nor 'inputs' under Rule 2(k) of the CENVAT Credit Rules, 2004 and hence, CENVAT credit of the duty paid thereon is not admissible to the appellant for the relevant period; (b) The CENVAT credit taken on the said items and utilized by the appellant is recoverable subject to limitation; (c) The limitation issue is remanded to the Commissioner for careful consideration and decision; (d) The question whether, on the facts and circumstances of this case, the appellant is liable to be penalized under Rule 15 of the CENVAT Credit Rules,2004 and, if so, to what extent is also remanded to the Commissioner for fresh consideration and decision; (e) The appellant shall be given a reasonable opportunity of being heard on the remanded issues." 14. We have heard Mr.V.Sridharan, learned Senior Counsel with Mr.Prakash Shah learned Advocate appearing on behalf of the appellant and Mr.Kev....
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....ly condition for the purpose of availing credit of duties paid on inputs and capital goods is that the inputs or the capital goods must be received by the provider of output services. It is submitted that the goods in questions have been received by the appellant who has provided output services viz. Telecommunication services. (VI) The contention of the Revenue that after the use of the towers and parts thereof and PFB they have become "immovable", is misconceived and credit cannot be denied accepting this contention. In support of this submission, reliance is placed on the following decisions:- (a) CCE Vs. SLR Steels Ltd., (2012 (280) ELT 176 (Kar)); (b) CCE Vs. ICL Sugars Ltd., (2011(271) ELT 360 (Kar)); (c) CCE Vs. Sai Sahmita Storages Ltd., (2011(23) L.T.R. 341(A.P.)); (d) Bannari Amman Sugars Ltd. Vs. CCE, (2010(250) ELT 326 (Kar); (e) CCE New Delhi Vs. Hindustan Sanitaryware & Industries Ltd. (2002(145) ELT (SC)); (f) Orders of the Bombay High Court dated 7.10.2008 in CCE, Mumbai Vs. N.R.C.Ltd." (VII) That the towers and shelters are used for providing telecommunication services on which service tax has been paid. That capital goods viz. Antenna and B....
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....lter respectively to provide telecommunication service. In support of this proposition reliance is placed on the definition of 'capital goods' as defined under Rule 2(a) of the Credit Rules to contend that the accessories of goods fall within the ambit of capital goods when they are used for providing output services. As regards the meaning of the word 'accessory', reliance is placed on the following decisions. (a) M/s.Annapurn Carbon Industries Co. Vs. State of Andhra Pradesh, ((1976)2 SCC 273); (b) CST, Maharashtra State, Bombay Vs. L.D.Bhave & Sons, (1981(47) STC 318.); (c) Mehra Brothers Vs. Joint Commercial Officer, Madras, ((1991) 1 SCC 514); (d) Banco Products (India) Ltd. Vs. Commissioner of C.Ex., Vadodara-I, (2009(235) ELT 636 (Tri-LB)); (e) CCE, Jaipur Vs. M/s.Rajasthan Spinning and Weaving Mills Ltd., (2010(255) ELT 481 (SC)) It is submitted that these are cases in which items were held to be fall within the definition of 'input' and also 'capital goods' and hence, in any case the appellant would be entitled for availing credit of duty paid on the same. (X) In regard to the prefabricated building, it is submitted that....
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....r article can be considered as components or parts of later. It is submitted that GSM and network antenna and such other goods classified specifically under Tariff heading 8517, but not the tower on which antenna is placed and hence tower cannot be considered as a component. That the tower does not enter into the composition of antenna, it is not constituted as part of antenna. (v) It is then contended that under the definition of input under the Credit Rules, the service provider cannot avail the Cenvat Credit on input goods only the manufacturer can avail such credit. The service provider can avail of input credit and also on capital goods which satisfies the definition under Rule 2(a) of the Credit Rules. Hence, the credit on excise duty paid on tower and prefabricated buildings do not satisfy the definition of capital goods and hence, are certainly not covered as input service. In support of his aforesaid submissions, learned ASG relied on the following judgments.:- (I) Vandana Global Ltd Versus Comm. Of C. Ex. Raipur, (2010(253) ELT 440(Tri-LB)); (II) Quality Steel Tubes (P) Ltd) versus Collector of C.Ex., ((1995) 2 SCC 372) (III) Triveni Engineering & Industries L....
