TaxTMI 
TaxTMI 
2024 (11) TMI 1042
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.... Dutt Tyagi, AOR Mr. Arvind P. Datar, Sr. Adv. Mr. Tarun Gulati, Sr. Adv. Mr. Kumar Visalaksh, Adv. Mr. Udit Jain, Adv. Mr. Pranav Bansal, Adv. Mr. Mahfooz Ahsan Nazki, AOR Mr. Harish N. Salve, Sr. Adv. Ms. Anuradha Dutt, Adv. Mr. Tushar Jarwal, Adv. Mr. Rahul Sateeja, Adv. Mr. Vikrant A. Maheshwari, Adv. Mr. Raghav Dutt, Adv. Ms. Pakhi Jain, Adv. Ms. B. Vijayalakshmi Menon, AOR Mr. Mahesh Agarwal, Adv. Mr. Rishi Agrawala, Adv. Ms. Sayaree Basu Mallik, Adv. Mr. Abhinabh Garg, Adv. Mr. E. C. Agrawala, AOR Mr. Arvind P. Datar, Sr. Adv. Mr. Tarun Gulati, Sr. Adv. Mr. Kumar Visalaksh, Adv. Mr. Udit Jain, Adv. Mr. Pranav Bansal, Adv. Mr. M. P. Devanath, AOR Mr. Sarad Kumar Singhania, Adv. Ms. Rashmi Singhania, AOR Mr. Yash Singhania, Adv. Mr. B. Krishna Prasad, AOR Mr. Gurmeet Singh Makker, AOR Mr. Puneet Agarwal, Adv. Mr. Yuvraj Singh, Adv. Ms. Shruti Garg, Adv. Mr. Amrendra Kumar Singh, Adv. Mr. Chetan Kumar Shukla, Adv. Mr. Santosh Kumar, AOR Mr. Rahul Bhatt, Adv. Ms. Hemlat Rawat, Adv. Mr. Harish N Salve, Sr. Adv. Mr. K. R. Sasiprabhu, AOR Mr. Vipin Jain, Adv. Ms. Shilpa Balani, Adv. Mr. Vappangi Sai Varaprasad, Adv. Mr. Bhavuk Agarwal, Adv. Mr. Raghav Shankar, Adv. Mr. Vishnu Sharm....
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....ces Ltd. vs. Commissioner of Central Service Tax) and CA No.1078 of 2016 (Tata Teleservices Maharashtra Ltd. v. Commissioner of Central Service Tax) have been filed before this Court; (iii) Central Excise Appeal No.159 of 2015, out of which CA No.5112 of 2021 (Idea Cellular Ltd. vs. Commissioner of Service Tax) has arisen; (iv) Central Excise Appeal No.1 of 2016, Central Excise Appeal No.2 of 2016, Central Excise Appeal No.4 of 2016, Central Excise Appeal No.6 of 2016, Central Excise Appeal No.7 of 2016 which have been challenged in CA No.1201 of 2018 (Reliance Communications v. Commissioner of Service Tax), CA No.1205/2018 (Reliance Communications v. Commissioner of Service Tax), CA No.1203 of 2018 (Reliance Communications v. Commissioner of Service Tax), CA No.1204 of 2018 (Reliance Communications v. Commissioner of Service Tax) and the CA No.1202 of 2018 (Reliance Communications v. Commissioner of Service Tax); (v) Central Excise Appeal No.7 of 2017 rendered on 02.04.2018 which has been challenged in CA No.5832 of 2018 (M/s Reliance Communication Infrastructure v. Commissioner of Service Tax, Mumbai). 1.3 The Delhi High Court in the case of Vodafone....
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....e handset, which is a radio equipment, performs the signal processing function of digitizing, encoding, error protecting, encrypting and modulating to transmitted signals. When it receives signals from other mobile stations, it performs the inverse functions. The mobile handset sends a signal, an electromagnetic wave, which is a modulated version of the user's voice or data. The signal emanating from the handset is received by the antenna mounted on the tower. Thereafter, the signal received by the antenna is sent through cables to the Base Station Sub-system (BSS). BSS is a set of base station equipment like Base Transceiver Station (BTS) and Base Station Controller (BSC). BSC essentially controls one or more BTS or BS. Base Transceiver Station (BTS) housed at the base of the tower is kept in secured and safe conditions in the prefabricated house or building (PFB). The BTS then converts the electromagnetic signal into a digital format that can be processed by the network. The processed signal is then transmitted to the mobile switching centre (MSC). The MSC then routes the calls or data to the destination through another tower or series of towers and by a reverse process of conver....
