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2012 (4) TMI 362 - AT - Service TaxCENVAT credit for cellular telephone service - Meaning and scope of the term capital goods - (i) antenna, (ii) tower and parts thereof and (iii) green shelter (same as PFB) - held that - if the signal transmitting antenna is installed on a tower, the signal receiving antenna could be installed on a high-rise building or flyover, and vice versa. If the tower is held to be an accessory of the antenna erected thereon, a high-rise building or a flyover with an antenna erected thereon will also have to be considered as accessory of such antenna. To our common sense, a huge immovable structure like tower cannot be termed accessory of any goods. A supplementary, subordinate, additional or extra thing which is added to make something more useful, effective, convenient etc. is understood as an accessory as per the cited dictionaries. It will be absurd to hold a gigantic immovable structure to be an accessory of a small equipment placed on its top. 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. - Not eligible as Capital goods for the purpose of cenvat credit. Alternative plea - If the towers and parts thereof are not capital goods falling under Rule 2(a)(A) of the CENVAT Credit Rules, 2004, it is argued, they are liable to be recognized as inputs under Rule 2(k). - held that - it has to be, firstly, goods and, secondly, used for providing any output service . The first requirement in this case is not met by the towers which are admittedly immovable structures and ipso facto non-marketable and non-excisable. Cenvat Credit on PFBs which were used as protective shelter for transmission equipments - office chairs - held that - They are not components or accessories of any goods specified in that sub-clause either. Thus PFBs have no place in sub-clause (iii) also. Hence CENVAT credit cannot be claimed on PFBs as capital goods. The same conclusion can also be reached in respect of office chairs which are goods of Chapter 94. Further the chairs cannot be held to have been used for providing telecom service, in the absence of evidence. CENVAT credit on printers which are office equipments - there is no direct nexus between this item and the output service provided by the appellant. The appellant has not established sufficient nexus between printers and their output service. - Credit denied. Extended period of limitation - held that - the learned Commissioner did not consider this plea at all. Therefore, in both the cases, the limitation issue requires to be remanded to the learned Commissioner for careful consideration and speaking order.
Issues Involved:
1. Denial of CENVAT Credit on Towers, Prefabricated Buildings (PFB), Printers, and Office Chairs. 2. Classification and eligibility of Antenna as capital goods. 3. Classification and eligibility of Towers and PFB as capital goods or inputs. 4. Limitation period for the demand. 5. Imposition of penalties under Rule 15 of the CENVAT Credit Rules, 2004. Issue-wise Detailed Analysis: 1. Denial of CENVAT Credit on Towers, Prefabricated Buildings (PFB), Printers, and Office Chairs: The appellant, engaged in providing cellular telephone service, received four show-cause notices (SCNs) from the department denying CENVAT credit on items such as towers, PFB, printers, and office chairs used for providing output service. The Commissioner confirmed the denial of credit on these items, except for antennas, which were allowed credit as they fell under Chapter 85 and were directly used for providing output service. 2. Classification and Eligibility of Antenna as Capital Goods: The Commissioner allowed CENVAT credit on antennas, noting that they fell under Chapter 85 of the Central Excise Tariff Act and were directly used by the appellant for providing output service, thus qualifying as 'capital goods' under Rule 2(a)(A) of the CENVAT Credit Rules. The department accepted this decision. 3. Classification and Eligibility of Towers and PFB as Capital Goods or Inputs: The Commissioner disallowed credit on towers and parts thereof, holding that they became immovable upon erection and could not be classified as 'goods.' Even in CKD or SKD condition, towers and parts would fall under Heading 73.08, not specified under Rule 2(a)(A). Similarly, PFBs, classified under Chapter 94, were not considered telecom equipment or used directly for providing output service. The appellant argued that towers and PFBs were essential for providing cellular service, but the Tribunal upheld the Commissioner's view that these items did not qualify as capital goods or inputs under the CENVAT Credit Rules. 4. Limitation Period for the Demand: The appellant claimed that the demands for certain periods were barred by limitation, arguing that they did not willfully suppress any facts. The Tribunal noted that the Commissioner did not address the limitation plea adequately and remanded the issue for reconsideration. 5. Imposition of Penalties Under Rule 15 of the CENVAT Credit Rules, 2004: The penalties were challenged on the grounds that the appellant did not intend to evade duty and that divergent legal views existed. The Tribunal remanded the penalty issue to the Commissioner for fresh consideration, emphasizing the need to determine whether the appellant's conduct warranted penalties under Rule 15. Conclusion: The Tribunal concluded that the subject items (towers, PFBs, printers, and office chairs) were neither 'capital goods' nor 'inputs' under the CENVAT Credit Rules, 2004, and thus, CENVAT credit was not admissible. The credit taken was recoverable, subject to the limitation issue, which was remanded for fresh consideration. The penalty issue was also remanded for a decision based on the appellant's conduct. The Tribunal appreciated the erudite arguments presented by both parties.
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