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....ent or appliance used in an office; or (2) for providing output service." (emphasis supplied) Rule 2(k) defines "input" as under :- "2(k) "input" means- (i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared alongwith the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any out service. Explanation 1- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2- Input include goods used in the manufacture of capital goods which are further used in the f....
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....n :- (i) Capital goods Only those goods qualify for Cenvat Credit as capital goods which are covered under Chapter 82, 84, 85, 90, 68.02 and those under heading 6805 of the first schedule to the Central Excise Tariff Act, pollution control equipment or those which are components, spares and accessories of these goods and used in the factory of the manufacturer of the final products or for providing output service, but does not include any equipment or appliance used in an office. (ii) Inputs All goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared alongwith the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; and all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as pet....
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....of final product or any other purpose within the factory of production. Sub-clause (ii) has been referred to as relevant by the appellant as the same pertains to goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. 23. In the context of these definitions the contentions as raised by the appellant are required to be examined. The position of the goods in question vis- a-vis the plain application of the rules is that the tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods. Further in the CKD or SKD condition the tower and parts thereof would fall under the chapter heading 7308 of the Central Excise Tariff Act. Heading 7308 is not specified in clause (i) or clause (ii) of rule 2 (a) (A) of the Credit Rules so as to be capital goods. The goods in question would not be capital goods for the purpose of CENVAT credit as they are neither components, spares and accessories of goods falling under any of the chapters or headings of the Central Excise Tariff Schedule as specified in sub-clause (i) of the defini....
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....e present case are quite different. The towers are not capital goods under the definition of capital goods as defined in rule 2 (a) of the credit rules being immovable and are non-excisable. This judgment is therefore of no assistance to the appellants. (b) In the decision of the Karnataka High Court in the case of "CCE Vs. ICL Sugars Ltd., (2011(271) ELT 360 (Kar))" the issue was in regard to the input used in the manufacturing of storage tank which was an immovable property are admissible for MODVAT credit. The Assesse was a sugar factory and had claimed CENVAT credit on the raw materials used for construction of storage tanks. The assessing authority had granted credit in respect of water storage tank on the ground that water is an essential raw material of sugar after conversion into steam. The water storage tank is a component of main machinery viz. boiler and the excise duty paid on the inputs in the construction of water storage tanks were held eligible for availing Modvat credit. However, Modvat credit was disallowed, in respect of syrup and molasses storage tank - MS staging of tank and shell plates/ bottom plates/ roof plates used for constructing non-excisable final m....
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....(2011(23) S.T.R. 341(A.P.))" decided by the Division Bench of Andhra Pradesh High Court the assessee was registered under Section 69 of the Finance Act, 1994 for providing storage and warehouse services. The Assessee was filing service tax returns classifying the services under storage and warehousing service. While scrutinizing the sale tax returns for the period from April, 2005 to September, 2005 the assessing officer came to a conclusion that the assessee had taken credit on Central Excise duty paid on cement, iron bars, expansion bellows and pipes, and hence, a show cause notice was issued proposing to adjudicate and determine short paid service tax and penalty thereon. The Assessing authority passed an order in original confirming the show cause notice and demanding service tax and interest thereon. The Assessee had preferred an appeal before the Commissioner of Central Excise which came to be dismissed. Before the High Court, it was contended by the Revenue that the cement used for making foundation and TMT bars used for reinforcement, cannot be treated as capital goods as defined in Rule 2(a) of the Rules and that the assessee had wrongly claimed credit when the items were ....
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....ion "used in or in relation to the manufacture" have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas used in the manufacture of sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Head Transfer oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being "used in or in relation to the manufacture" stands complied with. In our view, one has to therefore read the definition in its entirety." The reliance on this judgment may not be helpful to the appellants inasmuch as the definition of storage and warehousing as contained in Sect....
