TaxTMI 
TaxTMI 
2016 (3) TMI 165
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....(Judicial) is correct for holding that post 2006, wherever appellants are paying service tax under the category of "business Auxiliary Services", or "Business Support Services" for providing passive infrastructure, the appellants are entitled to take Cenvat Credit on towers, pre-fabricated shelters parts thereon etc. in the light of the decision of this Tribunal in the case of GTL Infrastructure Ltd. (supra) and Reliance Infratel Ltd. (supra), or; Member (Technical) is correct in holding that post 2006, wherever appellants are paying service tax under the category of "Business Auxiliary Services", or "Business Support Services" for providing passive infrastructure, the appellants are not entitled to take Cenvat Credit on towers, pre-fabricated shelters parts thereof etc. in the light of the decision in the case of Bharti Airtel Ltd. (supra) b) Whether Member (Judicial) is correct in holding that in Appeal No.ST/777/2009, the appellant is entitled to take Cenvat Credit to the tune of Rs. 2,59,95,327/- on shelters/parts as capital goods wherein the supplier has paid Excise duty on these items by classifying under Chapter 85 of the Central Excise Tariff Act, 1985, or....
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.... the difference of opinion. Before we proceed to analyze the issues referred and calling for resolution by this Larger Bench, in the several appeals including those that are tagged, we dispose of the preliminary objections orally asserted by the learned A.R. 6. Before the Division Bench on 30.7.2015, Learned A.R. conceded the position that the difference of opinion could be referred to a Larger Bench (and not invariably to a third Member), for resolution. This fact is recorded in para 3 of the order dated 30.7.2015. The only contention that was pressed on behalf of Revenue at that hearing was regarding the necessity of tagging the eight appeals (which are not involved in the difference of opinion) for hearing by a Larger Bench. This aspect also stands considered and answered in paragraph 5 of the order dated 30.7.2015. Further the provisions of Section 129 C of the Customs Act, 1962 read with provisions of Section 35 D(1) of the Central Excise Act, 1944 and Section 86(7) of the Finance Act, 1994 clearly inhere a plentitude of power, authority, discretion and concomitant jurisdiction for constitution of Benches of appropriate strength, reference of appeals to such Benches and tag....
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....tters moved by the concerned three respondents in these proceedings involved the same points and which were required to be thrashed out by a Special Bench we do not see any reason for holding that the constitution of a Special Bench by the President for deciding present three matters was an illegal or unjudicious exercise or an exercise based on whims and fancies the President. The Division Bench of the High Court on the facts of this case appears to have been uncharitable to the President of the Tribunal when it observed as aforesaid. It is also difficult for us to appreciate how the High Court could persuade itself to hold that when none of the Benches of the Tribunal had made any reference by judicial order the President of the Income Tax Tribunal was not competent to constitute a Special Bench. As we have already noted above Special Benches can be constituted by the President both in exercise of his administrative powers under Section 255(1) read with Section 255(3) as also on the basis of a judicial order passed by any Bench of the Tribunal making reference to the President in that connection under Regulation 98(A). But it is not as if that such a reference by the members unde....
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....ce of opinion, was pronounced in order dated 30.7.2015. As far as we are advised, the said decision has become final as the same was not reversed by any appellate forum. Pursuant to the order dated 30.7.2015, the President constituted the Larger Bench on 01.09.2015. The composition was thereafter altered since one of the Members of that Bench was transferred to another Regional Bench before effective hearing could take place. 8. For the aforesaid reasons, we reject the preliminary objections. 9. As already mentioned there are two sets of appeals now considered by this Larger Bench. The first one was consequent upon interim order No. 142-154/2015 dated 28/07/2015 referring a difference of opinion between Members of the Division Bench. We take up the issue referred to in the said interim order for decision. Two points for difference of opinion were referred to us. The first one is as below:- "a) Whether, Member (Judicial) is correct for holding that post 2006, wherever appellants are paying service tax under the category of "Business Auxiliary Services", or "Business Support Services" for providing passive infrastructure, the appellants are entitled to take Cenvat cred....