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....lusions. 7. Before we proceed to examine the decisions of the two High Courts, it may be apposite to refer to the relevant provisions of the CENVAT Rules as the issues dealt with by the two High Courts and before us are to be examined in the light of the provisions of the CENVAT Rules. 7.1 Rule 3(1) of the CENVAT Credit Rules, 2004 enables a provider of taxable service to claim CENVAT credit paid on any "capital goods" or "input" received in the premises of the service provider. As to what are "capital goods" and "input" have been defined under Rule 2(a)(A) and the Rule 2(k) of the CENVAT Rules. Consequently, if the mobile towers and prefabricated buildings, which are the items in issue here, qualify as "capital goods" or "inputs" received in the premises of the mobile service provider, the mobile service provider will be entitled to claim CENVAT credit which can be further used for paying service tax for the output services rendered by the mobile service provider. 7.2 While Rule 3(1) is the enabling provision for taking CENVAT credit, Rule (4) provides that the CENVAT credit in respect of "inputs" may be taken immediately on receipt of inputs in the factory of the manufac....
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....ucer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to the CENVAT credit) of - (i) the duty of excise specified in the First Schedule to the Tarrif Act, leviable under the Excise Act: ....................................................... paid on - (i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of out service on or after the 10th day of September, 2004; and (ii) any output service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004. (2) ................ (3) ................ (4) ................. (5) CENVAT credit may be utilized for payment of - (a) any duty of excise of any final product; or (b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed; or (c) an amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or (d) an amount under sub-rule (2) of rule 16....
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....ries of "capital goods" as specified in sub-clauses (i) and (ii) of Rule 2(a)(A) within the meaning of Rule 2(a)(A)(iii). Consequently, the Revenue sought not only the recovery of wrongfully claimed CENVAT credit but also imposed penalty and interests on account of misstatement of ineligible claim. 9.2 As regards prefabricated buildings (PFBs), it was alleged that these are used as shelter for protecting transmission devices etc. and not for providing output service i.e. telecommunication service and hence, cannot be considered "capital goods" within the meaning of Rule 2(a)(A). Further, it was also alleged that these cannot be said to be "inputs" for providing mobile service within the meaning of Rule 2(k). 9.3 The response of the Assessee in respect of the said show cause notice was that towers and parts of towers are "capital goods" and "inputs" for which CENVAT credit is admissible for the output service rendered by the Assessee. 9.4 In regard to the prefabricated buildings (PFBs), the Assessee explained that these are also eligible for CENVAT credit as "capital goods" and in any case as "inputs" for providing mobile telecom service to the subscribers. It was conten....
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....ded that since it is through these items including the prefabricated building that the mobile telephone service is provided as an output to the subscribers, these articles, including the prefabricated shelters/buildings will be eligible for CENVAT input credit. 9.8 The Revenue rejected the aforesaid pleas of the Assessee by holding that various goods/items like tower, antenna, prefabricated building (PFB) etc. have independent and definite functions and cannot be treated as a single integrated unit and accordingly, these items/goods cannot be treated as capital goods and CENVAT credit cannot be allowed. The Revenue held that only equipment like BTS, transmitter, antenna which are used in providing telecom service and which are covered under various Chapters under Rule 2(a)(A) are eligible for CENVAT credit vide order dated 19.12.2006 of the Commissioner of Excise/Revenue. 9.9 Being aggrieved by the aforesaid order of the Commissioner, the Assessee approached the Customs Excise and Service Tax Appellate Tribunal (CESTAT) by filing Appeal No. ST/49/2007 challenging the order dated 19.12.2006. 9.10 It may be noted that after the Commissioner, Excise/Revenue rejected the plea ....
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.... not "capital goods" within the meaning under Rule 2(a)(A) of the CENVAT Rules, since these are immovable property. (ii) That these goods are not the components/accessories of antenna within the meaning of Rule 2(a)(A)(iii). (iii) That these goods are not "inputs" within the meaning of Rule 2(k). In considering the aforesaid aspects the Bombay High Court analysed the relevant provisions of CENVAT Rules, as to what amounts to "capital goods" and "input" and also the provisions of Rule 3 which provides for credit on excise duty paid in discharging liability towards service tax. 9.14 The Bombay High Court, after considering the definition clauses in the CENVAT Rules, took the view that the goods in question i.e. tower and parts thereof which are fastened and fixed to the earth after their erection become immovable properties and therefore, these cannot be goods and hence not "capital goods" within the meaning of the CENVAT Rules. The Bombay High Court also took the view that the tower and parts thereof in the CKD or SKD condition, would fall under Chapter Heading 7308 of the Central Excise Tariff Act, but the aforesaid heading is not specified either in clause ....
