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2021 (5) TMI 834 - AT - Service TaxCENVAT Credit - denial on the ground that the subject goods being attached to earth, are immovable in nature - whether the finding of the Tribunal that the towers, shelters and accessories used by the appellant for providing business support services are immovable property is correct or not? - HELD THAT - The finding recorded by the Delhi High Court in VODAFONE MOBILE SERVICES LIMITED, INDUS TOWERS LIMITED, TOWER VISION INDIA PRIVATE LIMITED, BHARTI INFRATEL LIMITED, VERSUS COMMISSIONER OF SERVICE TAX, DELHI 2018 (11) TMI 713 - DELHI HIGH COURT where it was held that machine or apparatus annexed to the earth without its assimilation by fixing with nuts and bolts on a foundation to providing for stability and wobble free operation cannot be said to be one permanently attached to the earth and therefore, would not constitute an immovable property - It is seen that the decision of the Bombay High Court in M/S. BHARTI AIRTEL LTD. (EARLIER KNOWN AS BHARTI TELE-VENTURES LTD.) VERSUS THE COMMISSIONER OF CENTRAL EXCISE 2014 (9) TMI 38 - BOMBAY HIGH COURT was considered by the Delhi High Court. Whether the assessees are entitled to claim CENVAT credit on the towers and shelters either as capital goods or inputs in terms of Rule 2 (a) and (k) of the CENVAT rules and whether towers and shelters would qualify as accessories ? - HELD THAT - The finding recorded by the Delhi High Court in VODAFONE MOBILE SERVICES LIMITED on this issue and held that There is actual use of tower and shelters in conjunction with the Antenna and the BTS equipment in providing the output service, which also includes provision of the Business Support Service. Whether the Tribunal erred in applying the nexus test with reference to MS angles and channels as according to the appellant what was bought to the site were towers, shelters and accessories in CKD/SKD conditions for providing services? - HELD THAT - Delhi High Court in VODAFONE MOBILE SERVICES LIMITED has held that the CESTAT erred in applying the nexus test and therefore, credit has to be extended to the duty paid MS angles and channels. Whether the appellant was justified, in terms of rule 4(1) of the CENVAT Rules, in claiming CENVAT credit of excise duty paid by the manufacturer of towers and shelters after receipt of such towers and shelters at the premises? - HELD THAT - Delhi High Court in VODAFONE MOBILE SERVICES LIMITED has held that The entitlement of CENVAT credit is to be determined at the time of receipt of goods. The fact that such goods are later on fixed/fastened to the earth for use would not make them a non-excisable commodity when received. Therefore, this question is answered in favour of the assessee and against the Revenue. Whether emergence of immovable structure at intermediate stage (assuming without admitting) is a criterion for denial of CENVAT credit? - HELD THAT - Delhi High Court in VODAFONE MOBILE SERVICES LIMITED, INDUS TOWERS LIMITED, TOWER VISION INDIA PRIVATE LIMITED, BHARTI INFRATEL LIMITED, VERSUS COMMISSIONER OF SERVICE TAX, DELHI 2018 (11) TMI 713 - DELHI HIGH COURT that towers and pre-fabricated shelters form an essential ingredient in the provision of telecommunication service as they are used for the purpose of supplying the service and would qualify as inputs and, therefore, CENVAT credit can be availed. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Eligibility of the appellant to claim CENVAT credit on tower, tower material, and shelter. 2. Whether the items in question are immovable property. 3. Applicability of the Board Circular dated 26.02.2008. 4. Entitlement of CENVAT credit on towers and shelters as capital goods or inputs. 5. Nexus test application for MS angles and channels. 6. Timing of determining CENVAT credit entitlement. 7. Impact of intermediate emergence of immovable structure on CENVAT credit eligibility. Issue-wise Detailed Analysis: 1. Eligibility of the appellant to claim CENVAT credit on tower, tower material, and shelter: The appellant, a provider of telecommunication services, availed CENVAT credit on inputs, input services, and capital goods under the CENVAT Rules. The Commissioner denied this credit on the grounds that the goods were immovable and not used for providing output services. The appellant argued that the items were movable goods received in CKD condition, making them eligible for CENVAT credit at the time of receipt. 2. Whether the items in question are immovable property: The Delhi High Court in Vodafone Mobile Services Ltd. vs. Commissioner of Service Tax, Delhi held that "a machine or apparatus annexed to the earth without its assimilation by fixing with nuts and bolts on a foundation to provide stability and wobble-free operation cannot be said to be one permanently attached to the earth and therefore, would not constitute an immovable property." This finding was used to argue that the towers and shelters were not immovable property. 3. Applicability of the Board Circular dated 26.02.2008: The Department relied on a Board Circular which stated that items used for erecting towers and making housing/storage units are not excisable goods as they are attached to the earth and thus not used for providing taxable service. The tribunal, however, found that this circular did not apply because the Delhi High Court had already established that these items were not immovable. 4. Entitlement of CENVAT credit on towers and shelters as capital goods or inputs: The Delhi High Court determined that the term "all goods" in Rule 2(k) of the CENVAT Rules covers all goods used for providing output services, except those specifically excluded. The court concluded that towers and pre-fabricated shelters are essential for providing telecommunication services and thus qualify as inputs. The tribunal agreed that these items are used in conjunction with the Antenna and BTS equipment, making them eligible for CENVAT credit. 5. Nexus test application for MS angles and channels: The Delhi High Court found that MS angles and channels used for providing infra-support services/telecom services have a clear nexus with the output service. The tribunal agreed that these goods are integral to the towers used for providing telecom services, thus satisfying the nexus test and qualifying for CENVAT credit. 6. Timing of determining CENVAT credit entitlement: The Delhi High Court held that CENVAT credit entitlement is determined at the time of receipt of goods. The fact that these goods are later fixed to the earth for use does not change their status as excisable commodities when received. The tribunal agreed that the Commissioner erred in denying credit based on the later immovable status of the towers. 7. Impact of intermediate emergence of immovable structure on CENVAT credit eligibility: The Delhi High Court concluded that the emergence of an immovable structure at an intermediate stage does not affect the eligibility for CENVAT credit. The tribunal agreed that the towers and shelters, even if fixed to the earth temporarily, are still eligible for credit as they are essential for providing telecommunication services. Conclusion: The tribunal set aside the Commissioner’s order dated 13.02.2017, allowing the appellant's appeal and confirming their eligibility for CENVAT credit on the disputed items. The tribunal's decision was pronounced on 25.05.2021.
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