2019 (2) TMI 1736 - AT - Service Tax

CENVAT credit - inputs - tower, shelter, diesel generator sets, air conditioner and electrical works, DC power plant etc. which were used in providing Business Support Service to telecom companies - Revenue is of the view that as these towers, shelter parts thereof are immovable property in terms of CBEC Circular No. 137/315/2007-CX4 dated 26.02.2008, therefore, they are not entitled to cenvat credit. HELD THAT - The assessee-appellant are entitled to avail cenvat credit on items, towers, shelter parts thereof being input used for providing output service - reliance can be placed in the case of Bharti Infratel Ltd. vs. CST, New Delhi 2018 (11) TMI 713 - DELHI HIGH COURT . Appeal dismissed - decided against Revenue.

Summary

Issues:
Cenvat credit eligibility on towers, shelter parts, and other items used for providing Business Support Service.

Analysis:
The case involved an appeal against the denial of cenvat credit on towers, shelter parts, and other items used for providing Business Support Service to telecom companies. The Revenue contended that these items were immovable property and thus not eligible for cenvat credit. The issue was whether the assessee was entitled to avail cenvat credit on these items. The Tribunal considered previous judgments, including the decision of the Hon'ble Delhi High Court in Bharti Infratel Ltd., which allowed cenvat credit on such items used for providing output service.

The Tribunal noted that the towers and shelters were not permanently assimilated with the structure and could be moved without damage. It was observed that the fastening to earth was only for stability purposes and did not constitute annexation as per the permanency test. The functional utility test was applied to determine that the towers and shelters qualified as inputs used in conjunction with capital goods for providing cellular connectivity. The eligibility to claim credit on inputs was determined at the time of receipt of goods, and the emergence of immovable property did not disentitle the assessee from availing credit.

Additionally, it was highlighted that towers received in CKD condition and later assembled at the site did not lose their eligibility for credit, even if they became immovable for safety and stability reasons. The immovability of the property in the intermediate stage did not affect the assessee's eligibility to avail credit. Consequently, the Tribunal held that the assessee was entitled to avail cenvat credit on towers, shelter parts, and other items used for providing output service. The appeal filed by the Revenue was dismissed, and the appeals filed by the assessee were allowed.

In conclusion, the Tribunal's decision was based on the interpretation of immovable property, the functional utility of the items in providing output service, and the eligibility criteria for claiming cenvat credit on inputs. The judgment clarified that the emergence of immovable property during the process did not disentitle the assessee from availing credit, ultimately ruling in favor of the assessee's entitlement to cenvat credit on the specified items.