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.... 1963 SCC Online Guj 84:(1965) 16 STC 380 (Guj). (ii) Board of Revenue v. Phelps & Co. (P) Ltd., (1972) 4 SCC 121. (iii) J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO, AIR 1965 SC 1310. (iv) Indus Towers Ltd. v. CTO, 2012 SCC Online AP 628: (2012) 52 VST 447 (AP). (v) Collector of C.E. v. Jay Engineering Works Ltd., 1989 Supp (1) SCC 128. (vi) Banco Products (India) Ltd. v. Commissioner of C. Ex., Vadodara-I, 2009 SCC OnLine CESTAT 1043. (vii) Singh Alloys and Steel Ltd. v. Assistant Collector of Central Excise, 1993 SCC OnLine Cal 441 The Bombay High Court, however, did not find the aforesaid decisions applicable to the present case. 9.16.3 The Bombay High Court then proceeded to examine the alternate plea of the Assessee that the tower is an accessory of antenna and without towers, antenna cannot be installed and hence it cannot function, and therefore, tower should be treated as a part or component or accessory of the antenna. The contention of the Assessee was that the antenna falls under Chapter 85 of the Schedule to the Central Excise Tariff Act and is thus "capital good" within the meaning of Rule 2(a)(A)(i) and (ii....
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....vice provider. 9.17.1 In support of the contentions, the Revenue cited a number of judgments before the Bombay High Court, some of which are referred as below: (i) Vandana Global Ltd. v. Commissioner of Central Excise, Raipur, 2010 (253) E.L.T. 440 (Tri.-LB). (ii) Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, (1995) 2 SCC 372. (iii) Triveni Engineering & Industries Ltd. & Anr v. Commissioner of Central Excise, (2000) 7 SCC 29. (iv) Mittal Engineering Works (P) Ltd. v. Collector of Central Excise, Meerut (1997) 1 SCC 203. (v) Commissioner of Central Excise, Indore v. Cethar Vessels Ltd. & Ors., (2009) 17 SCC 551. (vi) Municipal Corporation of Greater Bombay v. Indian Oil Corporation, 1991 Supp (2) SCC 18. (vii) Cellular Operators Association of India & Ors. V. Municipal Corporation of Delhi etc., 2011 SCC OnLine Del 2003. (viii) Collector of Central Excise v. Hutchison Max Telecom P. Ltd., 2007 SCC OnLine Bom 702. (xi) Saraswati Sugar Mills v. Commissioner of central Excise, Delhi-III, (2014) 15 SCC 625). 9.18. The Bombay High Court after analysing the facts of the present case, in ....
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....al Excise Tariff Schedule as specified in sub-clause (i) of the definition of "capital goods". Thus they are not covered by sub-clause (iii) of Rule 2(a)(A). 9.22 The Bombay High Court repelled the contention of the Assessee that tower is an accessory of antenna and without tower, antenna cannot be installed and as such the antenna cannot function and that the tower should be treated as a part of antenna. The Bombay High Court held that towers are structures fastened to the earth on which antennas are installed and, hence, cannot be considered to be an accessory or part of the antenna. 9.23 The Bombay High Court also held that these items cannot be considered to be "inputs" within the meaning of Rule 2(k) of the CENVAT Rules as the Assessee is a service provider and not a manufacturer of capital goods. Further since tower and PFBs are in the nature of immovable, non-marketable and non-excisable goods, these cannot be classified as "inputs" to fall within the definition Rule 2(k) of the CENVAT Rules. 9.24 In view of the aforesaid conclusions arrived by the Bombay High Court, it was held that the subject items are neither "capital goods" under Rule 2(a)(A) nor "inputs"....
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....using electrical equipment i.e. transformers/batteries/stabilizers, rectifiers etc. which are necessary to enable the antenna to provide uninterrupted signals. The aforesaid configuration is supported by a Diesel Generating Set (Genset) to be used as a backup source of electricity supply in case of failure of the main power supply. It was contended that since BTS as a whole is to be treated as a single integrated system which is classified under Chapter Heading 85.25 of CETA, and thus, BTS being an eligible "capital good", the parts thereof i.e., the towers and other accessories are also eligible for credit under Rule 2(a)(A)(iii). 10.6 The Commissioner, however, did not agree with the aforesaid contention that these items form a composite integrated system classifiable under Chapter 85.25 of CETA and held that these goods had independent functions and could not be classified as a single unit. It was the view of the Revenue that all capital goods are not eligible for credit but only those which are used for providing output service would be eligible for credit. Thus, only telecom equipment like BTS, transmitters which are used for providing telecom services alone would be eligib....
