2015 (9) TMI 583 - HC - Service Tax

Availment of CENVAT Credit - duty paid on towers (in CKD/SKD form), parts of towers, shelters / prefabricated buildings purchased by them and used for providing output service - Held that - Goods are neither capital goods as defined in rule 2(a)(A) of the CENVAT Credit Rules, 2004 and nor do they fall within the definition of input as defined in rule 2(k) thereof. This Court has further held that in any event the towers and parts thereof are in the nature of immovable property and are non-marketable and non-excisable and therefore, they cannot be classified as inputs so as to fall within the definition of rule 2(k) of the CENVAT Credit Rules, 2004. - Bharti Airtel s case decision 2014 (9) TMI 38 - BOMBAY HIGH COURT squarely applies to the case of the Appellant - no substantial questions of law that need to be answered - Decided against assessee.

Issues Involved:

(a) Interpretation of Rule 2(k) of the CENVAT Credit Rules, 2004 regarding goods embedded in earth.
(b) Eligibility of towers and prefabricated shelters as inputs for CENVAT credit.
(c) Classification of goods not falling under capital goods definition.
(d) Applicability of Bharti Airtel Ltd. decision.
(e) Qualification of shelter/parts of towers as inputs.
(f) Classification of towers/shelters as immovable property.
(g) Classification of towers and parts under Chapter 85.
(h) Status of towers/parts as goods when received.
(i) Capability of towers/shelters to be moved.
(j) Towers as accessories to capital goods.
(k) Identity of towers/shelters post-embedding.
(l) Usage manner of goods for providing output service.
(m) Capital goods falling under input definition.
(n) Nature of embedding process of towers/shelters.
(o) Trade parlance classification of towers/shelters.
(p) Classification of towers/shelters under Chapter 85.

Detailed Analysis:

(a) Interpretation of Rule 2(k) of the CENVAT Credit Rules, 2004 regarding goods embedded in earth:
The Tribunal added an additional condition that goods used for providing output services should not be embedded in the earth. This interpretation was challenged by the Appellant, asserting that Rule 2(k) clearly provides that 'all goods' used for providing any output service are eligible for credit.

(b) Eligibility of towers and prefabricated shelters as inputs for CENVAT credit:
The Appellant argued that towers and prefabricated shelters should be allowed as credit for utilization under the CENVAT Credit Rules, 2004, as they are received as goods and used for providing output service.

(c) Classification of goods not falling under capital goods definition:
The Appellant contended that goods not classified as capital goods should still fall under the definition of input and thus be eligible for credit under the CENVAT Credit Rules, 2004.

(d) Applicability of Bharti Airtel Ltd. decision:
The Tribunal applied the Bharti Airtel Ltd. decision, which disallowed credit to the Appellant. The Appellant argued that this decision was distinguishable and should not be applied to their case.

(e) Qualification of shelter/parts of towers as inputs:
The Appellant argued that shelters and parts of towers should qualify as inputs under the CENVAT Credit Rules, 2004, as they are integral to the provision of output service.

(f) Classification of towers/shelters as immovable property:
The Tribunal held that the Appellant was not entitled to credit of duty paid on tower parts/shelters as they are 'immovable property' and thus do not qualify as 'capital goods' or 'inputs' under the CENVAT Credit Rules, 2004.

(g) Classification of towers and parts under Chapter 85:
The Appellant argued that towers, in CKD and SKD form, and parts of towers should qualify as components, parts, and accessories of goods falling under Chapter 85.

(h) Status of towers/parts as goods when received:
The Appellant contended that for availing credit under the CENVAT Credit Rules, towers and parts of towers are considered goods when received, and it is immaterial whether they are erected later.

(i) Capability of towers/shelters to be moved:
The Appellant presented technical literature and evidence showing that both towers and shelters are capable of being shifted or moved, challenging the Tribunal's findings as perverse.

(j) Towers as accessories to capital goods:
The Appellant argued that towers should be considered accessories to capital goods and thus eligible for credit under the CENVAT Credit Rules, 2004.

(k) Identity of towers/shelters post-embedding:
The Appellant contended that the identity of towers and prefabricated buildings/shelters is not lost when embedded in the earth and they continue to qualify as 'inputs' under Rule 2(k) of the CENVAT Credit Rules, 2004.

(l) Usage manner of goods for providing output service:
The Appellant argued that there is no restriction under Rule 2(k) of the CENVAT Credit Rules, 2004 on the manner in which goods should be used for providing output service, and even upon installation as part of an overall system, they can qualify as inputs.

(m) Capital goods falling under input definition:
The Appellant argued that even capital goods can fall under the definition of 'inputs' and are thus eligible for credit under Rule 2(k) of the CENVAT Credit Rules, 2004.

(n) Nature of embedding process of towers/shelters:
The Appellant contended that the process of embedding towers and prefabricated buildings/shelters is not permanent and they can be removed and reinstalled at another location, thus not being immovable property.

(o) Trade parlance classification of towers/shelters:
The Appellant argued that in common trade parlance, towers and prefabricated buildings/shelters are regarded as 'goods' and thus credit should be allowed under the CENVAT Credit Rules, 2004.

(p) Classification of towers/shelters under Chapter 85:
The Appellant contended that towers and prefabricated buildings/shelters are known as parts of base stations in common trade parlance and should be classified under Chapter 85 of the Central Excise Tariff Act, making them eligible for credit under the CENVAT Credit Rules, 2004.

Judgment Analysis:

The Tribunal's decision was based on the precedent set by the Bharti Airtel Ltd. case, which held that towers and shelters are immovable property and thus do not qualify as 'capital goods' or 'inputs' under the CENVAT Credit Rules, 2004. The Tribunal found that the Appellant's arguments did not warrant a departure from this precedent. The Appellant's contention that the goods should be considered as inputs or capital goods was rejected based on the interpretation of the relevant rules and the immovable nature of the goods.

The Tribunal also held that the goods in question, being fastened to the earth and becoming immovable, do not qualify for CENVAT credit as they are non-marketable and non-excisable. The Tribunal's findings were consistent with the Bharti Airtel Ltd. decision, and the Appellant's arguments were not sufficient to overturn this precedent.

In conclusion, the Tribunal dismissed the Appeals, finding no merit in the arguments presented by the Appellant and upholding the decision that the goods in question do not qualify for CENVAT credit under the CENVAT Credit Rules, 2004.

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