2018 (3) TMI 190 - AT - Service Tax

CENVAT credit - tower materials which are used for erecting telecommunication towers on various other accessories as part of the said towers - extended period of limitation - Held that - the assessee/appellant is a public sector undertaking and have availed such credit under bonafide belief that the duty paid on such components and items used for erection of towers are eligible to them. It is an admitted fact that the credit on various items used in the telecommunication towers were subject matter of substantial dispute starting from the Original Authority upto High Courts - extended period of limitation cannot be sustained in the present proceedings - penalties also set aside. Demand upheld for normal period - appeal allowed in part.

Summary

Issues: Eligibility of appellant/assessee to avail Cenvat credit on tower materials used for erecting telecommunication towers and accessories.

Analysis:
1. Dispute on Eligibility of Cenvat Credit: The appeals revolve around the eligibility of the appellant/assessee to claim Cenvat credit on tower materials and accessories used for erecting telecommunication towers. The Revenue challenged the order of the Commissioner allowing such credit, while the appellant/assessee appealed against lower authorities disallowing the credit on similar items.

2. Reference to Larger Bench Decision: Both parties referred to the decision of the Larger Bench in Tower Vision India Pvt. Ltd. Vs. CCE (Adj.), Delhi, where it was concluded that tower materials cannot be considered as inputs or capital goods for the purpose of Cenvat Credit Rules, 2004. This decision was based on the judgment of the Hon’ble Bombay High Court in Bharti Airtel.

3. Decision on Eligibility: Given the settled position by the Larger Bench, the Tribunal held that the appellants are not eligible for credit on such tower materials. Consequently, the Revenue's appeal was allowed, and the appeals by the assessee/appellant were dismissed.

4. Absence of Malafide Intent: The counsel for the assessee/appellant argued that there was no malafide intent in claiming the credit, as it involved a legal interpretation of the Cenvat Credit Rules. The appellant being a Government of India owned public sector entity, it was contended that there was a presumption of nonexistence of malafide. The Tribunal noted the absence of malafide intent and set aside penalties.

5. Limitation Period and Penalties: The Tribunal acknowledged the extended period of limitation could not be sustained due to the appellant's bonafide belief in claiming the credit. Penalties were also set aside considering the status of the appellant as a government-owned company. The jurisdictional authority was directed to verify the documents within the normal limitation period to determine the quantum of credit ineligible.

In conclusion, the Tribunal ruled against the appellant/assessee's eligibility for Cenvat credit on tower materials based on the precedent set by the Larger Bench. The judgment also highlighted the absence of malafide intent and the setting aside of penalties due to the appellant's status as a government-owned entity.