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....22; Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad, (1998) 1 SCC 400; Narne Tulaman Manufacturers Pvt. Ltd. Hyderabad v. Collector of Central Excise, Hyderabad, 1989 (1) SCC 172; Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, U.P. (1995) 2 SCC 372 1995 and Mittal Engineering Works (P) Ltd. v. Collector of Central Excise, Meerut, (1997) 1 SCC 203; Triveni Engineering & Indus Ltd. v Commissioner of Central Excise, (2000) 7 SCC 29 and other decisions rendered by the Delhi High Court, and applied the permanency test to come to the definitive finding that the entire tower and shelter are fabricated in the factories of the respective manufacturers and thereafter, are supplied in CKD condition to the mobile service providers. It was held that these are merely fastened to the civil foundation to make these wobble free and stable. It was also held that tower and PFB can be unbolted and reassembled without any damage and relocated to a new site. These are thus not permanently annexed to the earth for the beneficial enjoyment of the land of the owner as observed in para 37 of the decision of the Delhi High Court which is reproduced below: "37. On an a....
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....good" being BTS and the antenna. The Antenna which receives and transmits signals and used for providing output mobile service cannot be installed high above the ground without the tower. 10.9.6 It was also held that BTS is an integrated system which includes antenna, and each component in the BTS has to work in tandem to provide cellular connectivity to phone users to provide efficient services. 10.9.7 Further, it was held that the tower is part of the active infrastructure as the antenna cannot be placed at the appropriate altitude to generate uninterrupted frequency without the support of the tower and the PFBs are accessories for the placement of various BTS equipment and other items for these to remain in a dust-free environment with ambient temperature. 10.9.8 The Delhi High Court then concluded that tower and PFB/Shelter support the BTS for effective transmission of mobile signals and therefore, enhance the efficiency of BTS and antenna. The towers and shelters, therefore, act as components and parts and in alternative as accessories to the BTS and antenna and thus are covered by the definition of "capital goods". 10.9.9 The Delhi High Court accordingly found fau....
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....ndus Towers Ltd. vs. CTU, Hyderabad, 2012 SCC OnLine AP 628 which held that towers and shelters are indeed used and are integrally connected to the rendition of telecommunication services. The channels, which according to the Assessee, were in fact towers, shelters and accessories, were bought and brought to the site in CKD/SKD condition and put to use for mounting/installing telecommunication antenna and other equipment for providing output telecom services. However, the Revenue contended that these goods were used for assembling towers and shelters and do not fall within the definition of Rule 2(a)(A) i.e. "capital goods" and that these are items falling under Chapter 73 and the same is not included in Rule 2(a)(A) of the CENVAT Rules. 10.9.14 The Delhi High Court accepted the plea of the Assessee by invoking the nexus test as enunciated in Collector of Central Excise vs. Hyundai Unitech Electrical Transmission Ltd. (2015) 17 SCC 181 and took the view that MS angles and channels have gone into making towers and shelters which in turn are used for providing infra-support services/telecom services and hence are amenable to CENVAT credit. 10.9.15 Coming to the fourth question ....
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....e on the premise that the towers, on erection, resulted in an immovable property is erroneous and contrary to the judgment of this Court in the case of Solid and Correct Engineering (supra). The towers which are received in CKD condition are re-assembled and erected at the site, subsequently giving rise to a structure that remains immovable so long it is used for the reason of safety, stability and commercial reasons of use. 10.9.20 The Delhi High Court clarified that entitlement of CENVAT credit is determined at the time of receipt of the goods and the fact that such goods are later on fixed/fastened to the earth for use would not make them non-excisable commodities when received. 10.9.21 As regards the fifth question as to whether emergence of immovable structure at an intermediate stage will be a ground for denial of CENVAT credit, the Delhi High Court held that in view of the decision in Solid and Correct Engineering (supra), even if, in the intermediate stage, an immovable structure emerges, it is of no consequence in as much as entitlement of CENVAT credit is to be determined at the time of the receipt of goods and not at a later stage. It was held that if the goods tha....
