2025 (1) TMI 66 - HC - Central Excise

CENVAT Credit - inputs/capital goods - duty paid on tower materials, puff channels, shade parts thereof and pre-fabricated buildings materials - immovable property or not - tower would qualify as part or component or accessory of the capital goods i.e. antenna or not - towers, shelter are capital goods or inputs in terms of Rule 2(a) or 2(k) of the Cenvat Credit Rules, 2004 or not - invocation of extended period of limitation. HELD THAT - Their Lordships of the Supreme Court, considering the said issue involved in M/S BHARTI AIRTEL LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, PUNE 2024 (11) TMI 1042 - SUPREME COURT have held that ' Having held that the tower and pre-fabricated buildings (PFBs) are goods and not immovable property and since these goods are used for providing mobile telecommunication services, the inescapable conclusion is that they would also qualify as inputs under Rule 2(k) for the purpose of credit benefits under the CENVAT Rules.' Conclusion - Thus, tower materials and PFBs are not immovable property and qualify as inputs under the Cenvat Credit Rules, 2004. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment from the Chhattisgarh High Court addressed the following core legal questions:

(i) Whether the Appellate Tribunal was correct in holding that the Appellant was not entitled to credit of duty paid on tower materials, puff channels, shade & parts thereof, and pre-fabricated buildings materials?

(ii) Whether these materials are considered "immovable property" and thus do not qualify as "capital goods" or "inputs" under the Cenvat Credit Rules, 2004?

(iii) Whether the tower qualifies as a "part," "component," or "accessory" of the capital goods, specifically the antenna?

(iv) Whether the Appellant is entitled to claim Cenvat Credit on the towers and shelters as capital goods or inputs per Rule 2(a) or 2(k) of the Cenvat Credit Rules, 2004?

(v) Whether the CESTAT was correct in holding that the extended period cannot be invoked under the proviso to Section 73(1) of the Finance Act, 1994, for a Government of India-owned company when suppression of facts is involved?

(vi) Whether the CESTAT was correct in denying the invocation of the extended period of limitation without considering the grounds raised by the department?

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Entitlement to Cenvat Credit and Definition of Immovable Property

- Relevant Legal Framework and Precedents: The legal framework involved the Cenvat Credit Rules, 2004, particularly the definitions of "capital goods" and "inputs." The precedents included conflicting decisions from the Bombay and Delhi High Courts regarding the entitlement of mobile service providers to Cenvat Credit for tower materials.

- Court's Interpretation and Reasoning: The court referenced the Supreme Court's decision in Bharti Airtel Ltd. v. Commissioner of Central Excise, which clarified that towers and pre-fabricated buildings (PFBs) are not immovable property and qualify as "inputs" under Rule 2(k) of the Cenvat Credit Rules, 2004.

- Key Evidence and Findings: The court noted that towers and PFBs are indispensable for the functioning of antennas, which are used to provide mobile telecommunication services, thereby establishing their role as inputs.

- Application of Law to Facts: The court applied the Supreme Court's interpretation to conclude that the Appellant-BSNL is entitled to Cenvat Credit for the materials in question.

- Treatment of Competing Arguments: The court favored the Delhi High Court's interpretation, which was upheld by the Supreme Court, over the Bombay High Court's contrary view.

- Conclusions: The court concluded that the Appellant-BSNL is entitled to Cenvat Credit for tower materials and PFBs as they are not immovable property and qualify as inputs.

Issue (iii): Qualification of Tower as Part, Component, or Accessory

- Relevant Legal Framework and Precedents: This issue also revolved around the definitions within the Cenvat Credit Rules, 2004.

- Court's Interpretation and Reasoning: The court relied on the Supreme Court's finding that towers, while not directly transmitting signals, are essential for the operation of antennas, thus qualifying as components or accessories.

- Conclusions: The court determined that towers qualify as components or accessories of antennas, supporting the Appellant's claim for Cenvat Credit.

Issue (iv): Entitlement to Cenvat Credit under Rule 2(a) or 2(k)

- Relevant Legal Framework and Precedents: The court analyzed Rule 2(a) and 2(k) of the Cenvat Credit Rules, 2004, in light of the Supreme Court's decision.

- Court's Interpretation and Reasoning: The court interpreted these rules to include towers and PFBs as inputs, aligning with the Supreme Court's ruling.

- Conclusions: The court concluded that the Appellant is entitled to Cenvat Credit under the specified rules.

Issue (v) & (vi): Invocation of Extended Period and Limitation

- Relevant Legal Framework and Precedents: The relevant provision was Section 73(1) of the Finance Act, 1994, concerning the extended period of limitation.

- Court's Interpretation and Reasoning: The court did not find sufficient grounds to invoke the extended period, as the Appellant-BSNL acted under a bona fide belief regarding credit entitlement.

- Conclusions: The court dismissed the Respondent-Revenue's appeal seeking to invoke the extended period of limitation.

3. SIGNIFICANT HOLDINGS

- Verbatim Quotes: The court quoted the Supreme Court's reasoning: "Having held that the tower and pre-fabricated buildings (PFBs) are 'goods' and not immovable property... they would also qualify as 'inputs' under Rule 2(k) for the purpose of credit benefits under the CENVAT Rules."

- Core Principles Established: The judgment established that tower materials and PFBs are not immovable property and qualify as inputs under the Cenvat Credit Rules, 2004.

- Final Determinations on Each Issue: The court allowed the appeals by the Appellant-BSNL, granting entitlement to Cenvat Credit, and dismissed the Respondent-Revenue's appeal regarding the invocation of the extended period of limitation.