2025 (2) TMI 684 - HC - Service Tax

CENVAT Credit - capital goods or inputs - towers shelters and accessories used by the appellant for providing business support services are immovable property or not - emergence of immovable structure at intermediate stage (assuming without admitting) is a criterion for denial of Cenvat Credit or not - suppression of facts or not - invocation of extended period of limitation. HELD THAT - The Hon ble Supreme Court in M/s. Bharti Airtel Ltd. Vs. The Commissioner of Central Excise Pune 2024 (11) TMI 1042 - SUPREME COURT has held that Mobile Service Providers (MSPs) could avail the benefit of Central Value Added Tax/CENVAT Credit over excise duties paid on items such as mobile towers and prefabricated buildings (PFBs). The Hon ble Supreme Court has further observed that the towers and PFBs though themselves are not electrical equipments are essential for proper functioning of antenna. Thus tower being essential for rendering of the output service of mobile telephony these items certainly can be considered to be inputs akin to antenna. It is further observed that without the towers and the pre-fabricated buildings (PFBs) there cannot be proper service of mobile telecommunication. Hence these certainly would come within the definition of input under Rule 2 (k)(ii) of CENVAT Rules. Conclusion - Towers and shelters are not immovable property and qualify as inputs and capital goods under the Cenvat Credit Rules 2004. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issues presented and considered in this judgment include:

1. Whether the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) was correct in concluding that the towers, shelters, and accessories used by the appellant for providing business support services are immovable property.

2. Whether the appellant is entitled to claim Cenvat Credit on the towers and shelters either as capital goods or inputs in terms of Rule 2(a) or 2(k) of the Cenvat Credit Rules, 2004.

3. Whether the CESTAT erred in applying the nexus test with reference to MS angles and Channels, whereas the appellant contends that what was brought to the site were towers, shelters, and accessories in CKD/SKD condition for providing services.

4. Whether the appellant was justified in terms of Rule 4(1) of the Cenvat Credit Rules, 2004, in claiming Cenvat Credit of excise duty paid by the manufacturer of towers and shelters after receipt of such towers and shelters at their premises (i.e., tower sites).

5. Whether the emergence of an immovable structure at an intermediate stage (assuming without admitting) is a criterion for denial of Cenvat Credit.

6. Whether the finding of the CESTAT that there was no suppression of material facts is perverse to the materials on record.

7. Whether, in view of the stand taken by the appellant that there was suppression of material facts, the CESTAT was justified in holding that demand beyond the normal period of limitation shall not be sustainable in law.

ISSUE-WISE DETAILED ANALYSIS

1. Immovable Property and Cenvat Credit Entitlement

Relevant legal framework and precedents: The Cenvat Credit Rules, 2004, particularly Rule 2(a) and Rule 2(k), define capital goods and inputs. The Supreme Court's decision in M/s. Bharti Airtel Ltd. Vs. The Commissioner of Central Excise, Pune, clarified the classification of towers and shelters.

Court's interpretation and reasoning: The Court relied on the Supreme Court's interpretation that towers and prefabricated buildings (PFBs) are essential for the functioning of antennas and are not immovable property. They qualify as "inputs" under Rule 2(k) and as "capital goods" under Rule 2(a).

Key evidence and findings: The Supreme Court's ruling established that towers and PFBs are indispensable for mobile telecommunication services, thus qualifying them as inputs and capital goods.

Application of law to facts: The Court applied the Supreme Court's reasoning to conclude that the appellant is entitled to Cenvat Credit for the towers and shelters.

Treatment of competing arguments: The Court dismissed the argument that towers and shelters are immovable property, aligning with the Supreme Court's broader interpretation of inputs and capital goods.

Conclusions: The Court concluded that the towers and shelters qualify for Cenvat Credit as inputs and capital goods.

2. Nexus Test and Intermediate Stage Structures

Relevant legal framework and precedents: The nexus test examines the relationship between goods used and the output service provided.

Court's interpretation and reasoning: The Court found that the nexus between towers and mobile services is integral and not remote, as towers are essential for the proper functioning of antennas.

Key evidence and findings: The Supreme Court's decision highlighted the indispensability of towers for mobile services, negating the argument of remoteness.

Application of law to facts: The Court applied the Supreme Court's interpretation to affirm the integral role of towers in providing mobile services.

Treatment of competing arguments: The Court rejected the argument that intermediate structures should deny Cenvat Credit, emphasizing the essential use of towers.

Conclusions: The Court concluded that the emergence of an immovable structure at an intermediate stage does not preclude Cenvat Credit entitlement.

3. Suppression of Material Facts and Limitation Period

Relevant legal framework and precedents: The issue revolves around the applicability of the extended period of limitation due to alleged suppression of facts.

Court's interpretation and reasoning: The Court found no evidence of suppression of material facts, aligning with the CESTAT's findings.

Key evidence and findings: The CESTAT's decision, supported by the Supreme Court's ruling, indicated no suppression by the appellant.

Application of law to facts: The Court upheld the CESTAT's decision, finding no justification for applying the extended limitation period.

Treatment of competing arguments: The Court dismissed the Revenue's argument for the extended limitation period due to suppression.

Conclusions: The Court concluded that the normal limitation period applies, and there was no suppression of material facts.

SIGNIFICANT HOLDINGS

The Court held that:

- Towers and shelters are not immovable property and qualify as "inputs" and "capital goods" under the Cenvat Credit Rules, 2004.

- The nexus between towers and mobile services is integral, justifying Cenvat Credit entitlement.

- There was no suppression of material facts, and the normal limitation period applies.

The Court set aside the CESTAT's decision regarding the denial of Cenvat Credit and ordered the refund of the amount deposited by the appellant, with applicable interest.