2024 (10) TMI 149 - AT - Service Tax

Disallowance of Cenvat Credit taken by the Appellant on Input Services used in the BTS (Base Transceiver Station) Towers/Shelters - HELD THAT - This appeal was heard earlier also by this Tribunal, when vide order dated 28.6.2019 the Bench referred the issue to the Larger Bench while taking note of the decision of the Hon ble High Court of Judicature at Bombay in the matter of Bharti Airtel 2016 (3) TMI 165 - CESTAT NEW DELHI (LB) where the issue of admissibility of Cenvat Credit in respect of input used for erecting and commissioning the telecom towers was decided against such admissibility, whereas the Mumbai Bench of Tribunal in appellant s own cases 2019 (9) TMI 837 - CESTAT MUMBAI , 2016 (9) TMI 1136 - CESTAT MUMBAI and 2016 (10) TMI 1197 - CESTAT MUMBAI and few other co- ordinate Benches allowed the Cenvat credit in respect of input services used for commissioning and erection of towers, which according to the referral Bench, is contrary to the decision of Hon ble High Court in the matter of Bharti Airtel. Accordingly, the said Bench referred the matter to the Hon ble President of the Tribunal for constitution of larger Bench to consider the issue. The referral Bench has referred the issue to the Larger Bench because according to them the issue about admissibility of Cenvat Credit in respect of input services used for erection and commissioning of Telecom Towers by the Telecom Service providers have been decided by various Benches of the Tribunal without examining the issue in the light of the definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 as well as the decision of the Hon ble Bombay High Court in the matter of Bharti Airtel. As per the referral Bench the Hon ble High Court while deciding the issue about admissibility of Cenvat Credit against the assessee therein, did not make any distinction in respect of inputs and input services - It also observed that the services in respect of which the Cenvat credit has been claimed are not for providing the output services but have been used for commissioning and erection of telecom towers, which have been held by the Hon ble High Court as immovable property, not goods and thus the Cenvat chain is broken the moment it is admitted that these services have been used for erection and commissioning of the immovable property. The Larger Bench on the aforesaid issues/doubts raised by the referral Bench, while answering the reference, has observed that the decision in Bharti Airtel is limited to input as source of credit consequent on finding of ineligibility for claim as capital goods and, therefore, not relevant in dispute over entitlement of input service as credit. There is no break in CENVAT chain insofar as input service is concerned. The impugned order is set aside and the appeal filed by the appellant is allowed.

Issues Involved
1. Admissibility of CENVAT Credit on Input Services used in the erection and commissioning of BTS Towers/Shelters.
2. Interpretation of the definition of 'input service' under Rule 2(l) of CENVAT Credit Rules, 2004.
3. Applicability of the Bharti Airtel judgment to input services.

Detailed Analysis

1. Admissibility of CENVAT Credit on Input Services used in the erection and commissioning of BTS Towers/Shelters
The appellant, a telecommunication service provider, utilized various input services such as construction, erection, commissioning, and installation services for setting up BTS Towers/Shelters. The Principal Commissioner disallowed the CENVAT Credit taken on these input services, asserting that the BTS Towers/Shelters are immovable property and hence do not qualify as 'goods.' Consequently, the input services used for their erection and commissioning were deemed inadmissible for CENVAT Credit. This led to the issuance of three show cause notices and a demand for Rs. 70,42,49,379 along with interest and penalties.

2. Interpretation of the definition of 'input service' under Rule 2(l) of CENVAT Credit Rules, 2004
The Tribunal earlier referred the matter to a Larger Bench to resolve conflicting decisions on the admissibility of CENVAT Credit for input services used in erecting and commissioning telecom towers. The Larger Bench was tasked with interpreting whether the input services used for setting up BTS Towers/Shelters qualify for CENVAT Credit under Rule 2(l) of CENVAT Credit Rules, 2004. The Larger Bench concluded that the decision in Bharti Airtel was limited to 'input' and not 'input service.' Therefore, the CENVAT chain remains unbroken for input services, making them eligible for credit.

3. Applicability of the Bharti Airtel judgment to input services
The referral Bench had raised concerns that the Bharti Airtel judgment, which denied CENVAT Credit for inputs used in telecom towers, should also apply to input services. However, the Larger Bench clarified that the Bharti Airtel decision is specific to 'inputs' and does not extend to 'input services.' The Larger Bench emphasized that the CENVAT Credit Rules, 2004, distinguish between 'input' and 'input service,' and the eligibility criteria for each are different. Therefore, the decision in Bharti Airtel does not affect the admissibility of CENVAT Credit for input services used in the erection and commissioning of BTS Towers/Shelters.

Conclusion
The Larger Bench's interpretation that the Bharti Airtel decision is limited to 'inputs' and does not apply to 'input services' was pivotal. This clarification led to the setting aside of the impugned order and allowed the appeal filed by the appellant. The Tribunal concluded that the input services used for the erection and commissioning of BTS Towers/Shelters are indeed eligible for CENVAT Credit, thereby resolving the dispute in favor of the appellant.

(Pronounced in open Court on 30.09.2024)

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