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TMI Blog2014 (9) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... s not entitled to credit of duty paid on tower parts, green shelter, printers and office chairs ? 2. Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that the Appellant was not entitled to credit of duty paid on tower parts, green shelter on the ground that tower/green shelter is "immovable property" and hence, do not qualify as "capital goods" or "inputs" as defined under the Cenvat Credit Rules,2004 ? 3. Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that tower would not qualify as "part" or "component" or "accessory" of the capital goods i.e. antenna ?" The appeal is admitted on the above substantial questions of law. By consent of the Learned Counsel for the parties and at their request we have taken up these appeals for final hearing. The relevant facts are :- 2. The appellant is engaged in providing cellular telephone services and is paying applicable service tax on the cellular telephone services. The appellant, inter alia, availed Cenvat credit on excise duty paid on towers parts and shelters/ prefabricated buildings purchased by them and alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulates satisfaction of following two conditions:- "(a) The goods should fall under particular CSH or description specified for the purpose; (b) That in case of the service provider, the goods should be used for providing output service." It was stated that the Cenvat Credit availed by the appellant during the period October,2004 to September,2005 in respect of the following items was in contravention of Rule 2(a)(A) of the Credit Rules:- "(i) Tower and Parts of tower, (ii) Prefabricated building, (iii) Printer, (iv) Office chairs." It was stated that from the Cenvat Credit returns filed by the appellant for the said period it was found that the appellant had failed to give any 'chapter heading' under Central Excise Tariff nor the use of said goods in providing output service. Subsequently, information about use of the goods and Chapter heading under the Central Excise tariff was called for from the appellant. The same was, thereafter, furnished by the appellant vide its letter dated 8.3.2006. It was, alleged that the appellant had suppressed material facts and knowingly, willfully and wrongly had taken and utilized Cenvat credit on the said items. It was alleged that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inputs provided they are used for providing output service. The appellant also placed reliance on Rule 4 of the Credit Rules to contend that the credit in respect of "inputs" can be availed of immediately on receipt of the goods in the premises of the service provider. It was stated that credit of "inputs" can be taken in time and in any manner and non availment of whole or part of input credit immediately on receipt of inputs in the factory will not vitiate the right of the manufacturer or output service provider to take un-availed credit later. Further case of the Appellant was that the tower is part of the 'Base Transceiver Station (BTS)', which is an integrated system. It was stated that the BTS was classifiable under heading 85.25 of Central Excise Tariff Act which comprises of the tower also as one of its parts, without which the output service cannot be provided. It was, therefore, submitted that the towers are part of the eligible capital goods viz. BTS and are used for providing output services, as also the towers were eligible for capital goods credit. The appellant placed reliance on whole architecture of BTS in a GSM network in support of this submission. That the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as inputs as falling within the ambit of Rule 2(k) of the Credit Rules which defines "input". It was stated that as per the definition of term "input" irrespective of classification of the said goods under the Central Excise Tariff Act, they will qualify as "inputs" and will be eligible for input credit if they are used for providing output service. In regard to the prefabricated building, the appellant contended that they are eligible for capital goods credit as they were part of the integrated BTS and in any case they were eligible to input credit. As also, the same contention was raised in respect of office chairs and printers. As regards the penalty as proposed to be levied under rule 15(1) and (2) of the Credit Rules, the appellant submitted that the penalty provision is not attracted in view of classification of their goods as capital goods and in any case as "inputs". The appellant denied that they had availed credit wrongly by practicing fraud or by making willful mis-statement, collusion or suppression of facts. It was stated that there was no willful suppression. It was, therefore, submitted that the show cause notice as issued against the appellant be dropped. 6. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant, imposed a penalty of an amount of Rs. 2,04,39,093/- for wrongly availing credit under Rule 15(2) read with Section 11 AC of the Central Excise Act,1944. Further, payment of interest under Section 75 of the Central Excise Act at the rates applicable from time to time was also ordered. 7. The appellant being aggrieved by the order in original dated 19.12.2006 filed an appeal before the Tribunal being Appeal no.ST/49/2007. In the appeal, the principal ground of challenge to the order passed by the Commissioner disallowing Cenvat Credit was that the tower and parts thereof, prefabricated building, office chairs and printers were capital goods as falling under the definition of Rule 2(a)(A) of the Credit Rules, as also it was contended that in the alternative in any case the said goods also qualified as inputs under the definition of 'input' under Credit Rules and hence, the credit availed by the appellant was valid. The appellant also challenged the order of the Commissioner pertaining to interest on penalty on the ground that Rule 15(2) of the Credit Rules is applicable to a manufacturer and hence, levying of penalty was not proper. The appellant also field a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit amounting to Rs. 13,02,08,928/- under the provisions of Rule 14 of the Credit Rules. However, Cenvat credit on antenna amounting to Rs. 2,38,54,970/- was allowed and the demand in that regard was dropped. The demand in respect of other items viz. the tower