TaxTMI 
TaxTMI 
2022 (4) TMI 1361
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.... Act 1994, the Finance Act, has been dismissed. 2. The appellant is a telecom operator and claims to be offering Long Term Evolution-Fourth Generation, LTE 4G wireless telecommunications. For the purpose of rendering such telecommunication services, various monopoles, masts, poles and telecom towers which house the radio transmission and reception equipments such as antennas, routers, switches and electrical utility items like SMPs and battery have been installed by the appellant across the country. Monopoles, masts, poles and telecom towers shall collectively, for the sake of convenience, be called as 'towers', though they are known as separate articles in the market. 3. The dispute in the present appeal is: a) Whether the appellant is justified in availing CENVAT credit of central excise duty paid on towers, doors, racks, fall arrestor system, insulation material etc. as inputs and/or capital goods as defined in rules 2(k) and 2(a) of the CENVAT Credit Rules, 2004, the 2004 Rules during the period from March 2014 to June 2017 for payment of service tax on the telecommunication services provided by the appellant; and b) Whether the appellant is entitled to refund of the said....
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.... notice dated 17.01.2018 alleging that the goods on which CENVAT credit had been availed were neither 'capital goods' nor 'inputs' as defined under the 2004 Rules as they were 'attached to the earth', being immovable structures 'fixed to ground'. The show cause notice also relied on the judgment of the Bombay High Court in Bharti Airtel and alleged that since the said goods were immovable property, credit was not admissible. Accordingly, the show cause notice proposed to reject the refund application. 10. The appellant filed a detail reply dated 07.02.2018 to the aforesaid show cause notice and justified its eligibility to avail credit and also its entitlement to claim refund. 11. The submissions made by the appellant were not accepted and the refund application was rejected by the Assistant Commissioner for the following reasons: (i) Towers and parts thereof are fixed to the earth on installation and become immovable and, therefore, cannot be considered to be goods; (ii) The Bombay High Court in Bharti Airtel and Vodafone India held that telecommunication towers, being immovable in nature, are neither capital goods nor inputs; (iii) Towers, whether fixed on rooftop or land....
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....H 7308 and do not satisfy the conditions stipulated in clauses (i) and (ii) of rule 2(a) (A) of the 2004 Rules so as to be eligible for credit as capital goods; (iii) The towers and their parts are also not components, spares or accessories of capital goods falling under any of the Chapter Headings specified in clause (i) of rule 2(a)(A) of the 2004 Rules; (iv) The Bombay High Court in Bharti Airtel and Vodafone India held that telecommunication towers, being immovable in nature, are neither capital goods nor inputs under the 2004 Rules and consequently credit is not admissible; (v) The judgment of the Supreme Court in Solid & Correct Engineering is not applicable as the plant in that case was fixed at site to a foundation to give stability to the plant and to keep its operation vibration free and that the said plant was moved after completion of the road construction and repair project; and (vi) The judgment of the Delhi High Court in Vodafone Mobile Services would also not be applicable since the judgments of the jurisdictional Bombay High Court in Bharti Airtel and Vodafone India are binding. 14. This appeal has been filed to assail the order dated 30.08.2019 passed by ....
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....ame were to be considered as movable property since, such embedment was not for the beneficial enjoyment of land. The decision of the Delhi High Court in Vodafone Mobile Services is squarely applicable to the facts of the appellant; (vi) The judgments of the Bombay High Court in Bharti Airtel and Vodafone India have also not considered the test of permanency as laid down by the Supreme Court in Solid & Correct Engineering and the eligibility of credit is required to be determined at the time of receipt of the goods; (vii) The show cause notice did not dispute that the towers were used for the provision of output services. The Assistant Commissioner and the Commissioner (Appeals) have also not come to such a conclusion. The only reason that has been assigned is that the Bombay High Court has held in Bharti Airtel that the telecom towers, being immovable, do not qualify as capital goods or inputs. As the towers in the instant case are not immoveable, the judgement of the Bombay High Court in Bharti Airtel would not be applicable for holding that telecom towers do not qualify as inputs and/or capital goods; (viii) Insofar as the credit availed as 'capital goods' to the tune of R....