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.....C.E. New Delhi vs. Hindustan Sanitaryware & Industries, (2002(145) E.L.T. 3 (S.C.))", was a case of captive consumption. The assessee was a manufacturer of sanitarywares and used plaster of paris as inputs for the final product of sanitaryware. This involved making of moulds from plaster of paris which in turn used as inputs for manufacture of sanitaryware. The assessee had claimed the benefit of exemption under a Notification no.217 of 1986. The revenue declined to grant benefit of exemption. The Tribunal had set aside the orders passed by the Excise Authority and held that exemption would apply to the assessee. The Supreme Court after taking into consideration the contents of the Notification no.82/87 which showed that the description of inputs given in column (2) under Chapter 25, would be 'plaster of paris' and the final product given in column (3) under Chapter 69 would be 'ceramic goods' held as under:- "9. The proviso postulates a situation where the final product itself is exempted in which case alone the exemption of plaster of paris under Notification No.217/86 cannot be availed. It is nobody's case that the sanitaryware falling under Chapter 69 has be....
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.... Gujarat High Court in the case of "Industrial Machinery Manufacturers Pvt. Ltd. Vs. The State of Gujarat, ((1965) 16 STC 380)" concerned the item, 'humidifires' used by cotton textile mills in order to maintain certain humidity for the purpose of increasing the strength of yarn, avoiding breakages of yarn and improving the quality of yarn, are essential to the modern textile industry. It was held that humidifires are machinery used in the manufacture of cloth and fall within Entry 15 of Schedule C to the Bombay Sales Tax Act,1959. The appellants on the basis of this decision intend to canvass that similar to the position of humidifires as held by the Division Bench of Gujarat High Court, to be used in manufacturing of the goods, the towers and parts thereof and PFB are also to be construed to be used in providing output services and hence, credit ought to be granted. This decision, however, would not be applicable to the towers and PFB in view of the fact that they are not directly used for the output services namely telecommunication services and further as they are non excisable and hence, not falling within the definition of 'input' as defined under Rule 2(k) of the Cre....
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.... was in excess of the amount calculated at the rate of 10% of the value of the goods. Under the proviso, if the capital goods were imported for manufacture of items mentioned therein then they were exempted from payment of whole of the additional duty. Thus, in the facts of the case, if the capital goods were imported for the manufacture of textile garments then under the notification the importer would be exempted from payment of customs duty and additional duty. The assessee had imported machines for processing of fabric/yarn, fabric inspection machines, machines for knitting and dying fabrics and other such machines. The assessee was denied benefit of 100% exemption on the ground that the machines imported by them were not required for the purposes of manufacture of textile garments. In this context, the Supreme Court in paragraphs 8 and 9 has observed as under:- "8. Further, in our view, this Notification is very clear. The 100% exemption is given to capital goods required for manufacture of, amongst others, "textile garments". The term "capital goods" has been defined in the Notification. The term "capital goods" means goods which are used in the manufacture of that prod....
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....nclusion that the Assessee was entitled for the benefit of the exemption notification. However, in the present case, the term 'capital goods' as defined in Rule 2(a)(A) does not include tower and parts thereof or the PFB so that the said goods qualify as 'capital goods' and become entitle to credit of the duty paid thereon. (d) In the decision of the Supreme Court in the case of "Indian Farmers Fertilisers Co-op.Ltd. Vs. C.C.E., Ahmedabad, (1996(86) E.L.T. 177(S.C.))" the issue was 'whether the ammonia used in the off-site plants is also ammonia which is used elsewhere in the manufacture of fertilisers'. An exemption Notification no.187/61- C.E. was issued under the provisions of Rule 8 of the Central Excise Rules whereby the Central Government exempted raw naphtha falling under item no.6 of the First Schedule to the Central Excises and Salt Act,1944, from the payment of excise duty in excess of Rs. 4.36 per kilolitre at 15 degrees centigrade. The exemption Notification applied "in respect of such raw naphtha as is used in the manufacture of Ammonia provided such Ammonia is used elsewhere in the manufacture of fertilisers" and the procedure set out in Chapter....
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.... be said to be used in the manufacture of fertilizers. As regards the findings of the Collector, in so far as the effluent treatment plant was concerned, the same were upheld. In this context, referring to its earlier decisions in the case of "M/s.J.K.Cotton Spinning & Weaving Mills Co.Ltd. Vs. Sales Tax Officer, Kanpur and Anr., (1965(1) SCR 900" and "Collector of Central Excise, Calcutta-II vs. Eastend Paper Industries Ltd., (1989(4) SCC 244) held that the treatment of effluents from a plant is an essential and integral part of the process of manufacture in the plant and that the apparatus used for such treatment of effluents in a plant manufacturing a particular end product is part and parcel of the manufacturing process of that end product. It was held that the ammonia used in the treatment of effluents from the urea plant of the assessee was therefore, required to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia would be entitled for exemption. This conclusion was reached on the basis of the observations that the exemption Notification did not require that the ammonia should be used directly in the manufacture of fertili....