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.... received in the premises of service provider. In the present case, towers and shelters are received in the premises of service providers. Later on when the towers are embedded in earth the eligibility of credit will not change; (iii) credit of input services cannot be denied on the ground of immovability; (iv) Credit in case of pre-fabricated buildings/shelters classified under Chapter 85 would qualify as capital goods. The duty paid documents clearly indicated the classification and, as such, the credit cannot be denied at the recipients end; (v) Towers and shelters would qualify as 'inputs' themselves. This is made as an alternate submission. Rule 2 (k) (ii) defines inputs as "all goods used for providing output services". There is no bar to indicate that goods which do not fall under the category of capital goods would not also qualify as inputs; (vi) Towers and shelters are to be considered as 'accessories' of capital goods. For an item to fall under the category of 'components', 'spares' and 'accessories' it must be either a component or a spare or an accessory and the classification of such item is i....
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....port service" or "business auxiliary service" to telecommunication companies, which in turn provide telecommunication service. The first issue to address is whether the legal principles and ratio applicable to decide such credit availability will be same for both categories of providers namely those who provide telecommunication service [cellular mobile service companies] and those who provide merely infrastructure support by way of taxable service falling under 'business support service' or business auxiliary service. Schematically the position can be shown as below:- The scope of Cenvat credit scheme:- The Cenvat credit scheme as envisaged under Cenvat Credit Rules, 2004 is essentially to avoid cascading effect of taxation i.e. not to levy tax on tax. In other words, tax is sought to be levied on the quantum of value addition at each stage of manufacturing or/and service chain. A manufacturer of dutiable goods or a provider of taxable service can avail credit of duty/tax paid on 'inputs', 'capital goods' or 'input services'. These three terms are defined in the Rules and the credit availability is predicated on fulfillment of conditions mentione....
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....ht to be made now that the Hon'ble High Court had inter-changeably referred to parts, components and accessories which does not reflect the correct scope of these terms. Learned Counsel urged that an 'accessory' is having a different scope than a 'component' or 'a part'. We have examined this aspect as analyzed by the Hon'ble Bombay High Court. The High Court observed that all the three terms - "components", "spares" and "accessories" - used in sub-Clause (A) (iii) of clause (a) of Rule 2 should be understood as standing for movables only. It was held by the Larger Bench of this Tribunal in Vandana Global - 2010 (253) E.L.T. 440 (Tri. - LB) that "capital goods" defined under the Cenvat Credit Rules must be excisable goods. Hence, the Hon'ble High Court concluded that the argument of the learned Counsel with reference to the term 'accessory' cannot be accepted. We further note that the Hon'ble High Court examined the decision of the Hon'ble Supreme Court in CCE, Raipur vs. Rajasthan Spinning & Weaving Mills Ltd. reported in 2010 (255) E.L.T. 481 (S.C.), Saraswati Sugar Mills vs. CCE, Delhi - III reported in 2011 (270) E.L.T. 465 (S....
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....e not capital goods and are also not inputs. The Hon'ble High Court observed that towers are immovable structures and ipso facto non-marketable and non-excisable. 19. On the nature of tower being "goods", learned Counsel argued that the Bombay High Court in Bharti Airtel Ltd. (supra) dealt with an admitted fact of immovability of such towers. In the present appeals no such admission is made by appellants. In fact they are claiming that tower parts in sets are being cleared by the supplier in CKD condition. It was argued that, in modern day technology fabricating a tower at a site, where all components are cut and made to a particular design will involve only a simple integration by bolts and nuts though a base has to be secured to the concrete platform by embedding. The erection at site and embedding the tower in the concrete platform are only for convenience of easy transport. Learned Counsel contended that whether a product or a thing is movable goods or a immovable property is a question of fact. It is submitted that towers in their case are not immovable property and hence continue to be goods for excise purpose. 20. We find here the Hon'ble Bombay High Court whil....