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....f the appellant that the judgments of the Bombay High Court in Bharti Airtel and Vodafone India would not be applicable since the services provided by the appellant are based on LTE 4G technology, unlike the towers used by the other operators to render services based on 2G/3G technology, is not tenable since the towers used for supporting 2G/3G/4G technology are towers supporting capital goods. In support of this contention, reliance has been placed on the Larger Bench decision of the Tribunal in M/s. Wipro Ltd. v. Commissioner of Central Excise, Bangalore-III 2018 (363) E.L.T. 1111 (Tri. - L.B.); and (vii) Telecommunication towers irrespective of size or location used for support of capital goods for transmitting 2G/3G/4G are neither "capital goods" nor "input" under the 2004 Rules. 17. The submissions advanced by the learned senior counsel for the appellant and the learned authorized representatives of the department have been considered. 18. The appellant has, to support its claim, stated the following facts: (i) The appellant is an all India based telecom operator having a license and spectrum capable of offering LTE 4G wireless telecommunication services and for providin....
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.... pedestal. The size of such foundations depends on soil conditions and they may vary from 5 x 5 x 1.2 metres up to 10 x 10 x 3.5 metres; c. RTT/RTP Mobile Towers - In case of RTT/RTP, three to six pedestals are required on the roof top of a building, comprising four bolts for each leg of the tower/pole attached to the cement concrete foundation. The dimensions of the pedestals ranges from 500 mm x 500 mm x 500 mm upto 700 mm x 700 mm x 700 mm, depending on the structural stability report and arrangement of the walls, columns, beams, floor etc. of the building. (v) As the telecommunication services of the appellant use LTE 4G technology, the average height of the towers is lesser (3 to 18 metres for RTT/RTP and 30 to 60 metres for GBM/GBT) as compared to the towers of other telecom operators in India who used the old 2G/3G technology; (vi) For efficient and smooth transmission and reception of telecommunication signals over maximum area around a tower, transmission and reception equipments of each e-Node B sites are fixed with nuts and bolts on the tower at a specified height in a specified direction and the other accessories are inside the cabinets of the hollow portion of a ....
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....undation simply by bolting nuts to the pedestals or the foundation bolts. The said foundation bolts are already embedded to the foundation while such foundation is being laid; (x) The transmission and reception equipment are classifiable under ETH 8517 and electrical utility items are classifiable under Chapters 84 and 85 of the Excise Tariff Act. Hence, they qualify as 'capital goods' as defined in the 2004 Rules; (xi) The appellant has availed CENVAT credit on such equipment and there is no dispute raised by the department with regard to such CENVAT credit. The appellant has not availed CENVAT credit on materials like cement, sand , gravel, anchor plate, flange, CIP pipes, bolts etc. and services like construction services for making cement concrete foundations of the mobile towers; and (xii) All the goods were used by the appellant for setting up e-Node B sites, including towers, which goods are being used by the appellant for the purpose of providing telecommunication services. It is impossible for the appellant to provide telecommunication services without using the aforesaid goods, as the telecommunication signals of millions of its subscribers cannot be received or tra....
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....refractories and refractory materials; (vi) tubes and pipes and fittings thereof; (vii) storage tank, and (viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis but including dumpers and tippers. used - (1) in the factory of the manufacturer of the final products,; or (1A) xxxxxxxxxxx (2) for providing output service; (B) xxxxxxxxxxxxx (C) xxxxxxxxxxxxx (D) xxxxxxxxxxxxx" 22. 'Input' has been defined in rule 2(k) and the relevant portion is as follows: "2(k) "input" means - (i) all goods used in the factory by the manufacturer of the final product; or (ii) xxxxxxxxx (iii) xxxxxxxxx (iv) all goods used for providing any output service, or; (v) xxxxxxxxx but excludes - (A) xxxxxxxxxx (B) xxxxxxxxxx (C) xxxxxxxxxx (D) xxxxxxxxxx (E) xxxxxxxxxx (F) any goods which have no relationship whatsoever with the manufacture of a final product. Explanation. - xxxxxxxxxx" 23. Rule 3(1) of the 2004 Rules permits a provider of output service to take credit of the excise duties paid on any 'inputs' and 'capital goods'. 24. The first and fundamental issue that needs to be decided in the present ....