and parts thereof and the prefabricated building was confirmed. A penalty of Rs. 13,02,08,928/- was also imposed under Rule 15(1) of the Credit Rules, 2004. In confirming the demand in respect of tower and parts thereof, it was observed by the Commissioner that tower is fixed to the earth and after its installation becomes immovable and therefore, cannot be goods. It was also observed that even in CKD or SKD condition, the Tower and parts thereof would fall under Chapter heading 7308 of the Central Excise Tariff Act which is not specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules,2004 as capital goods. It was held that tower and parts thereof are not directly utilised for output service as the same has been basically a structural support for certain equipment. It was further observed that it may not be necessary if suitable alternate support is available. Such towers by no stretch of imagination can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Rule 2(k) of the Credit Rules are also rejected. The Tribunal in dismissing appeals filed by the appellants ordered as under:- "(a) The subject items are neither 'capital goods' under Rule 2(a) nor 'inputs' under Rule 2(k) of the CENVAT Credit Rules, 2004 and hence, CENVAT credit of the duty paid thereon is not admissible to the appellant for the relevant period; (b) The CENVAT credit taken on the said items and utilized by the appellant is recoverable subject to limitation; (c) The limitation issue is remanded to the Commissioner for careful consideration and decision; (d) The question whether, on the facts and circumstances of this case, the appellant is liable to be penalized under Rule 15 of the CENVAT Credit Rules,2004 and, if so, to what extent is also remanded to the Commissioner for fresh consideration and decision; (e) The appellant shall be given a reasonable opportunity of being heard on the remanded issues." 14. We have heard Mr.V.Sridharan, learned Senior Counsel with Mr.Prakash Shah learned Advocate appearing on behalf of the appellant and Mr.Kevic Setalvad, learned A.S.G. with Mr.Pradeep Jetly and Mr.J.B.Mishra, for Respondents. 15. The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by the provider of output services. It is submitted that the goods in questions have been received by the appellant who has provided output services viz. Telecommunication services. (VI) The contention of the Revenue that after the use of the towers and parts thereof and PFB they have become "immovable", is misconceived and credit cannot be denied accepting this contention. In support of this submission, reliance is placed on the following decisions:- (a) CCE Vs. SLR Steels Ltd., (2012 (280) ELT 176 (Kar)); (b) CCE Vs. ICL Sugars Ltd., (2011(271) ELT 360 (Kar)); (c) CCE Vs. Sai Sahmita Storages Ltd., (2011(23) L.T.R. 341(A.P.)); (d) Bannari Amman Sugars Ltd. Vs. CCE, (2010(250) ELT 326 (Kar); (e) CCE New Delhi Vs. Hindustan Sanitaryware & Industries Ltd. (2002(145) ELT (SC)); (f) Orders of the Bombay High Court dated 7.10.2008 in CCE, Mumbai Vs. N.R.C.Ltd." (VII) That the towers and shelters are used for providing telecommunication services on which service tax has been paid. That capital goods viz. Antenna and BTS are fitted into the tower and shelter to provide telecommunication services and therefore, they qualify as inputs under Rule 2(k). In support of this pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) of the Credit Rules to contend that the accessories of goods fall within the ambit of capital goods when they are used for providing output services. As regards the meaning of the word 'accessory', reliance is placed on the following decisions. (a) M/s.Annapurn Carbon Industries Co. Vs. State of Andhra Pradesh, ((1976)2 SCC 273); (b) CST, Maharashtra State, Bombay Vs. L.D.Bhave & Sons, (1981(47) STC 318.); (c) Mehra Brothers Vs. Joint Commercial Officer, Madras, ((1991) 1 SCC 514); (d) Banco Products (India) Ltd. Vs. Commissioner of C.Ex., Vadodara-I, (2009(235) ELT 636 (Tri-LB)); (e) CCE, Jaipur Vs. M/s.Rajasthan Spinning and Weaving Mills Ltd., (2010(255) ELT 481 (SC)) It is submitted that these are cases in which items were held to be fall within the definition of 'input' and also 'capital goods' and hence, in any case the appellant would be entitled for availing credit of duty paid on the same. (X) In regard to the prefabricated building, it is submitted that all the aforesaid submissions are equally applicable in respect of prefabricated building/ shelter. (XI) It is submitted that green shelters are falling under Chapter heading 85.37 and q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antenna is placed and hence tower cannot be considered as a component. That the tower does not enter into the composition of antenna, it is not constituted as part of antenna. (v) It is then contended that under the definition of input under the Credit Rules, the service provider cannot avail the Cenvat Credit on input goods only the manufacturer can avail such credit. The service provider can avail of input credit and also on capital goods which satisfies the definition under Rule 2(a) of the Credit Rules. Hence, the credit on excise duty paid on tower and prefabricated buildings do not satisfy the definition of capital goods and hence, are certainly not covered as input service. In support of his aforesaid submissions, learned ASG relied on the following judgments.:- (I) Vandana Global Ltd Versus Comm. Of C. Ex. Raipur, (2010(253) ELT 440(Tri-LB)); (II) Quality Steel Tubes (P) Ltd) versus Collector of C.Ex., ((1995) 2 SCC 372) (III) Triveni Engineering & Industries Ltd & Anr Versus Comm. Of C. Ex. (2000) & SCC 29 (IV) Mittal Enginnering Works (P) Ltd Vs. Collector of Central Excice (1997) 1 SCC 203 (V) Commissioner of C.Ex.Indore Versus Cethar Vessels Ltd & Ors., ((2009)17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared alongwith the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any out service. Explanation 1- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacture;" Rule 3 provides for credit on excise duty paid in discharging liability towards service tax payable by the manufacturer. Rule 3 of Cenvat Credit Rules provides as under:- Rule 3. CENVAT credit. --- (1) A manufacturer or producer of final p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of these goods and used in the factory of the manufacturer of the final products or for providing output service, but does