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....red after duty payment by the manufacturer under Chapter 73, which is an excluded chapter for capital goods. As such, there is no movable capital goods which are otherwise eligible for Cenvat credit which are being denied such credit only applying the test of immovability. Tower Parts (MS Channels, Angles etc.) as "Inputs" for availing credit:- An alternate claim has been made by the appellants to allow Cenvat credit paid on structural parts/towers/ shelters treating them as inputs in terms of Rule 2 (k) (ii) which allows credit of all goods used for providing output services. It was argued that there is no bar for goods which do not fall under the category of capital goods to qualify as inputs. Reliance was placed on the Larger Bench decision in Union Carbide India Ltd. vs. CCE, Calcutta - I reported in 1996 (86) E.L.T. 613 (Tribunal). In this ruling, Tribunal considered spare parts of machines to be eligible for credit as inputs under Modvat scheme. In Tata Engineering & Locomotive Co. Ltd. vs. CCE, Pune reported in 1994 (70) E.L.T. 70 (Tribunal), the Tribunal held that credit on the machines which stand excluded is available under input category. We have examined the appellan....
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....lied on decision of Hon'ble Supreme Court in Hyundai Unitech Electrical Transmission Ltd. reported in 2015-VIL-104-SC-CE. In the said case the Hon'ble Supreme Court held that doors and electrical boxes are components and/or parts of wind operated electricity generators. Learned Counsel submitted that towers of wind mill generator stand on a similar footing to the towers now in dispute and these should be considered as parts of overall BTS. We have examined the said decision as well as the Tribunal's decision which was considered by the Supreme Court. It is clear that the Tribunal was considering the scope of terms "wind operated electricity generator, their components and parts thereof". Applying the principle in a Customs case of import of such towers, the Tribunal held the assessee eligible for exemption on such towers as parts. The Tribunal in Customs case Bharat Heavy Electricals Ltd. vs. CC, Chennai reported in 1999 (108) E.L.T. 448 (Tribunal) examined the technical literature of imported wind mill generator/tower to arrive at the decision. Here, it is the assertion of appellants that the tower should be considered as part of BTS. The integrated BTS is never cleare....
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.... to the Tribunal while deciding GTL Infrastructure Ltd. The tower and BTS Cabin are used for providing output service, here business auxiliary/support service but the question is, is there any duty claimed as credit paid on tower or BTS Cabins as installed at site. These items cannot be considered as inputs as they were held to be immovable property. The inputs which suffered duty like MS angles and pre-fabricated shelters, per se, were not used for providing output service. In other words there is a tower and cabin structure erected and embedded before such support service could be provided to the telecom operators. 23. It is necessary to note that before infrastructure companies came into the picture, telecom operators themselves were putting up such infrastructure and using the same to provide telecom service. In other words, in the absence of infrastructure companies as an intermediary, telecom companies themselves created such infrastructure and "provided" such business support service to self. The issue of service tax liability in such situation on business support service is not raised because there are no two persons as a provider or recipient of such service. In a sense....
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....ed earlier in Bharti Airtel Ltd. (supra). 25. In such a situation and in the absence of any material before us to distinguish the said ratio vis-à-vis the fact of the present case we find the ratio of the Hon'ble Bombay High Court as laid down in Bharti Airtel Ltd. (supra) and Vodafone India Ltd. (supra) should be followed. Hence, first point of difference is answered against the appellant and in favour of Revenue. 26. The second point of difference of opinion referred to the Larger Bench is regarding the eligibility of the appellant to the credit on shelters and parts as capital goods. We find that our preceding analysis regarding ineligibility of credit on towers and shelters is equally applicable to the said items. The only reason for claiming the credit on shelters and parts is their classification under Chapter 85. We find that a particular classification of duty paid item by itself does not make the item eligible for Cenvat credit. The eligibility of credit is determined by the provisions of Cenvat Credit Rules. By classifying a product and paying duty under a particular heading, an automatic claim for such credit for that item cannot be made. The eligibility....