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....ce eligible for CENVAT credit. Analysis by this Court : 11. From the above discussion, what is evident is that the entire controversy revolves around the core issue as to whether the mobile service providers (MSPs) are entitled to claim CENVAT credit on excise duties paid on mobile tower, its parts thereof and prefabricated buildings (PFBs) in terms of the Rule 3 of the CENVAT Rules and whether the credit so claimed can be used to pay service tax for the output services rendered by the MSPs. 11.1 As discussed above, Rule 3(1) of the CENVAT Rules enables a provider of taxable service to claim CENVAT credit on duties paid on any "capital goods" or "input" received in the premises of the service provider. Thus, if the mobile towers and prefabricated buildings, which are the items in issue here, qualify as "capital goods" or "inputs" received in the premises of the mobile service provider, the mobile service provider will be entitled to claim CENVAT credit which can be further used for paying service tax for the output services rendered by the mobile service provider. 11.2 In the light of the provisions of the CENVAT Rules, if it is held that towers and/or parts thereof and....
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....Section 2(22): goods includes-(a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of movable property. (v) Competition Act, 2002 Section 2(i): "goods" means goods as defined in the Sale of Goods Act, 1930 (8 of 1930) and includes- (A) products manufactured, processed or mined; (B) debentures, stocks and shares after allotment; (C) in relation to goods supplied, distributed or controlled in India, goods imported into India. (vi) The Motor Vehicles Act, 1988 Section 2(13): "goods" includes live-stock, and anything (other than equipment ordinarily used with the vehicle) carried by a vehicle except living persons, but does not include luggage or personal effects carried in a motor car or in a trailer attached to a motor car or the personal luggage of passengers travelling in the vehicle. (vii) The Micro, Small And Medium Enterprises Development Act, 2006 Section 2(f): "goods" means every kind of movable property other than actionable claims and money. (viii) The Bureau of Indian Standards Act, 2016 Section ....
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.... of the Sale of Goods Act, 1930 and hence may qualify as "capital goods" within the meaning of Rule 2(a)(A) subject to fulfilling other conditions mentioned therein. 11.3.3 As to what is immovable property has been explained under Section 3 of the Transfer of Property Act, 1882 which specifies that "immovable property does not include standing timber, growing crops or grass". 11.3.4 It has been also defined under Section 3(26) of the General Clauses Act, though not exhaustively, but in an inclusive manner by providing that "immovable property" shall include "land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth". 11.3.5 Therefore, we have to consider whether these items are attached to the earth or are permanently fastened to anything attached to the earth, for if these are found to be so, these will be immovable properties and hence cannot be "goods" and consequently, cannot be "capital goods" within the scope of the CENVAT Rules. 11.4 As to what amounts to "attached to earth" as mentioned under Section 3(26) of the General Clauses Act, has been explained under Section 3 of the Transfer of Proper....
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....utory provisions has applied certain principles. It has also been noted that such determination may be done not based on a single test but after applying several criteria on the facts of each case. We will now refer to some of the decisions relied upon by the contesting parts. 11.7.1 This Court, in Solid and Correct Engineering (supra), applied the intendment and functionality test to determine whether any article is movable or immovable. The issue in the said case was whether the asphalt drum/hot mix plant, though apparently appearing to be immovable and fixed to the structure embedded to the earth, can be considered to be movable. After examining the expression "attached to the earth" as mentioned in Section 3 of the Transfer of Property Act, the observations of this Court were as follows: "25. It is evident from the above that the expression "attached to the earth" has three distinct dimensions viz. (a) rooted in the earth as in the case of trees and shrubs, (b) imbedded in the earth as in the case of walls or buildings, or (c) attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached. Attachment of the plant in question w....
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....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. 44. 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 be immune f....
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....nction between a turbo alternator and its components. Thus, in our view, the test of permanency fails." As regards marketability it was held as follows : - "21. The marketability test requires that the goods as such should be in a position to be taken to the market and sold and from the above findings it follows that to take it to the market the turbo alternator has to be separated into its components - turbine and the other alternator - but then it would not remain turbo alternator, therefore, the test is incorrectly applied. Though, there is no finding that without fixing to the platform such turbo alternator would not be functional, it is obvious that when without fixing, it does not come into being, it can hardly be functional." 11.7.6 In the case of Sirpur Paper Mills Ltd. (supra), this Court again applied the test of marketability. The issue which arose for consideration in the said case was whether paper machines assembled at site were liable for duties under the Excise Act. It was the plea of the Assessee that since the machine was embedded in concrete base, it became an immovable property though embedding was for providing a wobble-free operation of the mach....