not include any equipment or appliance used in an office. (ii) Inputs All goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared alongwith the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; and all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any out service. Explanation 2 to the definition of inputs is relevant which includes goods used in the manufacture of capital goods which are further used in the factory of the manufacture; 21. A plain reading of the definition of 'capital goods' as defined und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. In the context of these definitions the contentions as raised by the appellant are required to be examined. The position of the goods in question vis- a-vis the plain application of the rules is that the tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods. Further in the CKD or SKD condition the tower and parts thereof would fall under the chapter heading 7308 of the Central Excise Tariff Act. Heading 7308 is not specified in clause (i) or clause (ii) of rule 2 (a) (A) of the Credit Rules so as to be capital goods. The goods in question would not be capital goods for the purpose of CENVAT credit as they are neither components, spares and accessories of goods falling under any of the chapters or headings of the Central Excise Tariff Schedule as specified in sub-clause (i) of the definition of capital goods. 24. The alternate contention of the appellant is therefore that tower is an accessory of antenna and that without towers antennas cannot be installed and as such the antennas cannot function and hence the tower should be treated as parts or components of the antenna. It is urged that antenna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. ICL Sugars Ltd., (2011(271) ELT 360 (Kar))" the issue was in regard to the input used in the manufacturing of storage tank which was an immovable property are admissible for MODVAT credit. The Assesse was a sugar factory and had claimed CENVAT credit on the raw materials used for construction of storage tanks. The assessing authority had granted credit in respect of water storage tank on the ground that water is an essential raw material of sugar after conversion into steam. The water storage tank is a component of main machinery viz. boiler and the excise duty paid on the inputs in the construction of water storage tanks were held eligible for availing Modvat credit. However, Modvat credit was disallowed, in respect of syrup and molasses storage tank - MS staging of tank and shell plates/ bottom plates/ roof plates used for constructing non-excisable final molasses storage tank and shell of final molasses storage tank. This was on the ground that molasses tank is constructed on the floor with a concrete foundation and the shell of the final molasses storage tank will be placed over the concrete to hold about 2500 tons, and that since the final molasses storage tank is erected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale tax returns for the period from April, 2005 to September, 2005 the assessing officer came to a conclusion that the assessee had taken credit on Central Excise duty paid on cement, iron bars, expansion bellows and pipes, and hence, a show cause notice was issued proposing to adjudicate and determine short paid service tax and penalty thereon. The Assessing authority passed an order in original confirming the show cause notice and demanding service tax and interest thereon. The Assessee had preferred an appeal before the Commissioner of Central Excise which came to be dismissed. Before the High Court, it was contended by the Revenue that the cement used for making foundation and TMT bars used for reinforcement, cannot be treated as capital goods as defined in Rule 2(a) of the Rules and that the assessee had wrongly claimed credit when the items were outside the definition of input under Rule 2(k).That the assessee had suppressed this fact and filed returns adjusting the credit to which the assessee was not entitled to. In the context of the definition of 'storage and warehousing' as falling under Section 65(102) of the Finance Act, the Court considered the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Head Transfer oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being "used in or in relation to the manufacture" stands complied with. In our view, one has to therefore read the definition in its entirety." The reliance on this judgment may not be helpful to the appellants inasmuch as the definition of storage and warehousing as contained in Section 65(102) of the Finance Act itself stand on a different footing. In that context the Division Bench of Andhra Pradesh High Court has held that use of cement and TMT bars by the assessee for providing storage facility has become integral part of storage and warehousing and without the use of cement and TMT bars, storage and housing coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anitaryware. The assessee had claimed the benefit of exemption under a Notification no.217 of 1986. The revenue declined to grant benefit of exemption. The Tribunal had set aside the orders passed by the Excise Authority and held that exemption would apply to the assessee. The Supreme Court after taking into consideration the contents of the Notification no.82/87 which showed that the description of inputs given in column (2) under Chapter 25, would be 'plaster of paris' and the final product given in column (3) under Chapter 69 would be 'ceramic goods' held as under:- "9. The proviso postulates a situation where the final product itself is exempted in which case alone the exemption of plaster of paris under Notification No.217/86 cannot be availed. It is nobody's case that the sanitaryware falling under Chapter 69 has been exempted by the Central Government. What is exempted is plastic moulds but they are only inputs and not final product in this case. This fact is further clarified by the Central Government in Notification No.221/96, as amended by Notification No.89/89. Item 6 thereof clearly mentions that plaster of paris moulds are input for ceramic products. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modern textile industry. It was held that humidifires are machinery used in the manufacture of cloth and fall within Entry 15 of Schedule C to the Bombay Sales Tax Act,1959. The appellants on the basis of this decision intend to canvass that similar to the position of humidifires as held by the Division Bench of Gujarat High Court, to be used in manufacturing of the goods, the towers and parts thereof and PFB are also to be construed to be used in providing output services and hence, credit ought to be granted. This decision, however, would not be applicable to the towers and PFB in view of the fact that they are not directly used for the output services namely telecommunication services and further as they are non excisable and hence, not falling within the definition of 'input' as defined under Rule 2(k) of the Credit Rules. (b) The decision of the Supreme Court in the case of "Member, Board of Revenue, West Bengal Vs. M/s.Phelps & Co.(P) Ltd., (1972) 4 Supreme Court Cases 121" concerned the issue in regard to the gloves used by workmen engaged in hot jobs and handling corrosive substances to qualify as goods used in the course of manufacture of the goods for sale. The i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notification the importer would be exempted from payment of customs duty and additional duty. The assessee had imported machines for processing of fabric/yarn, fabric inspection machines, machines for knitting and dying fabrics and other such machines. The assessee was denied benefit of 100% exemption on the ground that the machines imported by them were not required for the purposes of manufacture of textile garments. In this context, the Supreme Court in paragraphs 8 and 9 has observed as under:- "8. Further, in our view, this Notification is very clear. The 100% exemption is given to capital goods required for manufacture of, amongst others, "textile garments". The term "capital goods" has been defined in the Notification. The term "capital goods" means goods which are used in the manufacture of that product and also goods which would be required for manufacture or production of other goods including packaging machinery and equipments. The term also includes instruments for testing, research and development. The term includes machines for pollution control, refrigeration, power generating sets etc. Thus, the example, if after manufacturing of textile garments the same hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of "Indian Farmers Fertilisers Co-op.Ltd. Vs. C.C.E., Ahmedabad, (1996(86) E.L.T. 177(S.C.))" the issue was 'whether the ammonia used in the off-site plants is also ammonia which is used elsewhere in the manufacture of fertilisers'. An exemption Notification no.187/61- C.E. was issued under the provisions of Rule 8 of the Central Excise Rules whereby the Central Government exempted raw naphtha falling under item no.6 of the First Schedule to the Central Excises and Salt Act,1944, from the payment of excise duty in excess of Rs. 4.36 per kilolitre at 15 degrees centigrade. The exemption Notification applied "in respect of such raw naphtha as is used in the manufacture of Ammonia provided such Ammonia is used elsewhere in the manufacture of fertilisers" and the procedure set out in Chapter -X of the said Rules was followed. The appellant-assessee was in the manufacture of urea which was a fertilizer and utilised for the purpose raw naphtha. The raw naphtha was obtained at the concessional rate of duty and was used for producing ammonia which in turn was used partly, directly in the urea plant and partly, directly, in the production of urea by being employed in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, Calcutta-II vs. Eastend Paper Industries Ltd., (1989(4) SCC 244) held that the treatment of effluents from a plant is an essential and integral part of the process of manufacture in the plant and that the apparatus used for such treatment of effluents in a plant manufacturing a particular end product is part and parcel of the manufacturing process of that end product. It was held that the ammonia used in the treatment of effluents from the urea plant of the assessee was therefore, required to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia would be entitled for exemption. This conclusion was reached on the basis of the observations that the exemption Notification did not require that the ammonia should be used directly in the manufacture of fertilisers and that it requires only that the ammonia should be used in the manufacture of fertilisers. It was observed that exemption notification must be so construed as to give due weight to the liberal language it uses. From perusal of the facts and the observations of the Supreme Court in this decision as relied upon by the appellants, it is clear that the Supreme Court had con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Section 8(3)(b) mere intention to use the goods in the manufacture or processing of goods for sale, will not be a sufficient ground for specification. The intention must be to use the goods as raw materials, as processing materials, as machinery, as plant, as equipment, as tools, as stores, as spare parts, as accessories, as fuel or as lubricants. It is in this context, it was held that the expression "in the manufacture of goods" should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods and where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression "in the manufacture of goods". The aforesaid observations of the Supreme Court were clearly in the context of Section 8(3)(b) of the Central Sales Tax Act and Rule 13 as relevant in the said decision. However, the context in the present case as falling under the definition of 'input' as defined under Rule 2(k) would not permit the interpretation as it became possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) provide other assets like shelter, air-conditioning equipment, diesel generator, electrical wiring, power plant, etc., for their network operations and concluded that sharing of infrastructure is incidental and only as a means of rendition of telecommunication service; that the effective control and possession of such equipment continues with the passive service provider; is not parted to the other service providers who are merely permitted use of this equipment; and levying tax on the proceeds received by the passive infrastructure provider from sharing of their infrastructure with other service providers, treating it as a sale under Explanation IV to sub-section (28) of Section 2 of the APVAT Act,2005, is without jurisdiction and illegal. 