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.... paid on telecom towers, shelters and parts for remittance of service tax on the taxable services of, "Business Auxiliary Service" (BAS) or "Support Services of Business or Commerce" (BSS) as the case may be, to telecom service providers, is thus the core issue that falls for our determination. 4. In Bharti Airtel Limited vs. CCE, Pune-III - 2014 (35) STR 865 (Bom.) followed in the decision in Vodafone India Ltd. vs. CCE (Appeal No. 126/2015), the Hon'ble Bombay High Court concluded (in the context of availment of Cenvat credit of duty, paid on towers shelters and parts, by telecom service providers, for remittance of service tax on the rendition of telecom service), that towers and shelters have become immovable property and whether they be treated as components, parts or accessories, credit cannot be availed. 5. In these appeals, ld. Counsel for the several appellants urge that there is a clear distinction between availment of Cenvat credit on towers, shelters and parts by active telecom service providers (as was the case in the rulings of the Bombay High Court in Bharti Airtel Limited and Vodafone India Limited) and the facts in the present batch of appeals, since appe....
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....after erection and installation at the site, by affixture by bolts or foundation plates to concrete foundations. In what circumstances, conditions or factual matrixes plant, equipment or machinery cease to be goods and transmutes to immovable property, we notice a divergence in curial interpretation. 8. In the factual context of towers and shelters owned by active infrastructure service providers, the Mumbai Bench of the Tribunal in Bharti Airtel Limited vs. CST, Pune - 2013 (20) STR 401 (Tri. Mum.) ruled that Cenvat credit could not be availed. This ruling was predicated on the position admitted by appellants therein that towers and shelters are immovable property. This conclusion was upheld by the Hon'ble Bombay High Court in Bharti Airtel Limited vs. CCE, Pune-III - 2014 (35) STR 865 (Bom). In Central Excise Appeal No. 126/2015 in Vodafone India limited and batch, the High Court followed its earlier decision in M/s Bharti Airtel Limited (supra). Cenvat credit was however allowed by the Mumbai Bench of the Tribunal in GTL Infrastructure Limited vs. CST, Mumbai - 2015 (37) STR 577 (Tri. Mum.); in M/s Reliance Infratel Limited vs. CST, in Service tax Appeal Nos. 88497 and 85....
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....ng Works, the decision was rendered on the basis of a contention by the assessees therein that manufacture of parts and components for road and civil construction machinery and equipment, like asphalt drum/ hot mix plants and asphalt paver machines etc. are not excisable to the levy of excise duty since even though the setting up of the plant may amount to manufacture of a plant and the plant may be machinery covered by entry 8474, manufacture of the same would not amount to manufacture of "excisable goods" since such plant or machinery need to be permanently embedded in the earth, and are thus immovable property. Whether annextiation of these goods to the earth by fixation on foundations, for ensuring stability of the plant and avoidance of vibration during operations, transform these goods into immovable property and what constitutes immovable property in the circumstances, was therefore the core issue before the Apex Court. To the extent relevant and material for our discussion, the relevant portion of the analysis by the Supreme Court in Solid & Concrete Engineering Works, is reproduced below: "18. It is not the case of the respondents that plants in question are per s....
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.... category it must be for permanent beneficial enjoyment of that to which the plant is attached. 20. It is nobody's case that the attachment of the plant to the foundation is meant for permanent beneficial enjoyment of either the foundation or the land in which the same is imbedded. 21. In English law the general rule is that what is annexed to the freehold becomes part of the reality under the maxim quidcquid plantatur solo, solo cedit. This maxim, however, has no application in India. Even so, the question whether a chattel is imbedded in the earth so as to become immovable property is decided on the same principles as those which determine what constitutes an annexation to the land in English law. The English law has evolved the twin tests of degree or mode of annexation and the object of annexation. In Wake V. Halt (1883) 8 App Cas 195 Lord Blackburn speaking for the Court of Appeal observed: "The degree and nature of annexation is an important element for consideration; for where a chattel is so annexed that it cannot be removed without great damage to the land, it affords a strong ground for thinking that it was intended to be annexed in perpetui....