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....n the case 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". 11.7.8 The test of marketability was also applied in the case of Mittal Engg. Works (P) Ptd. (supra). 11.7.9 Much reliance was placed by the Revenue on the T.T.G. Industries Ltd. (supra) in which this Court, by relying on the permanency test as also applied in the Municipal Corporation of Greater Bombay (supra) held that if the article cannot be shifted without first being dismantled and thereafter re-erected at another site, it cannot be considered to be a movable property but an immovable property. In the aforesaid case, the machinery was erected at the site on a specially made concrete floor at a very high level of 25 feet from the ground level and the sheer weight, even without being fastened by nuts and bolts, rendered it incapable of being shifted to another site without dismantling and re-erecting. Given these facts, this Court held that it can be said to be immovable property. In Municipal Corporation of Greater Bombay (supra) this Court observed as follows: "32.....
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....oned till such time as they are worn out or discarded. According to him they really become a component of the plant and machinery because without their aid a blast furnace cannot operate. It is not necessary for us to express any opinion as to whether the mudgun and the drilling machines are really a component of the plant and machinery of the steel plant, but we are satisfied that having regard to the manner in which these machines are erected and installed upon concrete structures, they do not answer the description of "goods" within the meaning of the term in the Excise Act." It may be noted that while this Court invoked permanency test in T.T.G. Industries Ltd. (supra), what was also observed was that if the machinery cannot be shifted and re-erected without dismantling, it would show that it is an immovable property. 11.7.11 In the present case, while mobile tower cannot be shifted to another location without dismantling it, it is to be noted that mobile tower itself was bought and brought in a completely knocked-down (CKD) or semi-knocked-down (SKD) condition and it was erected and installed at the site after assembling the parts. If the said mobile tower is to be shift....
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....ms and components are embedded in the earth. Therefore, the structure would not be considered as movable. 11.7.15 Therefore, the finding of the CESTAT is that even though the tower can be relocated to another site, it would entail damages to it. 11.7.16 There can no dispute that if the newly set up BTS/BSC is relocated to another site it may entail certain damages. However, what is important to be noted is that the damage is qua the BTS/BSC or cables connecting the various components, but not the tower itself or PFB with which we are concerned. If the tower or the PFB can be dismantled and relocated in another site without causing any damage to either the tower or PFB, the mobility or the marketability of these items is retained. Thus, as far as the tower and PFBs are concerned, these exhibit the character of a movable property. 11.8 In view of the above decisions, we are of the opinion that merely because certain articles are attached to the earth, it does not ipso facto render these immovable properties. If such attachment to earth is not intended to be permanent but for providing support to the goods concerned and make their functioning more effective, and if such items....
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....earth, as in the case of walls or buildings; or (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached: 11.9.2 The present items in issue are not the ones which are rooted in the earth as in the case of trees and shrubs [sub-clause (a)]. Therefore, the next consideration will be whether these are embedded in the earth, as in the case of walls or buildings [sub-clause (b)], or whether these are attached to what is so embedded for the permanent beneficial enjoyment of that to which these are attached to the earth [sub-clause (c)]. The attachment of tower to the earth/building, however, does not partake of the character of walls or buildings imbedded in the earth. 11.9.3 It is on the tower that the antennas are mounted and affixed at proper height, to make these stable. Since the antennas are used for receiving and sending radio signals, these need to be attached at a certain height, and these are required to be stable and wobble-free. It is not in dispute that the mobile tower is attached and fastened to the earth or building to provide stability to the same and to make antennas unshakable due to wind, rain o....
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....ut to make it stable for effective functioning of the antenna for seamless rendering of mobile services by the service provider to the consumers/subscribers. Same is the case with prefabricated buildings (PFB). 11.9.7 If we thus apply the functionality test, it can be stated that the attachment of tower to the earth /building is not for the benefit of the land or the building but for better functioning of the antenna which is fixed on the tower. Thus, based on functionality test it can be said that tower is a movable property, as also held in Municipal Corporation of Greater Bombay (supra). 11.9.8 These items are not embedded in the earth as in the case of walls or buildings so as to fall under clause (b) of the definition of "attached to the earth" as provided under Section 3 of the Transfer of Property of Act. Neither do these items fall under clause (c) of the definition of "attached to the earth" and nor are these intended to be for permanent beneficial enjoyment of the building or land to which these are attached. In this regard, it may be apposite herein to mention what was stated in Solid & Correct Engg. Works (supra) as follows:- "25. It is evident from....