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....at the installation and erection of machines at site were held to be by this Court, to be immovable property that ceased to remain movable or marketable as they were at the time of their purchase. Once such a machine is fixed, embedded or assimilated in a permanent structure, the movable character of the machine becomes extinct. The same cannot thereafter be treated as movable so as to be dutiable under the Excise Act. But cases in which there is no assimilation of the machine with the structure permanently, would stand on a different footing. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach 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....
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....roperty of the Company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property." (emphasis supplied) 29. In Mallur Siddeswara Spinning Mills (P) Ltd., the Supreme Court held that mere bolting of machine to a frame from which it can be unbolted and then shifted would not render the machine to be an immoveable property. The observations of the Supreme Court, in this connection, are reproduced below: "2. Briefly stated the facts are as follows :- The Appellants are in the business of spinning cotton yarn. It is claimed that in Salem there is acute power shortage. Thus two generator sets were installed in their factory one on 13th March, 1991 and the second on 15th January, 1992. Show Cause Notice dated 2nd July, 1993 was issued to them claiming duty on manufacture of generating sets. The Collector confirmed the demand for duty holding that there was deliberate suppression of the fact of manufacture of generating sets. The Appeal preferred by the Appellants has been dismissed by the Tribunal by the impugned Judgment. 3...................... 4.................. 5............... 6. It was nex....
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....ation and in fact, were merely attached to the foundation above the ground using nuts and bolts so that no damage was caused to any part of the tower on re-location. The show cause notice does not dispute that the towers were fastened on a foundation above the ground using nuts and bolts, nor does the order passed by the Assistant Commissioner or the Commissioner (Appeals) dispute this factual position. 33. The judgment of the Bombay High Court in Bharti Airtel, it needs to be again noted, proceeded on a footing that the towers in issue were immovable structure and in this connection the relevant paragraphs of the judgment are reproduced below: "25...........However, in the present case the facts are distinct. The towers are admittedly immovable structures and non-marketable and nonexcisable. We therefore, of the clear opinion that this judgment of the Division Bench of Andhra Pradesh High Court is inapplicable in the facts of the present case............." 35.............."Again, the cited judgment does not improve the appellant's case inasmuch as the tower being an admittedly immovable structure cannot be accessory of any kind of instrument. The appellant's admission of th....
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....ything attached to earth. The towers are merely fastened above the ground to a foundation using nuts and bolts. The fastening is, therefore, not permanent, since the towers can be easily unfastened and in fact, according to the appellant, have been moved on a number of occasions without any damage from one location to another. 36. It also needs to be noticed that in Bharti Airtel, the Bombay High Court specifically mentioned that it was not deciding the wider question with respect to eligibility of tower per se but was restricting its conclusions to the facts and circumstances which fell for consideration in the appeal before it. The relevant observations are as follows: "33. ............ We clarify that we are not deciding any wider question but restricting our conclusion to the facts and circumstances which have fell for our consideration in these appeals." 37. In Vodafone India, the Bombay High Court based its judgment on Bharti Airtel. The judgments of the Bombay High Court in Bharti Airtel and Vodafone India were rendered in the context of the admitted factual position that the towers therein were embedded in the earth. However, there is enough evidence in this appeal to c....
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....ally because the attachment is not permanent and what is attached can be easily detached from the foundation. So also, attachment of the tower to the foundation on which it rests would not fall in the third category (attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached), for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the tower is attached. ********* 36. In view of this Court, in the facts of the present case, the permanency test has to be applied, in the context of various objective factors and cannot be confined or pigeonholed to one single test. In the present case, the entire tower and shelter is fabricated in the factories of the respective manufacturers and these are supplied in CKD condition. They are merely fastened to the civil foundation to make it wobble free and ensure stability. They can be unbolted and reassembled without any damage in a new location. The detailed affidavit filed by the assessees demonstrate that installation or assembly of towers and shelters is based on a rudimentary "screwdriver" technology. They can be bolted and unbolted, assembled and ....