39. In the facts and circumstances of this lis (adverted to supra), in view of the ratio deducible from the judgments of the Supreme Court in Rajasthan Electricity Board (1997) 104 STC 89(SC); (1997)10 SCC 330 and in J.K.Cotton Spinning & Weaving Mills Co.Ltd. (1965)16 STC 563 (SC), we are of the considered view that the purchase of goods by the petitioners from outside the State, comprising goods specified in the certificates of registratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Section 8(1) and 8(3)(b) of the Act. The Division Bench was dealing in a case arising under the Central Sales Tax Act and was examining the benefits which would be available to the dealer of reduction in duties on a "C" form being availed by the dealer. It is in this context that the Division Bench had come to the conclusion that the cell phone towers are integral to telecommunication network. Secondly, the expression "telecommunication network" was being considered in the context of Section 8(1) read with section 8(3)(b) of the Central Sales Tax Act. It was also observed that in the case of "State of Andhra Pradesh Vs. Bharat Sanchar Nigam Ltd." (supra) ruling of the Division Bench of Andhra Pradesh High Court, it was held that telecommunication tower is immovable property and that it being a immovable property must have direct relevance to the issue as arising for adjudication in the said case. In the present case the issue is one which falls under the Credit Rules and as to whether towers and parts thereof fall within the scope and ambit of the specific definition of Capital goods and the definition of inputs under the Credit Rules,2004. Any issue falling for int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med that it is eligible for Cenvat Credit of service tax paid on input services used for the ammonia storage tanks installed at JNPT so that input/ raw material stored therein was intended for manufacture of the final product at the factory of the appellant at Taloja. The Cenvat Credit in respect of the services of consulting engineers, technical inspection and certification, construction, erection, commissioning and installation services for the installation of the ammonia storage tanks was claimed. The facts of this case can no manner apply to towers and parts thereof, prefabricated building/shelter which are immovable property and not excisable goods and hence, reliance on this judgment is misconceived. 26. The appellants in support of their alternate contention that the 'towers are the accessories of antenna' and therefore, qualify as 'capital goods' falling under Chapter Heading 85 and that PFB is also an accessory of BTS equipment falling under Chapter 85 on the basis of definition of 'capital goods' as defined under rule 2(a)(A) of the Credit Rules, relied on the following decisions:- (a) In the case of "M/s.Annapurna Carbon Industries Co. Vs. State of Andhra P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Bombay Sales Tax Act,1959 and the rate of sales tax as would be applicable to the items. It is in this context the Division Bench has considered the judgment of the Supreme Court in the case of M/s.Annapurna Carbon Industries Co. Vs. State of Andhra Pradesh" (supra), and has observed as under:- "Thus, an accessory is considered as something that is an extra or additional item, an adjunct to the main item. It may add to the performance of the main items but it can also be for more convenient use of the main item. It fact, there can be various types of accessories and whether an item constitutes an accessory or not will depend upon how the item is considered in common parlance more than in terms of its dictionary meaning. For example, the leather case in which a transistor radio is kept is an accessory though it does not add to the performance of the transistor radio. At the highest, it protects the transistor radio and makes for its easy carriage. 7. In the case of Annapurna Carbon Industries Co. v. State of Andhra Pradesh the Supreme Court was required to consider whether are carbons known as "cinema arc carbons" were accessories required for use along with cinematographic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stores to processing machine and from one machine to other machine and to finished goods storage. They were mainly used for storage and supply of different components of radiators, in the production of which the appellant is engaged. The issue which is considered was 'whether the plastic crates can be considered as accessories as falling under clause (iii) of the goods specified in Clause (I) of the definition of capital goods as defined under 2(b) of Cenvat Credit Rules,2002. The observations in paragraphs 14 and 19 are relevant they read as under:- "14. Reference to all the above decisions was necessary to understand the scope of the term "accessory". If the plastic crates are held to be an accessory to the main machine, appearing against Sr.no.(i) of the definition of the capital goods, as contained in Rule 2(b) of the Cenvat Credit Rules,2002, they would earn the status of the eligible capital goods for the purposes of Modvat. The appreciation of the various judgments on expression "accessory" as discussed above, leads us to observe that an accessory may or may not be required for essential working of the main unit, but is an object which is used for the convenience and ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision holding against the admissibility of the plastic crates as accessory. In any case, having elaborately discussed as to what is the meaning and scope of the term "accessory", as interpreted by Hon'ble Supreme Court in various decisions and by Tribunal, it has to be held that the plastic crates are eligible capital goods for the purposes of Modvat credit. We answer accordingly." The insistence on behalf of the appellants that the analogy as applied by the Larger Bench be applied in the facts of the present case is not acceptable. The argument of the appellants is that the antenna is being classified as capital goods and being held eligible for availing credit of duty paid, tower and PFB become its accessories. To reach to this conclusion on the lines on which the larger Bench of the Tribunal in this decision has held, it would be required to be held that it is impossible for cellular antenna to function in the absence of a tower or a prefabricated building. It is not a case of the appellants that the antenna becomes non functional in the absence of tower and prefabricated building. On