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....ilding for enhancing the operational efficacy and proper functioning of the antenna which is fixed on the tower by making it stable and wobble free. The fact that the tower, if required can be removed, dismantled in the CKD and SKD and sold in the market is not disputed. Application of the tests evolved and discussed above on these items clearly points to the movability as opposed to immovability of these items. We are, thus, of the view that mobile towers and PFBs are movable properties and hence, "goods". 11.9.10 What we have also noticed is that the Bombay High Court has held that since the towers and parts thereof are fastened and fixed to the earth and after their erection, they become immovable, and therefore, these cannot be classified as goods. While this conclusion is based on the classic definition of immovable property based on one criterion, as noticed earlier, that may not be the sole consideration to determine whether a property is immovable or movable. Even if the property is embedded to the earth and appears ex-facie immovable, if there are other indicators which show the characteristics of a movable property, as for instance, susceptibility to removal of t....
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....brought and sold in the market - a test which is too well established by a series of decisions of this Court to be elaborated here. 14. 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 immovable property there is neither mobility nor marketability as understood in the excise law. Whether an article is permanently fastened to anything attached to the earth requires determination of both the intention as well as the factum of fastening to anything attached to the earth. And this has to be ascertained from the facts and circumstances of each case." 11.9.14 Hence, it is to be noted that the tower, though appears to be fastened to the earth, cannot be said to be permanently fastened to the earth or a building for the beneficial enjoyment of the land or the building. The tower possesses the characteristics of mobility as the same can be dismantled and relocated to another place or site. Therefore, in our opinion, t....
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....lation 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. 11.9.16 The Revenue has also relied on the decision in Mittal Engineering Works (P) Ltd. (supra) by referring to paras 9 and 10 of the said judgment which are reproduced as below: "9. Upon the material placed upon record and referred to above, we are in no doubt that the mono vertical crystalliser has to be assembled, erected and attached to the earth by a foundation at the site of the sugar factory. It is not capable of being sold as it is, without anything more. As was stated by this Court in the case of Quality Steel Tubes (P) Ltd. [(1995) 2 SCC 372] the erection and installation of a plant is not excisable. To so hold would, impermissibly, bring into the net of excise duty all manner of plants and installations. 10. The Tribunal took an unreasonable view of the evidence. It was the case of the appellants, not disputed by the Revenue, that mono vertical crystallisers were delivered t....
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....rs. 11.9.20 We are of the considered opinion that though the Revenue/ Department may issue any such circular based on their understanding of the matter and the Revenue authorities/officers are bound to follow it, yet, in view of the findings arrived at by us in these proceedings, the said circular would be of no avail and to the extent the same is contrary to our findings in these proceedings would not be enforceable and would be liable to be withdrawn. 11.9.21 In Commissioner of Central Excise, Bolpur Vs. M/s Ratan Melting & Wire Industries, (2008) 14 SCR 653, it was held that, "6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are n....
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.... 11.10.1 However, it may be noted that neither tower nor prefabricated shelter/building (PFB) finds mention under any of the Chapters/Heading specified under sub-clause (i), nor these are pollution control equipment to fall within sub-clause (ii). Hence, these items on their own cannot be said to be "capital goods" within the meaning of sub-clause (i) and (ii) of Rule 2(a)(A). 11.11 However, it is to be noted that it has been provided under subclause (iii) that components, spares and accessories of goods specified in sub-clause (i) and sub-clause (ii) will also be treated as "capital goods" if used for providing output service within the meaning of CENVAT Rules. Therefore, we have to examine whether towers and PFBs which on their own are not "capital goods" within the scope of either of the sub-clauses (i) and (ii) can be considered to be "capital goods" under sub-clause (iii) by virtue of being accessories of any of the "capital goods" mentioned under sub-clauses (i) and (ii) of Rule 2(a)(A). 11.11.1 It is also not the case of the Assessees before us that mobile towers and PFBs are goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 68.02 and su....
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....of some other items can be said to be accessory of that other thing and it may or may not be essential for functioning of main machinery. Seen from the above perspective what is evident is that the tower is a structure fixed to the earth or building on which microwave antenna is fastened to provide the necessary height and stability to the antenna by making it steady and wobble free. The function of antenna as part of the BTS is to receive and transmit radio signal and is used for providing mobile telecom service to the subscribers. The tower itself is not an electrical component of microwave antenna per-se, yet it is necessary and helps in keeping the antenna at proper height and in a stable position so that the antenna can transmit signals for ensuring uninterrupted and seamless services to the subscribers. It is with the aid of the tower that the potential of the antenna is fully realised, making it function optimally. Without tower, antenna cannot effectively function for the purpose it is used. Hence, there can be no doubt that tower is to be considered as an accessory of antenna. 11.11.6 Similarly, the PFB houses other BTS equipment and alternative electricity source in th....