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.... Section 8(3)(b) and Rule 13, it was observed that by Rule 13 the Central Government has prescribed the goods referred to in Section 8(3)(b), such goods must be intended for use in the manufacture or processing of goods for sale or in mining or generation or distribution of power, and the intended use of the goods must be as specified in Rule 18. It was observed that under Rule 13 read with Section 8(3)(b) mere intention to use the goods in the manufacture or processing of goods for sale, will not be a sufficient ground for specification. The intention must be to use the goods as raw materials, as processing materials, as machinery, as plant, as equipment, as tools, as stores, as spare parts, as accessories, as fuel or as lubricants. It is in this context, it was held that the expression "in the manufacture of goods" should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods and where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expre....
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....munication towers are held by a Division Bench of this Court in BSNL (2012)49 VST 98 (AP) to be immovable property. We are not informed at the Bar that the judgment in BSNL (2012) 49 VST 98 (AP) has either been stayed or appealed against or the ratio of the said decision stands eclipsed. This judgment has also analysed that the service providers (passive infrastructure service providers) provide other assets like shelter, air-conditioning equipment, diesel generator, electrical wiring, power plant, etc., for their network operations and concluded that sharing of infrastructure is incidental and only as a means of rendition of telecommunication service; that the effective control and possession of such equipment continues with the passive service provider; is not parted to the other service providers who are merely permitted use of this equipment; and levying tax on the proceeds received by the passive infrastructure provider from sharing of their infrastructure with other service providers, treating it as a sale under Explanation IV to sub-section (28) of Section 2 of the APVAT Act,2005, is without jurisdiction and illegal. 39. In the facts and circumstances of this lis (adverte....
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....oncessional rate of tax under the said provision. The Division Bench in this case was examining three aspects, firstly the goods as procured by the dealer in the context of the registration obtained by the dealer under the Central sales Tax Act by procuring 'C' form under the Central Sales Tax Act and the benefit of the 'C' forms whether would be entitled in the context of the provisions of Section 8(1) and 8(3)(b) of the Act. The Division Bench was dealing in a case arising under the Central Sales Tax Act and was examining the benefits which would be available to the dealer of reduction in duties on a "C" form being availed by the dealer. It is in this context that the Division Bench had come to the conclusion that the cell phone towers are integral to telecommunication network. Secondly, the expression "telecommunication network" was being considered in the context of Section 8(1) read with section 8(3)(b) of the Central Sales Tax Act. It was also observed that in the case of "State of Andhra Pradesh Vs. Bharat Sanchar Nigam Ltd." (supra) ruling of the Division Bench of Andhra Pradesh High Court, it was held that telecommunication tower is immovable property and t....
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....a is an intrinsic part of that process." However, the observations are required to be read in the context of the facts of the said case. The appellant the said case was engaged in manufacturing of excisable goods which fell under Chapters 28, 29 and 31 of the Central Excise Tariff Act,1985. The appellant had installed storage tanks for storing ammonia at its premises situated at JNPT and had claimed that it is eligible for Cenvat Credit of service tax paid on input services used for the ammonia storage tanks installed at JNPT so that input/ raw material stored therein was intended for manufacture of the final product at the factory of the appellant at Taloja. The Cenvat Credit in respect of the services of consulting engineers, technical inspection and certification, construction, erection, commissioning and installation services for the installation of the ammonia storage tanks was claimed. The facts of this case can no manner apply to towers and parts thereof, prefabricated building/shelter which are immovable property and not excisable goods and hence, reliance on this judgment is misconceived. 26. The appellants in support of their alternate contention that the 'towers ar....