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....erein it was in admitted position that the towers were embedded in the earth. 39. The contention of the revenue is that the towers may not per se be immovable property but they become immovable property once they are permanently embedded in the earth in the sense that they are fixed to a foundation embedded in earth. 40. It is settled law that eligibility to credit is required to be determined on the date of receipt of such goods by the assessee and in the form and manner in which the goods are received and not after they have been installed for effective functioning. The question whether the goods are immovable or movable is, therefore, required to be determined when the goods are received by the assessee and not after they are installed. This is what was held by the Delhi High Court in Vodafone Mobile Services and the relevant observations are as follows: "65. The above analysis shows that the definition of 'input' does not contain any condition relating to emergence of immovable property to be ineligible for taking credit. The eligibility of credit must be determined at the time of receipt of the goods in terms of Rule 4(1) of the Credit Rules. Credit cannot be denied so as ....
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....equired, without any damage either to the tower or to any of its components. 43. Since these equipments and goods had suffered central excise duties, the appellant availed CENVAT credit on such goods, either as 'inputs' or as 'capital goods' from March 2014. The description of the goods installed at e-Node B sites, on which credit was availed either as 'inputs' or as 'capital goods', is provided below: Serial No. Description of goods installed at e-Node B sites Tariff Chapter Heading CENVAT Credit claimed in Rs. Primary Function Part I (Inputs) 1. Ground Base Mast (GBM) 7308 1,41,30,75,486 To place telecom transmission/ reception equipment, battery bank, power source equipment 2. Pole/Pipe/RTT 7308 44,91,88,951 To place telecom transmission/ reception equipment 3. Pole Mount 7308 18,60,45,332 To mount antennas 4. Ground Base Tower (GBT) 4008 18,43,66,801 To place telecom transmission/ reception equipment 5. Cabinet 7326 7,67,76,717 To house utilities & telecom electronic equipment like battery bank, power source equipments 6. Clamp 7308 7,41,03,807 To secure wa....
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....the show cause notice indicates that the eligibility to avail credit as inputs was disputed by the department only on the ground that items like "telecom tower which comprises of items like masts, poles, doors, racks, fall arrestor systems, insulation material and outdoor cabinets are attached to earth being immoveable structure fixed to ground." In order to rebut the alternative claim made by the appellant, the show cause notice also alleged that the aforesaid items are not capital goods for the reason that these goods fall under Chapters 72 and 73 of the Excise Tariff Act which is not one of the specified heading in rule 2(a)(A) of the 2004 Rules. Insofar as the CENVAT credit of Rs. 9,49,69,651/- availed by the appellant as capital goods is concerned, the only ground urged in the show cause notice for denying credit is that these goods are immovable in nature, as was held by the Bombay High Court in Bharti Airtel. In respect of these goods, the show cause notice does not dispute that the same are classifiable under specific headings for which CENVAT credit could be availed as capital goods in terms of rule 2(a)(A) of the 2004 Rules. 46. On a perusal of the allegations made in th....
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.... of general use. The said Explanation reads as under: "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 Deform (CTD) bar or Thermo-Mechanically Treated (TMT) bar and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods." 50. Thus, as the telecom towers in the present case are not immoveable property, and since immovability of such towers was the only ground for rejection of the refund claim, it has to be held that all such items on which CENVAT credit was taken as 'inputs' are eligible for credit as inputs. 51. This being the case, there is no need to examine the alternative claim of the appellant that these items could also be covered under the definition of capital goods. 52. Learned authorized representatives of the department also pointed out that the show cause notice had sought to reject the claim for refund on the ground that the issue of admissibility to credit on towers and part thereof had been decided by the Bombay High Court in Bhart....
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.... vs. Union of India 2009 (234) E.L.T. 234, wherein it was held that irrespective of whether or not the amount deposited during the course of investigation was voluntary or otherwise, there is no justification in retaining the amount unless there is an assessment and that in all such cases, the assessee is entitled to claim refund. The relevant observations of the Tribunal are reproduced below: "9. Shri Vipin Jain, ld. Counsel appearing for the appellant has assailed this view by citing a plethora of judgments and decisions of which two judgments, one of the Punjab & Haryana High Court and other of the Madras High Court are directly on the point. The judgment of the Punjab & Haryana High Court in the case of Century Metal Recycling Pvt. Ltd. v. Union of India - 2009 (234) E.L.T. 234 was dealing with a situation where refund was claimed of the amounts deposited in the course of investigation and there was a dispute, as in the present case between the two parties on the question whether such payments had been made voluntarily or under duress. The High Court held that the question whether the payment was voluntary or under coercion was irrelevant and that as long as there was an asse....