TaxTMI 
TaxTMI 
2015 (3) TMI 701
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....ct, 1985 (CETA) claiming them to be "Capital Goods". These goods were used in erection/fabrication of Telecom Towers. Telecom Towers are fixed to earth and become an immovable property which are neither chargeable to excise duty nor payment of service tax. These Telecom Towers are used on shareable basis by various Telecom companies for providing Telecom Service for a consideration. The appellant paid service tax under the category of "Business Support Service" for providing passive telecom infrastructure by way of Telecom towers, to various cellular telecom operators. It appeared to Revenue that the said goods are not covered in the ambit of Capital Goods in terms of the definition of "Capital Goods" provided under Rule 2(a)(A) (i) of the Cenvat Credit Rules, 2004 (CCR). Therefore, they were not eligible for CENVAT credit of excise duty paid on such goods claiming them to be "Capital Goods." 2.1. Show Cause Notice was issued which was adjudicated by the Commissioner of Service Tax-II, Mumbai vide Order-in-Original No. 82/ST-II/RS/2013 dated 29.11.2013/4.12.2013/ which disallowed ineligible Cenvat credit of Rs. 43,78,87,988/- for the period 2007-08 to 2010-2011 and ordered for i....
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....24 of the Hon'ble High Court judgment as extracted below: "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 definition of capital goods. 24. The alternate contention of the appellant is therefore that tower is an accessory of antenna and that without towers antennas cannot be installed and as such the antennas cannot function and hence the tower should be treat....
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....) of the Cenvat Credit Rules. According to Ld. Counsel, in their case the situation is different. They are not using towers as inputs for providing Telecommunication Service. According to him the fundamental distinction in their case is that they are not providing Telecommunication Service as output service. They are providing Business Support Service in the form of 'Passive Telecom Infrastructure' on which any telecom operator can install their antennas. Further, that they are making a direct claim for credit on inputs used for providing output services in terms of Rule 2 (k) (ii) of the Rules. 5. The Ld. AR appearing for Revenue emphasized that initially the appellant took Cenvat Credit on goods and termed them as capital goods. But the Chapter Heading of these goods, as declared in their Cenvat register, such as Rack (Chapter heading 7308), Pipes (Chapter Heading 3917), Pre-fabricated Shelter (Chapter Heading 9406) do not fall in the ambit of capital goods as defined in Rule 2 (a) (A). He relied on the case of Bharti Airtel Ltd. (supra) and emphasized that as there is no excise liability on towers, being immoveable property, therefore, no credit is admissible on the i....
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....n 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 output 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 factory of the manufacturer; [but shall not include cement, angles, channels, Centrally Twisted the deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods]; On going through the above said provision of Rule 2(k)(i) ibid we find it deals with manufacturing activity. Admittedly, the appellants are providing output service, therefore, Rule 2k(ii) ibid is relevant to the facts of the case in hand, wherein it has been said that "all goods, except light diesel oil, high....
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....n of the appellant and their client (Operators) is to confer the Operators a right to install active infra network equipment including GSM Antenna and BTS equipment, and to extend and receive, highly specialized technical service, which includes the provision of creation and maintenance of highly controlled artificial temperatures and humidity levels at all times and continuous power supply at the prescribed voltage so as to operate the equipment of the operators, and thus be conducive to the functioning of the Operator's signal transmission for their ultimate consumers. In these circumstances, we hold that appellant are entitled for input service credit on towers and cabin, which have been used by the appellant for providing output service under the category of 'Business Auxiliary Service' in the facts of the case." 7. It is true that the judgment in the case of Bharti Airtel Ltd. (supra) relied upon by Revenue was delivered later. Therefore, it is necessary to examine the issue at hand with reference to the said judgment. The first point for consideration is whether the facts in the two cases are identical. This is important because the Hon'ble High Court concl....
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....the earth and cannot be regarded as essential inputs inasmuch as an antenna can be installed irrespective of tower or one tower can install number of antennas for different service providers and hence, the same cannot be regarded as integral part of the output services as being provided by the appellants." Again, while distinguishing the case of Singh Alloys & Steel Ltd. in par 27 of its judgment the Hon'ble High Court held that : ".................. The tower and parts thereof and PFB cannot be regarded as inputs as defined under Rule 2(k) of the Credit Rules and that they are not integral part of the output services viz. telecommunication services as provided by the appellants. To consider the towers and parts thereof and PFB as inputs would clearly go contrary to the clear reading of Rule 2(k) read with definition of 'excisable goods' as defined in Section 2(d) of the Central Excise Act, 1944". 7.3 It is clear from the above findings that the Hon'ble High Court was examining the issue on a different platform of facts. Hon'ble High Court was concerned with admissibility of CENVAT Credit of duty paid on tower parts for providing telecom services. The t....
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....under any of the chapters or headings of the Central Excise Tariff Schedule as specified in sub-clause (i) of the definition of capital goods. Hence a combined reading of sub-clause (a)(A) (i) and (iii) and sub-rule (2) indicates that only the category of goods in Rule 2(a)(A) falling under clause (i) and (iii) used for providing output services can only qualify as capital goods and none other. Admittedly the goods in question namely the tower and part thereof, the PFB and the printers do not fall within the definition of capital goods and hence the appellants cannot claim the credit of duty paid on these items. Even applying the ratio of the judgments as relied upon by the appellants as observed above the said goods in the present context cannot be classified as capital goods................." Further Hon'ble High Court held "that 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. Tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable a....
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....n for their ultimate consumers. Whereas the Hon'ble High Court, in the case of Bharti Airtel Ltd., was examining a different output service. Before coming to its conclusion the High Court, in para 31 defined the point it would examining as follows: "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." But what we have to examine within the four corners of law is whether Cenvat Credit would be admissible on inputs such as steel, structural, racks etc. which become the basis i.e. input goods for providing Business Support Service under Rule 2(k) (ii) of Cenvat Credit Rules, 2004. 8.1 At this stage, it would be appropriate to refer to the various judgments relied upon the Ld. ASG appearing for Revenue in the Bharti Airtel Ltd. case. The Ld. ASG referred to the case of Vandana Global Ltd. vs. Commissioner of C. Ex., Raipur 2010 (253) E.L.T. 440 (Tri-LB) which held that "Since the foundation and the supporting structures cannot be considered as capital goods, nor as parts or accessories of capital goods....
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....for construction of jetties further used for providing port services, it is noted that in the case of Adani Petronet Port Pvt. Ltd. vs. Commissioner, Ahmedabad (Order No. -M/12912-12-913/2014 dated 17.06.2014) the same Bench stayed recovery in a similar case relying on the case of Sai Sahmita Storages Ltd. (supra). 10. The learned AR contended that decision in Sai Sahmita (supra) be considered per incuriam. We find that Hon'ble Bombay High Court in the case of Bharti Airtel Ltd. found the Sai Sahmita distinguishable on facts and did not agree with the judgment on merits. We have explained above how the present case is based on similar circumstances as Sai Sahmita. 11. We find that the appellant is solely emphasizing on the provisions of Rule 2(k) (ii) which 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 along with the fi....