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2016 (3) TMI 165 - AT - Service TaxEntitlement of Cenvat credit of service tax - Appellant provided telecom towers, pre-fabricated shelters and parts thereon to telecom service providers for providing passive infrastructure on lease basis and claim for Cenvat credit - Held that for entitlement of credit on towers, shelters or parts thereof, it is therefore essential that these should be goods and should fall, either within the ambit of capital goods specified in Rule 2(a)(A)(i) of the rules, namely goods falling under Chapters 82, 84, 85 or 90 or to components, spares or accessories of goods specified in sub-clause (i). Even for availing credit as inputs , towers, shelters or components thereof should be goods and used for providing an output service. These are conditions precedent for availment of Cenvat credit, on duty paid on these goods, for remittance of service tax on the output services rendered, whether the output service is BAS or BSS (in the case of passive infrastructure providers) or Telecom Services (in the case of active infrastructure providers, namely where the telecom companies themselves own the infrastructure used for rendition of telecom services). As these conditions are not fulfilled, appellant is not entitled to Cenvat credit. Entitlement of Cenvat credit of duty of excise - Appellant provided telecom towers, pre-fabricated shelters and parts thereon to telecom service providers for providing passive infrastructure and supplier has paid Excise duty on on them as capital goods by classifying them under Chapter 85 of the Central Excise Tariff Act, 1985 - Held that to decide whether Cenvat credit can be availed or not, first it is to be decided that whether towers and shelters are capital goods or immovable property. By relying on the judgments of Hon ble Bombay High Court in the case of Bharti Airtel Limited vs. CCE, Pune - III 2014 (9) TMI 38 - BOMBAY HIGH COURT and Vodafone India Limited 2015 (9) TMI 583 - BOMBAY HIGH COURT, and as the the provision of towers and shelters as infrastructure used in the rendition of an output service is common to both passive and active infrastructure providers, whether of BAS or BSS in one case and telecom service in the other, the towers and shelters and parts are decided to be immovable property. Therefore, the appellant is not entitled to Cenvat credit. - Decided against the appellant
Issues Involved:
1. Eligibility for Cenvat Credit on towers and pre-fabricated shelters under "Business Auxiliary Services" or "Business Support Services". 2. Entitlement to Cenvat Credit on shelters/parts classified under Chapter 85 of the Central Excise Tariff Act, 1985. Issue-wise Detailed Analysis: 1. Eligibility for Cenvat Credit on Towers and Pre-fabricated Shelters: - The core issue was whether appellants providing passive infrastructure and paying service tax under "Business Auxiliary Services" or "Business Support Services" are entitled to Cenvat Credit on towers and pre-fabricated shelters. - The Tribunal analyzed the eligibility of appellants for credit of duty paid on MS Steel Angles/Towers, pre-fabricated shelters and parts thereon. The Division Bench agreed that appellants were not eligible for credit of duty on towers and cabins if they were providing telecommunication services as output services, following the Bombay High Court decision in Bharti Airtel Ltd. vs. CCE, Pune - III. - The Tribunal examined the contentions of the appellants, which included the classification of towers and shelters as capital goods, the immovability of these items, and their use as inputs or accessories. The Tribunal found that the towers and shelters, when erected and fixed, became immovable property and thus were not eligible for Cenvat credit. - The Tribunal also considered the argument that towers and shelters should be treated as accessories of Base Transmission System (BTS) but found that no BTS as identified capital goods emerged in this case. The towers and shelters were considered immovable and not accessories of any kind of instrument. - The Tribunal rejected the appellants' contention that the towers and shelters continued to be goods after being erected on a concrete foundation, citing the Bombay High Court's detailed analysis in Bharti Airtel Ltd., which concluded that towers and shelters are immovable structures and non-marketable. - The Tribunal also addressed the appellants' alternate claim of treating tower parts as inputs for availing credit, concluding that there was no direct nexus between the duty-paid items and the output service provided. - The Tribunal concluded that the decision of the Bombay High Court in Bharti Airtel Ltd. applied to both telecom operators and infrastructure companies, and no distinction could be made between them in deciding the eligibility of Cenvat credit on the impugned items. 2. Entitlement to Cenvat Credit on Shelters/Parts Classified under Chapter 85: - The second issue was whether the appellants were entitled to take Cenvat Credit on shelters/parts as capital goods when the supplier paid Excise duty on these items by classifying them under Chapter 85 of the Central Excise Tariff Act, 1985. - The Tribunal found that the classification of duty-paid items by itself does not make the item eligible for Cenvat credit. The eligibility of credit is determined by the provisions of the Cenvat Credit Rules, 2004. - The Tribunal held that shelters and parts classified under Chapter 85 were not eligible for Cenvat credit either as capital goods or as inputs, as they were found to be immovable property. - The Tribunal rejected the appellants' argument that the denial of credit was only based on the classification of shelters, reiterating that the Bombay High Court had categorically held that towers and pre-fabricated buildings are immovable goods and non-marketable. Conclusion: - The Tribunal concluded that the Hon'ble Bombay High Court judgments in Bharti Airtel Ltd. and Vodafone India Ltd., which held that towers and shelters are immovable property, constitute the binding law. - The issues referred for resolution were answered in favor of the Revenue and against the assessees. - The eight tagged appeals were remitted to the appropriate Division Bench for determination on merits, following the conclusions recorded by the Tribunal. Separate Judgments: - Justice G. Raghuram recorded a separate but concurring opinion, agreeing with the conclusions of the Hon'ble Member (Technical) Shri B. Ravichandran, and emphasized that the Tribunal must follow the binding precedents set by the Hon'ble Bombay High Court.
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