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....cannot be held to be an accessory of antenna. (b) In the decision of the Division Bench of this Court in the case of "Commissioner of Sales Tax, Maharashtra State, Bombay Vs. L.D.Bhave & Sons, (1981(47) STC 318)", the issue was as regards the stand specially designed for keeping gas stoves and whether they were 'accessories' for gas stoves. This issue arose in the context of Entry 7A of Schedule E to the Bombay Sales Tax Act,1959 and the rate of sales tax as would be applicable to the items. It is in this context the Division Bench has considered the judgment of the Supreme Court in the case of M/s.Annapurna Carbon Industries Co. Vs. State of Andhra Pradesh" (supra), and has observed as under:- "Thus, an accessory is considered as something that is an extra or additional item, an adjunct to the main item. It may add to the performance of the main items but it can also be for more convenient use of the main item. It fact, there can be various types of accessories and whether an item constitutes an accessory or not will depend upon how the item is considered in common parlance more than in terms of its dictionary meaning. For example, the leather case in which a transis....
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....f "Banco Products (India) Ltd. Vs. Commissioner of C.Ex., Vadodara-I, (2009(235) ELT 636 (Tri-LB))" of the Larger Bench of the Central Excise and Service Tax Appellate Tribunal concerns the issue as to whether the plastic crates would either to be capital goods or inputs so as to qualify for input credit. These plastic crates were used for internal transportation of the raw material/semi-finished and finished goods from stores to processing machine and from one machine to other machine and to finished goods storage. They were mainly used for storage and supply of different components of radiators, in the production of which the appellant is engaged. The issue which is considered was 'whether the plastic crates can be considered as accessories as falling under clause (iii) of the goods specified in Clause (I) of the definition of capital goods as defined under 2(b) of Cenvat Credit Rules,2002. The observations in paragraphs 14 and 19 are relevant they read as under:- "14. Reference to all the above decisions was necessary to understand the scope of the term "accessory". If the plastic crates are held to be an accessory to the main machine, appearing against Sr.no.(i) of the d....
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....as under Rule 57A and 57B as 'inputs'. The claim for admissibility of the credit as capital goods was not one of the issue before the Bench. As such, it can be recorded that M/s.PKPN Spinning Mills' case and followed subsequently in M/s.Sugavaneswara Spinning Mills' case, was by way of concession and M/s.Hindustal Seals judgment having not considered the availability of credit as capital goods, there is no decision holding against the admissibility of the plastic crates as accessory. In any case, having elaborately discussed as to what is the meaning and scope of the term "accessory", as interpreted by Hon'ble Supreme Court in various decisions and by Tribunal, it has to be held that the plastic crates are eligible capital goods for the purposes of Modvat credit. We answer accordingly." The insistence on behalf of the appellants that the analogy as applied by the Larger Bench be applied in the facts of the present case is not acceptable. The argument of the appellants is that the antenna is being classified as capital goods and being held eligible for availing credit of duty paid, tower and PFB become its accessories. To reach to this conclusion on the lines ....
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....appeal is devoid of any merit. 12. Inter alia observing that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition of "capital goods" in the said Rule, which is not there in Rule 57Q, as applicable in the instant case, yet the "user test" evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of "capital goods" would depend upon the user it is put to. 13. Applying the "user test" on the facts in hand, we have no hesitation in holding that the steel plates and M.S.channels, used in the fabrication of chimney would fall within the ambit of "capital goods" as conte....
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....roducts under Chapter 38 Heading 3816.00 of the Schedule to the Central Excise Tariff Act,1985. Magnesite peas have been classified under Heading No.28.20 of the Schedule to the Tariff Act which deal with Manganese Oxides. Heading no.28.20 is under Chapter 28 which deals with inorganic chemicals, organic or inorganic compounds of precious metals, or rare earth metals, of radioactive elements or of isotopes. These three items are used when ingots are manufactured. It is the admitted case that these items are first charged into the furnace as fettling materials. The items dissolve and seal the crevices in the refractory walls of the furnace to prevent leaking of the liquid metal from the furnace and to reduce the erosion of the refractory lining of the furnace. The items lose their identity and are consumed in the process. Some part of the items remains in the liquid metal which forms the ingot and the balance forms part of the residue or slug." It is on the basis of the aforesaid observations, the Court in paragraph 23 concluded as under:- "23. The respondents then argued that steel ingots could be manufactured even without the items. That may be so, but that is immaterial. Th....