the basis of technical material it is clear that an antenna can function irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there in Rule 57Q, as applicable in the instant case, yet the "user test" evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of "capital goods" would depend upon the user it is put to. 13. Applying the "user test" on the facts in hand, we have no hesitation in holding that the steel plates and M.S.channels, used in the fabrication of chimney would fall within the ambit of "capital goods" as contemplated in Rule 57Q, it is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are manufactured. It is the admitted case that these items are first charged into the furnace as fettling materials. The items dissolve and seal the crevices in the refractory walls of the furnace to prevent leaking of the liquid metal from the furnace and to reduce the erosion of the refractory lining of the furnace. The items lose their identity and are consumed in the process. Some part of the items remains in the liquid metal which forms the ingot and the balance forms part of the residue or slug." It is on the basis of the aforesaid observations, the Court in paragraph 23 concluded as under:- "23. The respondents then argued that steel ingots could be manufactured even without the items. That may be so, but that is immaterial. The definition of inputs is not dependent upon what ought to be used but what is in fact used. There is no dispute that the petitioner No. 1 had in fact, used and uses the items in the manufacturing of ingots. The Supreme Court has also held that manufacture would include a process which was commercially expedient in the production of goods [See : Collector of Central Excise v. Eastend Paper Industries - ; Collector of Central Exise, Jaipur v. Rajastha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (as His Lordship then was) observed thus:- "15. The White Paper on a State level Value Add Tax published under the aegis of the Empowered Committee of State Finance Ministers on 17 January 2005 took note of the fact that in the existing structure of indirect taxation, the tax regime resulted in a cascading tax burden where inputs are first taxed and after a commodity is produced with an input tax the output is taxed again. VAT was considered as a preferred alternative to rationalize the overall tax burden so as to obviate the cascading effects of indirect taxation. Moreover, VAT was to replace existing systems of inspection by a system of built in self assessment by dealers and auditing, which would make the system simple and transparent. Improved tax compliance and the augmentation of revenue were important policy objectives of the system of value added taxation. 16. As an economic concept, translated into State legislation VAT sub-serves two important fiscal goals. First a system of taxation based on VAT obviates a cascading effect of tax burdens. This is achieved inter alia by the grant of a set off for input taxation and in respect of taxes paid on previous purchases. Secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to their final products as inputs for capital goods or none of the above, and whether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant. It was the case of the assessee that structural support should be considered as a part of capital goods and that the definition of 'capital goods' under the Credit rules includes goods falling under Chapters 82, 84, 85 and 90, as well as specified goods such as pollution control equipment, storage tanks etc. and the only condition laid down in the definition is that these should be used in the factory of the manufacturer of the final products. It was further contended by the Assessee that the definition of 'capital goods' does not stipulate that same should be in movable condition and there is no bar to avail credit if a plant and machinery item is embedded to earth. The Assessee also contended that 'capital goods' cannot be made functional unless structural support is provided and such machineries are erected and installed in the factory and that further the capital goods becoming immovable property is irrelevant. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking into consideration the law laid down by the Supreme Court, it was held that phrases 'capital assets' and 'capital goods' cannot be held to be synonymous and that the arguments on behalf of the assessee that the term 'capital goods' included plants, structures embedded to earth was negatived. It was further held that the foundation and supporting structures are neither machinery items nor components, spares and accessories of machinery, nor that those items have been listed for special inclusion in the definition. The observations of the Larger Bench in paragraphs 41, 42 and 43 of this decision are relevant which read as under:- "41. Keeping in view the scheme of the Act and the Cenvat Credit Rules, we are of the opinion that the phrases 'capital assets' and 'capital goods' cannot be held to be synonymous. The phrase capital goods has been defined in the Cenvat Credit Rules enumerating a number of goods. Obviously, the said definition of 'capital goods' has to be adopted while interpreting the rules for the purposes of granting and denying of credit. The phrase 'capital assets' has a wider meaning and it would certainly include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edded to earth are in the nature of immovable property and are not goods or excisable goods. Not only is the departmental contention well supported by a plethora of case laws, but even by the definition of 'capital goods' in the Cenvat Credit Rules which reads as "the following goods" supplemented with a list of goods that follows. 