2018 (11) TMI 713 - DELHI HIGH COURT

Cenvat Credit - towers, shelter and accessories used for providing telecom services - whether immovable property or not - towers, shelter to be treated as ‘accessories’ either as capital goods or input goods or not - installation after receipt of such towers and shelters at their premises (i.e. tower sites) - Held that:- the debate mainly centers round the definition of ‘capital goods’ in clause (a) of Rule 2 of the Credit Rules. - all components, spares and accessories of such capital goods falling under chapter 85, would also be treated as Capital goods.

The towers and shelters support the BTS in effective transmission of the mobile signals and therefore, enhance their efficiency. The towers and shelters plainly act as components/ parts and in alternative as accessory to the BTS and would are covered by the definition of “capital goods”.

Inputs or not - Held that:- There is actual use of the tower and shelters in conjunction with the Antenna and the BTS equipment in providing the output service, which also includes provision of the Business Support Service. The CESTAT has failed to appreciate that the towers and the parts thereon and the pre-fabricated shelters are inputs, in accordance with the provisions of Rule 2(k) of the Credit Rules.

Credit on inputs such as MS Angles and channels - Held that:- clearly goods in question have gone into the making of such towers which in turn are used for providing infra-support service/ telecom service. It is therefore, held that the CESTAT erred in applying the nexus test and therefore, credit has to be extended to the duty paid MS angles and channels.

Immovable property or not - Held 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 long as the goods are used for the provision of the output service.

The towers which are received in CKD condition, are assembled/ erected at the site subsequently giving rise to a structure that remains immovable till its use because of safety, stability and commercial reasons of use. The entitlement of CENVAT credit is to be determined at the time of receipt of goods.

Emergence of immovable property in the intermediate stage - Held that:- several High Courts in different contexts have taken a view that credit of excise duty and service tax paid would be available irrespective of the fact that inputs and input services were used for creation of an immovable property at the intermediate stage, if it was ultimately used in relation to provision of output service or manufacturing of final products.

The conclusion of CESTAT, denying the assessee CENVAT credit on the premise that the towers erected result in immovable property, is erroneous and plainly contrary to Solid and Correct Engineering [2010 (4) TMI 15 - SUPREME COURT] - If the goods that are received qualify as inputs or capital goods, the fact that they are later fixed/fastened to the earth for use would not make them a non-excisable commodity when received.

Credit allowed - Decided in favor of assessee.