2018 (4) TMI 226 - AT - Service Tax

CENVAT credit - inputs - tower / tower materials and prefabricated shelters - extended period of limitation - penalties - Held that - various Benches of the Tribunal have held that the appellants are not entitled to take CENVAT credit on tower / tower materials and prefabricated buildings/shelters as capital goods as well as inputs - demand upheld. Extended period of limitation - penalties - Held that - the issue in the present appeals was of an interpretation nature i.e. as to the eligibility of CENVAT credit or otherwise on the towers and building - the appellant could have entertained a bona fide belief - extended period of limitation and penalties not warranted. Demand upheld for the normal period - appeal allowed in part.

Summary

Issues:
- Appellant filed appeals against impugned orders dated 30/11/2010 and 31/01/2011 regarding CENVAT credit.
- Department filed miscellaneous petition seeking early hearing.
- Appeals pertain to the year 2011 and involve identical issues.
- Details of two appeals provided, including periods, demands, and limitations.
- Appellants providing telecommunication services and took CENVAT credit for erecting towers and prefabricated buildings.
- Department alleged irregular CENVAT credit availed and issued show-cause notice for recovery.
- Appellant argued towers and materials are essential for services, entitled to CENVAT credit.
- Department defended orders, stating credit not allowed for towers and shelters.
- Tribunal considered arguments, previous decisions, and Larger Bench ruling in Tower Vision case.
- Tribunal confirmed demand within limitation period but set aside demand with extended period.
- Penalties dropped based on interpretation nature of the issue and bona fide belief.

Analysis:
The appeals before the Appellate Tribunal CESTAT Bangalore involved challenges to impugned orders related to CENVAT credit taken by the appellant. The Department sought early hearing, leading to the disposal of both appeals due to identical issues. The appellant, providing telecommunication services, had availed CENVAT credit for towers and prefabricated buildings, which the Department alleged as irregular. The show-cause notice was issued for recovery, prompting the appeals and arguments from both parties.

The appellant contended that towers and materials were crucial for their services, justifying the CENVAT credit availed. They cited the necessity of these items for effective service provision and relied on various decisions supporting their position. On the other hand, the Department defended its orders, claiming the credit was not allowable for towers and shelters, emphasizing they did not qualify as inputs or components. The Tribunal, after considering submissions and precedents, found that previous decisions had consistently ruled against the appellant regarding the eligibility of CENVAT credit on towers and buildings.

The Tribunal acknowledged the interpretation nature of the issue and the conflicting decisions, ultimately relying on the Larger Bench ruling in the Tower Vision case. While confirming the demand within the limitation period, the Tribunal set aside the demand with extended period and dropped all penalties. This decision was based on the belief that the issue required settlement by the High Court and that the appellant could have held a bona fide belief in their actions. Consequently, the penalties imposed on the appellants were set aside invoking the provisions of Section 80 of the Finance Act, 1994.