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....overloaded in a certain region, the operators can increase the capacity by increasing the base stations density. A cellular network not only consists of base stations but also comprises a network infrastructure for interconnecting base stations, mobility support, service provisioning and connection to other networks like internet. Therefore, a cellular network consists of several access networks, which include the radio equipment which is necessary to interconnect a terminal to the network. The access networks are interconnected by the core network. For example, in GSM, the access network is referred to as Base Station Subsystem ("BSS") whereas the core network is denoted as Mobile Switching and Management Subsystem ("SMSS"). BSS is responsible for monitoring and controlling the air interface. BSS consists of two different components, namely Base Transceiver Station ("BTS") and Base Station Controller ("BSC"). BTS stands for "base station". It contains transmitter and receiver equipment as well as an antenna. The base station is equipped with very limited capabilities for signalling a protocol processing. The bulk of the work, for example, allocation and release of channel....
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....ion of this Court in Saraswati Sugar Mills v. Commissioner of Central Excise, Delhi-III, (2014) 15 SCC 625). In the aforesaid case of Saraswati Sugar Mills (supra) it was held by this Court that anything required to make the goods a finished item can be described as component or part of the finished item. It was held that iron and steel structures would not go into the composition of vacuum pans, crystallizers etc. If an article is an element in the composition of another article made out of it, such an article may be described as a component of another article. Thus, structures in question in the said case did not satisfy the description of 'component'. 11.11.9 While there can be no dispute about the aforesaid proposition, we are of the view that it cannot be the only criterion to determine what amounts to component of another article. In order for any article to be considered a component of another article, it does not necessarily mean that it has to be consumed or used up for producing the said another article as in the case of a manufacturing process. In our considered opinion, a component of any good would also mean to include those which make the good fully functional and ....
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....tal goods falling under sub-clause (i) would also be treated as capital goods, a mobile tower can also be treated as "capital good". 11.11.12 We, therefore, agree with the conclusion arrived at by the Delhi High Court that towers and shelters (PFBs) support the BTS/antenna for effective transmission of mobile signals and thus enhance their efficiency and since these articles are components/accessories of BTS/antenna which are admittedly "capital goods" falling under Chapter 85 within sub-clause (i) of Rule 2(a)(A) of CENVAT Rules, these items consequently are covered by the definition of "capital goods" within the meaning of sub-clause (iii) read with sub-clause (i) of Rule 2(a)(A) of CENVAT Rules. Further, since these are used for providing output service, i.e., mobile telecommunication service, and since these are "capital goods" received in the premises of the provider of output service as contemplated under Rule 3(1)(i), the Assessees would be entitled to CENVAT credit on the excise duties paid on these goods. 11.12 The alternative plea taken by the Assessee is that these items, viz., mobile tower and the prefabricated buildings (PFBs) are "inputs' used for providing outp....
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....In this regard one may refer to the decision in Member, Board of Revenue, West Bengal Vs. M/s. Phelps & Co. (P) Ltd., (1972) 4 SCC 121 wherein it was held that, "6. We have now to find out what exactly is the meaning of the expression "for use by him in the manufacture of goods for sale". Identical words are used in Section 8(b) of the Central Sales Tax Act 1956. This court was called upon to find out the scope of that expression in M/s. J.K. Cotton Spinning & Weaving Mills Co Ltd. Vs. Sales Tax Officer, Kanpur and Anr. (AIR 1965 SC 1310). Dealing with that expression this Court observed: The expression "in the manufacture of goods" would normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. 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, in our judgment, fall within the expression "in the manufacture of goods. In the present case the assessee company has sold the goods in question to certain manufactures who were manufa....
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....y for transmission of signal. In our view since the subject matter is same, i.e., what amounts to "input" though the end use is for two different products, one tangible, in the form of final manufactured product, and one intangible i.e., output service, applying similar tests to determine what amounts to "input" would not be impermissible. 11.12.4 We have also noted that the Bombay High Court had taken the view that it cannot be said that it is impossible to provide the service without the aid of the towers, thus showing non dependency of antenna on tower. In our view, while theoretically antenna may receive and transmit signal without the tower, practically, the same is not feasible and tower is an essential accessory for keeping the antenna at an appropriate height and in a stable position so that there is no disturbance in receiving and transmission of signal and there can be wider coverage of signal. The link between antenna and tower is almost inseparable for the effective functioning of antenna for providing mobile telecommunication service and it cannot be said that the nexus between antenna and tower is remote. Rather, in our view, their relationship is quite proximat....