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2021 (9) TMI 605 - AT - Service TaxLevy of interest and penalty - Utilisation of ineligible credit - capital goods like angles, beams, channels, etc., used in erection of towers/pre-fabricated buildings/shelters - excess availment of credit on capital goods taken in excess of 50% - period from September 2004 to December 2007 - invocation of extended period of limitation. CENVAT Credit - capital goods - angles, beams, channels, tower/tower materials and pre-fabricated shelters - items fall under rule 2(a) of the Credit Rules or not - denial also on the ground that they do not qualify as accessories or components - HELD THAT - The two conflicting views have been expressed by the Delhi High Court in Vodafone Mobile Services 2018 (11) TMI 713 - DELHI HIGH COURT and the Bombay High Court in Bharti Airtel Ltd. 2014 (9) TMI 38 - BOMBAY HIGH COURT . It, therefore, needs to examined as to which of these two decisions should be relied upon in this appeal, which is being decided by the Bangalore Bench of the Tribunal. In the present case, the judgment of the Bombay High Court rendered in Bharti Airtel was considered by the Delhi High Court in Vodafone Mobile Services and it was distinguished as is clear from paragraph 48 of the judgment having held that 2018 (11) TMI 713 - DELHI HIGH COURT It is, therefore, considerd appropriate to follow the decision of the Delhi High Court in Vodafone Mobile Services. The appellant would, therefore, be entitled to claim CENVAT credit on tower/tower materials and pre-fabricated buildings/shelters. Correct availment CENVAT credit on capital goods - whether the appellant had utilized more than 50% of the credit on capital goods during the Financial Year 2005- 2006 because if the appellant had not utilised more than 50% of the credit on capital goods , it would not be liable to pay interest or penalty? - HELD THAT - This issue was decided in favour of the appellant in Satish Industries 2012 (9) TMI 383 - BOMBAY HIGH COURT where it was held that If the credit of the subsequent financial year wrongfully taken in the initial financial year if not utilized till the commencement of the subsequent financial year, then no prejudice is caused to the Revenue and the decision of the Tribunal deserves acceptance. In view of the specific finding recorded by the Commissioner in the impugned order that though the appellant had taken credit of ₹ 13,60,54,686/- during the year 2005-2006, but the appellant had utilized only half the amount i.e. ₹ 6,80,27,343/-, the appellant would not be liable to pay interest or penalty on the balance amount since it was not utilised by the appellant, in view of the aforesaid two decisions of the Bombay High Court and the Karnataka High Court in Satish Industries and Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT . Invocation of Extended Period - HELD THAT - In the instant case, the period of dispute is from September 2004 to December 2007. The show cause notice was issued on 14.05.2008. The period from April 2007 to December 2007 would fall within the normal period, while that from September 2004 to March 2007 would fall beyond the normal period contemplated under section 73(1) of the Finance Act - in view of the fact that the issue as to whether credit could be taken or not was ultimately resolved by a Larger Bench of the Tribunal, the extended period of limitation could not have been invoked by the Department. The confirmation of demand for the period prior to March 2007, therefore, cannot also be sustained for this additional reason. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Irregular availment of CENVAT credit on goods used in erection of towers/pre-fabricated buildings/shelters. 2. Excess availment of CENVAT credit on capital goods taken in excess of 50% during the year 2005-2006. 3. Invocation of the extended period for recovery of CENVAT credit. Detailed Analysis: Issue 1: Irregular Availment of CENVAT Credit on Goods Used in Erection of Towers/Pre-Fabricated Buildings/Shelters The appellant contended that towers/tower materials and pre-fabricated buildings/shelters are 'capital goods' under Rule 2(a) of the CENVAT Credit Rules, 2004 (Credit Rules), and thus eligible for CENVAT credit. The impugned order denied this credit on the grounds that these items do not fall under the definition of 'capital goods' and are not components or accessories. The appellant argued that these items are integral to the erection of cell sites for providing cellular coverage and should be considered 'capital goods' used for providing output services. The Delhi High Court in Vodafone Mobile Services Ltd. ruled that towers and shelters, which are essential for the functionality of antennae, qualify as 'capital goods' and 'inputs' under Rule 2(a) and Rule 2(k) of the Credit Rules, respectively. The court emphasized that these items, when received, are movable and their subsequent fixation to the earth does not change their status as excisable commodities. This decision was distinguished from the Bombay High Court's ruling in Bharti Airtel Ltd., which held that towers and shelters are immovable and do not qualify for CENVAT credit. The Tribunal decided to follow the Delhi High Court's decision in Vodafone Mobile Services Ltd., allowing the appellant to claim CENVAT credit on towers/tower materials and pre-fabricated buildings/shelters. Issue 2: Excess Availment of CENVAT Credit on Capital Goods The appellant argued that it had correctly availed CENVAT credit on capital goods, utilizing only 50% of the credit during the Financial Year 2005-2006. The Commissioner had noted that while the appellant took 100% credit, it did not utilize more than 50% in the same financial year. The Tribunal referred to the decisions of the Bombay High Court in Satish Industries and the Karnataka High Court in Bill Forge Pvt. Ltd., which held that if the credit is not utilized, the appellant is not liable to pay interest or penalty. Based on these precedents, the Tribunal concluded that the appellant is not liable to pay interest or penalty on the unutilized CENVAT credit. Issue 3: Invocation of Extended Period The extended period for recovery of CENVAT credit was invoked by the Department on the grounds of suppression of facts. The appellant argued that the issue of credit availability on towers and related materials was subject to ongoing litigation and interpretational disputes, making the extended period inapplicable. The Tribunal noted that the issue was ultimately resolved by a Larger Bench in Tower Vision India Pvt. Ltd., and cited various decisions indicating that extended periods cannot be invoked in cases of interpretational disputes. The Tribunal held that the extended period of limitation could not be invoked, and thus, the demand for the period prior to March 2007 was unsustainable. Conclusion The impugned order dated 22.10.2009 was set aside, and the appeal was allowed. The Tribunal ruled in favor of the appellant on all issues, allowing the CENVAT credit on towers/tower materials and pre-fabricated buildings/shelters, confirming the correct availment of CENVAT credit on capital goods, and rejecting the invocation of the extended period for recovery.
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