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.... paid on goods on which a set off was claimed. The proposition which the Appellant would canvass in relying on this decision is that the Credit Rules are required to be harmoniously construed so as to permit the benefit of the credit of the excise duty to the appellants in discharge of their service tax liability. Reliance is placed on paragraph 15 and 16 of the judgment wherein the Division Bench of this Court speaking through Dr. Justice D.Y.Chandrachud (as His Lordship then was) observed thus:- "15. The White Paper on a State level Value Add Tax published under the aegis of the Empowered Committee of State Finance Ministers on 17 January 2005 took note of the fact that in the existing structure of indirect taxation, the tax regime resulted in a cascading tax burden where inputs are first taxed and after a commodity is produced with an input tax the output is taxed again. VAT was considered as a preferred alternative to rationalize the overall tax burden so as to obviate the cascading effects of indirect taxation. Moreover, VAT was to replace existing systems of inspection by a system of built in self assessment by dealers and auditing, which would make the system simple and t....
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....e decisions as relied upon by the learned ASG for the revenue. (a) In the larger Bench decision of the Tribunal in the case of "Vandana Global Ltd. Vs. Commissioner of C.Ex.Raipur, (2010(253) E.L.T. 440(Tri-LB))" the question was whether the term 'capital goods' can include plant and structures embedded to earth, and whether the goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures can be treated as "inputs" in relation to their final products as inputs for capital goods or none of the above, and whether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant. It was the case of the assessee that structural support should be considered as a part of capital goods and that the definition of 'capital goods' under the Credit rules includes goods falling under Chapters 82, 84, 85 and 90, as well as specified goods such as pollution control equipment, storage tanks etc. and the only condition laid down in the definition is that these should be used in the factory of the manufacturer of the final products. It was further contended by th....
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....ds separately and that since the two terms have been defined in the statute, it cannot be said that commodities covered under one will be included in the other. The revenue relying on the judgment of the Supreme Court in the case of "CCE Vs. Solaris Chemtech Ltd., (2007(214) E.L.T. 481 (S.C.)" contended that considering the wider scope of inputs, the structures which are not connected with the process of manufacture cannot be held to be eligible for credit. After taking into consideration the law laid down by the Supreme Court, it was held that phrases 'capital assets' and 'capital goods' cannot be held to be synonymous and that the arguments on behalf of the assessee that the term 'capital goods' included plants, structures embedded to earth was negatived. It was further held that the foundation and supporting structures are neither machinery items nor components, spares and accessories of machinery, nor that those items have been listed for special inclusion in the definition. The observations of the Larger Bench in paragraphs 41, 42 and 43 of this decision are relevant which read as under:- "41. Keeping in view the scheme of the Act and the Cenvat Cred....
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....ever, it cannot be anyone's case that the table, the TV stand, the TV trolley or the wall should be considered as a part or accessory of the television set. Similarly, the foundation and the supporting structure for a machinery cannot be considered to be part or accessory of the machinery. 42. Additionally, it has been argued on behalf of the Department that the capital goods have to be goods first and that the foundation and the supporting structures being embedded to earth are in the nature of immovable property and are not goods or excisable goods. Not only is the departmental contention well supported by a plethora of case laws, but even by the definition of 'capital goods' in the Cenvat Credit Rules which reads as "the following goods" supplemented with a list of goods that follows. 43. Since the foundation and the supporting structures cannot be considered as capital goods, nor as parts or accessories of capital goods, nor the same have been specifically listed in the definition of capital goods; (as tubes and pipes and storage tank etc. have been specifically listed), the question of treating cement and steel items as inputs for capital goods cannot arise. ....
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....of appellant as the tube mill or welding head having been erected and installed in the premises and embedded to earth they ceased to be goods within meaning of Section 3 of the Act. 6. Learned counsel for the revenue urged that even if the goods were capable of being brought to the market it would attract levy. True, but erection and installation of a plant cannot be held to be excisable goods. If such wide meaning is assigned it would result in bringing in its ambit structures, erections and installations. That surely would not be in consonance with accepted meaning of excisable goods and its exigibility to duty." (emphasis supplied) (c) In the case of "Triveni Engineering & Industries Ltd. & Anr. Vs. Commissioner of Central Excise & Anr., ((2002) 7 Supreme Court Cases 29)". the assessee dealt with the turbo alternator which had two components viz. (I) steam turbine and (ii) complete alternator also called as generator. The assessee manufactured steam turbine in their factories and paid excise duty on them. The assessee however, purchased duty-paid complete alternators which were delivered at the customer's site. By the combination of 'steam turbine' and '....
