2023 (2) TMI 734 - HC - Service Tax

Extended period of limitation - Cenvat Credit - telecom towers erected at site and affixed to earth - inputs or not - goods used in the erection of Tower - prefabricated buildings shelters, PUF Panels - HELD THAT - The impugned decision of the tribunal was a common order involving several telecom companies including the Respondent herein as well as Reliance Communication Limited, in respect of whom this Court dismissed the appeal in THE COMMISSIONER OF SERVICE TAX MUMBAI VERSUS M/S. RELIANCE COMMUNICATION LTD 2018 (4) TMI 1941 - BOMBAY HIGH COURT - The issue involved in the group of appeals filed before the CESTAT was with regard to denial of cenvat credit to the telecom communication companies on the ground that cenvat credit availed on towers used to rendering telecommunication service is ineligible to cenvat credit as they are immovable goods. On this issue, the tribunal sustained the demand of Revenue partially. The demand for duty and interest within the limitation period was sustained. Demand of ineligible cenvat credit issued beyond the period of limitation was dropped considering that the issue was a debatable issue. This Court having already rendered its decision on the Tribunal order impugned herein, we are not persuaded to take any other view. The affidavit filed on behalf of the Revenue does not elicit any distinguishing feature. Learned Counsel for the Revenue has also not brought any material on record to demonstrate that the decision dated 2nd April 2018 in CEXA 6 of 2017 has been a subject matter of any further challenge. Learned counsel for the Appellant-Revenue has not been able to demonstrate any material difference or distinguishing feature in the facts of this case - There being neither any perversity nor any error on the face of the record, the appeal does not raise any substantial question of law - Appeal dismissed.

Summary

Issues Involved:
1. Eligibility of Cenvat Credit on goods used for erecting telecom towers.
2. Application of extended period of limitation for demand recovery.
3. Imposition of penalties on the assessee.
4. Interpretation of "capital goods" and "input" under Cenvat Credit Rules.
5. Applicability of previous court decisions on similar issues.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Goods Used for Erecting Telecom Towers:
The Respondent, a telecom company, availed Cenvat Credit on goods like angles, channels, beams, and prefabricated buildings used to erect towers for installing transmission equipment. The Revenue contended that since the telecom towers, once erected and affixed to the earth, were not "goods" and did not amount to manufacture, they were neither excisable goods nor output services under the Central Excise Act, 1944, and the Finance Act, 1994. Therefore, materials used for erection did not qualify as "inputs" under the Cenvat Credit Rules (CCR). The Tribunal partially upheld the Revenue's demand, confirming the ineligibility of Cenvat Credit on these items within the limitation period but dropped the demand for the extended period, considering the issue as interpretative.

2. Application of Extended Period of Limitation for Demand Recovery:
The Revenue issued several Show Cause Notices (SCNs) invoking the extended period of limitation, alleging that the assessee had suppressed facts regarding the availment of Cenvat Credit. The Tribunal, however, found that the issue was of interpretative nature and that the assessee could have entertained a bona fide belief regarding the eligibility of Cenvat Credit. Consequently, the Tribunal set aside the demand for the extended period. The High Court, referencing a similar case (CEXA No. 6/2017), upheld the Tribunal's decision, noting that the issue was debatable and involved legal interpretation, thus not warranting the invocation of the extended period of limitation.

3. Imposition of Penalties on the Assessee:
The Revenue sought to impose penalties under Rule 15 of the CCR, 2004, read with Section 78 of the Finance Act, 1994, and Section 11AC of the Central Excise Act, 1944. The Tribunal invoked Section 80 of the Finance Act, 1994, to set aside the penalties, considering the interpretative nature of the issue and the possibility of the assessee's bona fide belief. The High Court affirmed this view, noting that the Tribunal's decision was not perverse or erroneous on the face of the record.

4. Interpretation of "Capital Goods" and "Input" Under Cenvat Credit Rules:
The Revenue argued that the goods used for erecting telecom towers did not fall under the definition of "capital goods" as per Rule 2(a) of the CCR. Additionally, the definition of "input" excluded items like angles, channels, and beams used for activities not amounting to manufacture. The Tribunal and the High Court found that the issue required legal interpretation and was subject to debate, thus supporting the assessee's claim of a bona fide belief in their eligibility for Cenvat Credit.

5. Applicability of Previous Court Decisions on Similar Issues:
The High Court referenced its previous decision in CEXA No. 6/2017 involving a similar issue with Reliance Communication Limited. In that case, the court had dismissed the Revenue's appeal, affirming the Tribunal's decision to drop the demand for the extended period and penalties. The High Court found no material difference between the present case and CEXA No. 6/2017, thus applying the same reasoning to dismiss the Revenue's appeal in the current case.

Conclusion:
The High Court upheld the Tribunal's decision, confirming the demand within the limitation period but setting aside the demand for the extended period and penalties. The court emphasized the interpretative nature of the issue and the possibility of the assessee's bona fide belief, thus not warranting the invocation of the extended period of limitation or the imposition of penalties. The appeal was dismissed, with no substantial question of law arising from the case.