43. Since the foundation and the supporting structures cannot be considered as capital goods, nor as parts or accessories of capital goods, nor the same have been specifically listed in the definition of capital goods; (as tubes and pipes and storage tank etc. have been specifically listed), the question of treating cement and steel items as inputs for capital goods cannot arise. Hence, Explanation 2 to Rule 2(k) cannot be held to cover cement and steel items used for laying foundation and for building structural support even during the period prior to the 2009 amendment." (b) In the case of "Quality Steel Tubes (P) Ltd. Vs. Collector of Central Excise, U.P., ((1995)2 Supreme Court Cases 372)" the question which fell for consideration of the Supreme Court was ' whether the tube mill and welding head erected and installed by the appellant fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures, erections and installations. That surely would not be in consonance with accepted meaning of excisable goods and its exigibility to duty." (emphasis supplied) (c) In the case of "Triveni Engineering & Industries Ltd. & Anr. Vs. Commissioner of Central Excise & Anr., ((2002) 7 Supreme Court Cases 29)". the assessee dealt with the turbo alternator which had two components viz. (I) steam turbine and (ii) complete alternator also called as generator. The assessee manufactured steam turbine in their factories and paid excise duty on them. The assessee however, purchased duty-paid complete alternators which were delivered at the customer's site. By the combination of 'steam turbine' and 'alternator' a turbo alternator emerged at the customer's site. The Excise Authorities and CEGAT held that turbo alternators were liable to excise duty under Heading 85.02 of the Central Excise Tariff Act,1985. In this context the Supreme Court in paragraph 14 held as under:- "There can be no doubt that if an article is an immovable property, it cannot be termed as excisable goods for purposes of the Act. From a combined reading of the definition of immovable property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomer a complete mono vertical crystalliser had left the appellants' factory and that therefore, mono vertical crystallisers were marketable. The Tribunal ought to have remembered that the record showed that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundations to the earth and, therefore, were not, in any event, marketable as they were." (e) The decision of the Supreme Court in the case of "Commissioner of Central Excise, Indore Vs. Cethar Vessels Ltd. & Ors., ((2009)17 Supreme Court Cases 551)", concerned an issue as to whether the erection of boiler at site by assembling various components and parts has brought into existence immovable property or not, fell for consideration, The Revenue had contended that fabrication of such plants out of duty-paid bought out items amounts to manufacture of a new marketable commodity and therefore, excise duty is payable. The Tribunal had held that no excise duty is leviable and thus these plants are not subject to excisability. While accepting the stand of the assessee that these plants are basically systems comprising of various components and are thus in the nature of systems and not machines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the earth only for the purpose of ensuring vibration free movement) (e) If items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods.........." (f) In the Division Bench's judgment of this Court in the case of "Bharti Tele-Ventures Ltd. and Sunil Bharti Mittal Vs. State of Maharashtra, (2007 Vol.109(1) Bom.L.R. 0595)" the issue was whether the construction of cell sites and erection of towers is included in "building" and/or "development" within the meaning of Maharashtra Regional and Town Planning Act,1966 (for short 'MRTP Act') or other Corporations Act. The issue arose in the context of a Notification dated 4.7.2005 issued by the Government of Maharashtra under Section 154 of the MRTP Act by which the Government of Maharashtra had sought to amend its earlier order dated 9.10.1996 thereby authorising various Municipal Corporations in the State to charge retrospectively from 9.10.1996 a premium at the rate of land value as per the ready reckoner for the area o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uts and bolts were used to imbed the tank to the earth by itself is not conclusive. Though the witness stated that the tank is capable of being shifted, as a fact the tanks were never shifted from the places of erection. By scientific process, the tanks stand on their own weight on the earth at the place of erection as a permanent structure. 33. The petroleum products are being stored through pipes and are taken out by mechanical process. The operational mechanisation also though relevant, is not conclusive. The rateable value is based on the rent, which the building or land is capable to fetch. Due to erection of the tanks whether the value of the demised property had appreciated or not, is also yet another consideration. Undoubtedly, when the tanks are erected and used for commercial purposes, the value of the demised property would get appreciated. The annual letting value is capable of increase. However, the rate of increase is a question of fact but the fact remains that the value of the land gets increased by virtue of erection of the storage tanks. Considering from this perspective we have no hesitation to hold that the the petroleum storage tanks are structures or things a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same being dangerous to life, health or property or likely to create nuisance is concerned, neither is there any opinion in this regard nor can it be at this stage said that such installation will fall in the said category. The reliance on Section 430 is misconceived without showing that licence or written permission is needed for such licence. I am thus W.P.(C) 3267, 3423, 439/10, 13476, 13863, 14178, 14199/ 09, 2382, 4084/10 Page 56 of 68 unable to hold that the Commissioner under the Act is empowered to prevent installation of such towers without a licence. 40. I am however firmly of the view that the said towers definitely fall within the definition of building which includes within its ambit a structure of metal or other materials. What else is a tower but a metallic structure. The contention of the senior counsels for the petitioners that a building has to be necessarily a house/habitable cannot be accepted." (i) In the decision of the Division Bench of this Court in the case of "Commissioner of C.Ex., Mumbai-IV Vs. Hutchison Max Telecom P.Ltd., (2008(224) E.L.T. 191 (Bom.)", the issue which fell for consideration of the Division Bench inter alia was pertaining to transmiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pments which have gone into manufacture of the above transmission apparatus. The argument that after installation of BTS of cell site it becomes immovable properly was rejected. The statement of Narayan in his statement dated 28/1/2004 was partly relied upon to hold it was not immovable property. 