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.... done either by the appellants or by the customer. Where it was done by the appellants, fabrication materials of the customer were used and the customer sent to the appellants debit notes in regard to their value. Where the assembly and erection was done by the customer', there was no occasion for it to send to the appellants a debit note. The fact that there was no debit note in respect of one customer could not reasonably have led the Tribunal to conclude that in the case of that customer a complete mono vertical crystalliser had left the appellants' factory and that therefore, mono vertical crystallisers were marketable. The Tribunal ought to have remembered that the record showed that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event, marketable as they were." (e) The decision of the Supreme Court in the case of "Commissioner of Central Excise, Indore Vs. Cethar Vessels Ltd. & Ors., ((2009)17 Supreme Court Cases 551)", concerned an issue as to whether the erection of boiler at site by assembling various components and parts has brought into existence immovable property o....
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....ial (such as handling plants) are actually a system or a net work of machines. The system comes into being upon assembly of its component. In such a situation there is no manufacture of 'goods' as it is only a case of assembly of manufactured goods into a system. This cannot be compared to a fabrication where a group of machines themselves may be combined to constitute a new machine which has its own identity/marketability and is dutiable (e.g. a paper making machine assembled at site and fixed to the earth only for the purpose of ensuring vibration free movement) (e) If items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods.........." (f) In the Division Bench's judgment of this Court in the case of "Bharti Tele-Ventures Ltd. and Sunil Bharti Mittal Vs. State of Maharashtra, (2007 Vol.109(1) Bom.L.R. 0595)" the issue was whether the construction of cell sites and erection of towers is included in "building" and/or "development" within the meaning of Maharash....
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....ter place? If the answer is yes to the former it must be a moveable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth. For instance a shop for sale of merchandise or eatables is a structure. The same could be sold by keeping in a push cart which has its mobility from place to place. Merely because it is stationed at a particular place and business was carried on, it cannot be said that push cart is a shop. The fact that no nuts and bolts were used to imbed the tank to the earth by itself is not conclusive. Though the witness stated that the tank is capable of being shifted, as a fact the tanks were never shifted from the places of erection. By scientific process, the tanks stand on their own weight on the earth at the place of erection as a permanent structure. 33. The petroleum products are being stored through pipes and are taken out by mechanical process. The operational mechanisation also though relevant, is not conclusive. The rateable value is based on the rent, which the building or land is capable to fetch. Due to erection of the tanks whether the value of the demised property had app....
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.... or for any purpose which in the opinion of the Commissioner is/are dangerous to life, health and property or likely to create nuisance or for keeping horses, cattle or any animals or birds or for storing articles specified in Part-II of the Eleventh Schedule. I have gone through the Eleventh Schedule carefully; even by extending any entry therein, it is not possible to include such installation of towers therein. As far as requiring licence for the towers for the reason of the Commissioner forming an opinion of the same being dangerous to life, health or property or likely to create nuisance is concerned, neither is there any opinion in this regard nor can it be at this stage said that such installation will fall in the said category. The reliance on Section 430 is misconceived without showing that licence or written permission is needed for such licence. I am thus W.P.(C) 3267, 3423, 439/10, 13476, 13863, 14178, 14199/ 09, 2382, 4084/10 Page 56 of 68 unable to hold that the Commissioner under the Act is empowered to prevent installation of such towers without a licence. 40. I am however firmly of the view that the said towers definitely fall within the definition of building w....
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....ithout the tower, UPS, Cable trays, AC., etc., the BTS would not be in a position to function as transmitting and receiving apparatus. The contention of the assessee that various equipments installed at site were individual machine was rejected. The Commissioner further held that with the assembly of various equipment installed what emerges is a commodity with a distinct name, identity, character and use; distinct from inputs and classifiable under chapter 8525 of Central Excise Tariff and the same is distinct and separate from the various equipments which have gone into manufacture of the above transmission apparatus. The argument that after installation of BTS of cell site it becomes immovable properly was rejected. The statement of Narayan in his statement dated 28/1/2004 was partly relied upon to hold it was not immovable property. 8. The Learned Tribunal re-examining the various aspects of what is described as determination of levy of duty of base station, noted that the appellant is engaged in providing Mobile Telecommunication Service (MTS) and is based on global system for mobile communication (GSM). The infrastructure for GSM is similar to other networks. The Tribunal t....