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.... affixtures. 24. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be "attached to the earth" within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. 25. We may, at this stage, refer to the decisions of this Court which were relied upon by learned counsel for the parties in support of their respective cases. 26. In Sirpur Paper Mills Ltd. (supra) this Court was dealing with a near similar situation as in the present case. The question there was whether the paper machine as....
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....), the question that fell for consideration was whether a turbo alternator comprising two components (i) steam turbine and (ii) complete alternator and fixing the same on a platform brought about a new dutiable product. The Court held that the process of fixing the same on a platform and aligning them in a specified manner that turbine was nothing but a manufacturing process and a new commodity come into existence in the said process. The machine so manufactured was, however, erected on a platform, specially constructed for that purpose which made the machine immovable in character. The Court declared that while determining whether an article is permanently fastened to anything attached to the earth both the intention as well as the factum of fastening has to be ascertained from the facts and circumstances of each case. The following passage is apposite in this regard: "There can be no doubt that if an article is an immovable property, it cannot be termed as "excisable goods" for purposes of the Act. From a combined reading of the definition of "immovable property" in Section 3 of the Transfer of Property Act, Section 3 (25) of the General Clauses Act, it is evident that in an immo....
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....noted that mono vertical crystallisers are fixed on a solid RCC slab having a load bearing capacity of about 30 tonnes per sq. mt. and are assembled at site with bottom plates, tank coils, drive frames, supports, plates, distance places, cutters, cutter supports, tank ribs, distance plate angles, water tanks, coils, extension pipes, loose bend angles, coil supports, railing stands, intermediate platforms, drive frame railing and flats, oil trough, worm wheels, shafts, housing, stirrer arms and support channels, pipes, floats, heaters, ladders, platforms, etc. The Court noted that the mono vertical crystallisers have to be assembled, erected and attached to the earth on a foundation at the site of the sugar factory and are incapable of being sold to consumers in the market as it is without anything more. Relying upon the decision of this Court in Quality Steel Tubes case (supra), the erection and installation of mono vertical crystallisers was held not dutiable under the Excise Act. This Court observed that the Tribunal ought to have remembered that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundation to the earth and, therefore, were not, i....
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.... it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing, embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty". (emphasis is added). 12. Assessees contend before us that in the facts before us, as in the case of Solid and Correct Engineering Works there is no permanent affixation of towers and the pre-fabricated shelters to the earth, permanently. These are fixed to foundations by nuts and bolts, not with the intention to permanently attach them to the earth or for the beneficial enjoyment thereof, but only since securing these to a foundation is necessary to provide stability and wobble/vibration free operation and to ensure stability. Since affixation of towers and shelters is without the necessary intent of making these a non-temporal part and parcel of the earth to w....
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....hat its earlier decision might have been incongruous with the ratio of the Apex Court's decision in Solid & Correct Engineering Works, it is clearly beyond the province of this Tribunal to embark upon such an exercise, on any grounds, including the per-incuriam principle. 15. On the above analyses, we conclude that the Hon'ble Bombay High Court judgments in Bharti Airtel Limited and Vodafone India Limited, which are directly on the issue of the character of towers and shelters and parts, and held to be immovable property, constitute the binding law, in so far as we are concerned. Since the provision of towers and shelters as infrastructure used in the rendition of an output service is common to both passive and active infrastructure providers, whether of "BAS" or "BSS" in one case and "telecom service" in the other, consequences of the application of the above Hon'ble High Court's rulings, would not be different. 16. I, therefore, agree with the judgment of my ld. brother, the Hon'ble Member (Technical) Shri B. Ravichandran on the issues referred for resolution; and hold that our answers to the issues referred are a fortiori applicable to the appeals tagge....