8. The Learned Tribunal re-examining the various aspects of what is described as determination of levy of duty of base station, noted that the appellant is engaged in providing Mobile Telecommunication Service (MTS) and is based on global system for mobile communication (GSM). The infrastructure for GSM is similar to other networks. The Tribunal then set out the various infrastructure required for GSM and noted that GSM Architecture consists of Radio Station Sub Systems (constitution of MS, BTS, & BSCs) which are networked with the operation support subsystem (constitued MSCs) which networked with the Public network. The entire sub systems of BTSs and BSCs or MSCs and the number of constituents would depend on the Geographical area covered by the Cellular Network and there is no fixed designation numbers to constitute a component of transmission apparatus. It is not necessary to set out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the second finding of marketability recorded by the Tribunal namely that BTS/BSC is not marketable as licence is required from the Department of Telecommunication, Government of India. The facts on record would indicate that the equipments erected are embedded in the earth or on a building. The Tribunal noted that revenue does not contest or dispute the fact that whenever BTS/BSC site has to be relocated, all the equipments like BTS/BSC, Microwave Equipment, batteries, control panels, air conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reassembled at new site. This involves damages to certain parts like cable trays, etc. which are embedded/fixed to the Civil structure as also the BTS microwave equipment itself. All the components of the new product cannot be shifted as an illustration the room housing the equipment. This act of dismantling from the permanent site would render such goods not marketable. Apart from that the goods cannot be re-erected as in the previous place as the requirement of each place is different. Further, from the statement of Narayan as set out in the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired the support of structural items for their installation. In view of this, the assessee started the manufacturing of iron and steel structures, after purchasing excise duty paid iron and steel sheets, angels, nuts and bolts etc. for the installation of the said machineries. Thus, iron and steel structures were classified under sub-heading 7308.90 of Chapter 73 as capital goods and claimed exemption under Notification date 16.3.1995 which exempts capital goods as defined in Rule 57Q of the Rules, manufactured and used within the factory from the excise duty leviable on such goods. The Assistant Commissioner, Central Excise had issued a show cause notice to the assessee for short payment of excise duty claiming that the notification is not applicable to iron and steel structures and hence, exemption was not available to the assessee. After considering the reply as filed by the Assessee, the Assistant Commissioner confirmed the duty demand as also imposed a penalty on the ground that notification was not applicable to the iron and steel structures as they are neither inputs used in relation to manufacture of final products nor capital goods as defined in column 2 of the table giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured and used within the factory of production. The Notification specifically states that what is exempted under the Notification are "capital goods" as defined in Rule 57Q. Rule 57Q specifies five categories of items as capital goods. It is not the case of the assessee or its learned counsel that the exemption claimed was on Items 1 to 4 of the Table to Rule 57Q but as components which would fall under item No.5 of the Table to Rule 57Q. Therefore, in order to get the benefit of non excise duty on Iron and Steel Structures, it had to be established by the assessee that Iron and Steel Structures are utilized as component parts for the finished products, viz. vacuum pan, crystallizers, sugar grader, elevator, cooling tower etc. Our Analysis And Conclusion : 19. It appears to us, in the light of the meaning of the expression `component parts' that the iron and steel structures are not essential requirements in the sugar manufacturing unit. Anything required to make the goods a finished item can be described as component parts. Iron and Steel structures would not go into the composition of vacuum pans, crystallizers etc. If an article is an element in the composition of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be entitled to the credit of the duty paid on the item in question on the output service namely the cellular service. We may observe that a plain reading of the definition of 'capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No.6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specified at sub clauses (i) and (ii) which are used either in the factory for manufacture of final products but does not include any equipment or appliance used in the office and those used for providing output service. Further in the CKD or SKD condition the tower and parts thereof would fall under the chapter heading 7308 of the Central Excise Tariff Act. Heading 7308 is not specified in clause (i) or clause (ii) of rule 2 (a)(A) of the Credit Rules so as to be capital goods. Further the Appellants contention that they were entitled for credit of the duty paid as the Base Transreceiver Station (BTS) is a single integrated system cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose, within the factory of production, and as provided in sub-clause (ii) all goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Explanation (2) of sub-rule (k) is also which provides that input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. A plain reading of the definition of input indicates that in the present context, clause (i) of Rule 2 (k) may not be of relevance as same pertains to manufacturing activity and pertains to goods used in relation to manufacture of final product or any other purpose within the factory of production. Sub- clause (ii) has been referred to as relevant by the appellant as the same pertains to goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods. 33. The alternative contention of the appellant is that tower is an accessory of antenna and that without ..... X X X X Extracts X X X X X X X X Extracts X X X X
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