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....her the activities is purely service and consequently, the appellants are not manufacturers. We proceed on the footing that what has been assembled and installed is a new commodity having a distinct name from the components from which it was assembled. The question is whether this new commodity is marketable. We have already considered the test of marketability as laid down by the Supreme Court in Triveni Engineering & India Ltd. (supra) and also Moti Laminates Pvt. Ltd. (supra). At this stage, we also note that we proceed on the footing by ignoring the second finding of marketability recorded by the Tribunal namely that BTS/BSC is not marketable as licence is required from the Department of Telecommunication, Government of India. The facts on record would indicate that the equipments erected are embedded in the earth or on a building. The Tribunal noted that revenue does not contest or dispute the fact that whenever BTS/BSC site has to be relocated, all the equipments like BTS/BSC, Microwave Equipment, batteries, control panels, air conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reass....
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....n the excise duty paid for the capital goods used in the factory for manufacturing process under Rule 57Q of the Central Excise Rules. In April,1999, the assessee, in order to modernize the manufacturing process of sugar and molasses, has installed new machineries by replacing the old one. However, certain machineries like cane milling plant, clarification plant, evaporator and pan boiling plant, power generation plant etc. which were specified as capital goods in terms of Serial no.2 and 3 of the Table below sub-rule (1) of Rule 57Q of the Rules, required the support of structural items for their installation. In view of this, the assessee started the manufacturing of iron and steel structures, after purchasing excise duty paid iron and steel sheets, angels, nuts and bolts etc. for the installation of the said machineries. Thus, iron and steel structures were classified under sub-heading 7308.90 of Chapter 73 as capital goods and claimed exemption under Notification date 16.3.1995 which exempts capital goods as defined in Rule 57Q of the Rules, manufactured and used within the factory from the excise duty leviable on such goods. The Assistant Commissioner, Central Excise had issue....
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....levator and cooling tower. We can call these machineries as essential items in a sugar manufacturing plant. The assessee also fabricates Iron and Steel Structures for installation of the aforementioned equipments. Even according to learned senior counsel Sri Lakshmikumaran, these Iron and Steel Structures are used for effective functioning of Sugar Manufacturing Plant. Under the Notification, the Central Government had exempted duty in respect of "capital goods", as defined in Rule 57 Q of the Rules if they are utilized in a place where such goods are manufactured and used within the factory of production. The Notification specifically states that what is exempted under the Notification are "capital goods" as defined in Rule 57Q. Rule 57Q specifies five categories of items as capital goods. It is not the case of the assessee or its learned counsel that the exemption claimed was on Items 1 to 4 of the Table to Rule 57Q but as components which would fall under item No.5 of the Table to Rule 57Q. Therefore, in order to get the benefit of non excise duty on Iron and Steel Structures, it had to be established by the assessee that Iron and Steel Structures are utilized as component parts....
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....f the Tribunal." The reliance of the aforesaid judgment on behalf of the Revenue is quite appropriate. The enunciation of law as laid down in the judgment clearly goes to show that the towers are immovable property and non excisable and hence, can neither be regarded capital goods so as to fall within the definition of 'capital goods' appearing in Rule 2(a) of the Credit Rules, nor can be categorized as 'input' applying Rule 2(k) of the Credit Rules. 31. In the light of the aforesaid discussion we examine whether on the rules as they stand the appellants would be entitled to the credit of the duty paid on the item in question on the output service namely the cellular service. We may observe that a plain reading of the definition of 'capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No.6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specified at sub clauses (i) and (ii) which are used either in the factory....
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....nder rule 2(k) includes all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production, and as provided in sub-clause (ii) all goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Explanation (2) of sub-rule (k) is also which provides that input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. A plain reading of the definition of input indicates that in the present context, clause (i) of Rule 2 (k) may not be of relevance as same pertains to manufacturing activity and pertains to goods used in relation t....