2019 (9) TMI 837 - AT - Service Tax

CENVAT credit - input/input services used for commissioning and erection of BTS towers/ shelters - construction services - erection, commissioning installation services - technical testing analysis services - Difference of Opinion - HELD THAT - Since on the issue there is the decision of the Bombay High Court which is binding on the bench in Mumbai, we refer the matter to President for constituting a larger bench to decide the controversy. The matter is referred to President for constitution of larger bench to consider following questions of law - Whether the CENVAT Credit in respect of input services namely construction services, erection, commissioning installation services, technical testing analysis services which were used by the telecom service providers for commissioning and erection of BTS towers/ shelters used for providing telecom services is admissible or otherwise?

Summary

Issues Involved:
1. Admissibility of CENVAT Credit on input services used for erection and commissioning of telecom towers.
2. Invocation of the extended period for demand.
3. Imposition of penalties under Rule 15(3) and Rule 15(1) of the CENVAT Credit Rules, 2004.

Detailed Analysis:

1. Admissibility of CENVAT Credit on Input Services:
The primary issue revolves around whether CENVAT Credit is admissible on various input services such as construction services, erection, commissioning & installation services, and technical testing & analysis services used for the erection and commissioning of telecom towers by telecom service providers.

- Appellant's Argument:
- The appellant argued that CENVAT credit on input services used for commissioning and erection of towers has been allowed by the Tribunal in their own case and in similar cases of other telecom service providers.
- The Bombay High Court’s decision in Bharti Airtel Ltd. disallowed credit on inputs but did not address input services. They cited several cases where credit on input services was allowed even when the resultant structure was immovable property.
- They emphasized that the definition of input services up to March 2011 included services used for setting up premises for providing output services, and post-2011, only specific exclusions applied.

- Revenue's Argument:
- The revenue contended that the Bombay High Court in Bharti Airtel disallowed credit on inputs used for telecom towers, and the same rationale should apply to input services.
- They argued that the definition of input and input services are similar concerning service providers, and the nexus test applied to inputs should also apply to input services.
- They referred to several judgments supporting the denial of credit on inputs and input services used for immovable property.

- Tribunal's Analysis:
- The Tribunal noted that the Bombay High Court's decision in Bharti Airtel disallowed credit on inputs used for erecting telecom towers, which were considered immovable property.
- The Tribunal observed that the logic applied by the High Court for inputs should equally apply to input services used for the same purpose.
- Previous decisions by the Tribunal allowing credit on input services were distinguished based on the facts and were not considered binding precedents.
- The Tribunal referred the matter to a larger bench for a definitive decision on the admissibility of CENVAT Credit on input services used for telecom towers.

2. Invocation of Extended Period for Demand:
The Commissioner invoked the extended period under the proviso to Section 73(1) of the Finance Act, 1994, for the first show cause notice.

- Appellant's Argument:
- The appellant argued that the extended period of limitation should not be invoked as the issue was already settled in their favor in previous cases.

- Tribunal's Analysis:
- The Tribunal deferred the consideration of the limitation issue until after the larger bench's decision on the merits of the case.

3. Imposition of Penalties:
Penalties were imposed under Rule 15(3) and Rule 15(1) of the CENVAT Credit Rules, 2004, read with Section 78 of the Finance Act, 1994.

- Appellant's Argument:
- The appellant contended that no penalties should be imposed given the circumstances and the legal precedents in their favor.

- Tribunal's Analysis:
- The Tribunal deferred the consideration of penalties until after the larger bench's decision on the primary issue of admissibility of CENVAT Credit.

Conclusion:
The Tribunal referred the matter to the President for constituting a larger bench to decide the following question of law: "Whether the CENVAT Credit in respect of input services namely construction services, erection, commissioning & installation services, technical testing & analysis services which were used by the telecom service providers for commissioning and erection of BTS towers/ shelters used for providing telecom services is admissible or otherwise."

All other issues, including limitation and penalties, will be considered after the larger bench's decision on the referred issue.