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TMI Blog2019 (9) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... njiv Srivastava, Member (Technical) Shri S.S. Gupta, C.A., with Shri Manoj Chauhan, C.A., for the Appellant Shri M.K. Sarangi, Authorised Representative for the Respondent ORDER PER: SANJIV SRIVASTAVA This appeal is directed against the order in original No 12 to 14/ST4/ STC-IV/ SKS/15-16 dated 23.06.2015 of the Commissioner Service Tax Mumbai IV. By the said order Commissioner has held as follows: i) I order to disallow CENVAT credit taken on input Services used in BTS Towers and Shelters as given below. The CENVAT Credit on OFC duct has been ordered to be eligible to them. Accordingly I confirm the demand of ₹ 70,42,49,379/- (Rupees Seventy Crore Forty Two Lakhs Forty Nine Thousand Three Hundred and Seventy Nine only) and the same is recoverable from M/s Idea Cellular Limited, under the provisions of Rule 14 of The CENVAT Credit Rules, 2004, read with the proviso to Section 73(1)/ Section 73(1) of Chapter V of the Finance Act, 1994. SCN No. Dated Period CENVAT Credit Demanded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,88 Rule 15(1) 5,00,000 Total ₹ 70,42,49,379 iv) This order is issued without prejudice to any other action that may be initiated against the noticee under the provisions of the Finance act, 1994 or rules framed there under or any other law for the time being in force in India. 2.1 Appellants are engaged in providing telecommunication services. For providing the said services they are required to install towers for which antenna and other equipments are required to be installed. They had taken the credit of service tax paid on various input services such as construction services, erection, commissioning installation services, technical testing analysis services which were used by them for commissioning and erection of BTS towers/ shelters. 2.2 Bombay High Court has in case of Bharti Airtel Ltd [2014 (35) STR 865 (Bom)] disallowed the credit in respect of the excise duty paid on shelters and towers. Following the decision of Bombay High Court, revenue was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uts used on the premise that after erection the tower becomes immovable property. High Court has itself allowed the credit of input services when used in relation to immovable property.{ Citi Centre Mall Nashik Pvt Ltd [2017-TIOL-4322-CESTAT-MUM], Bellsonica Auto Components India Pvt Ltd [2015-(7)-TMI-930-P H High Court], Gujarat State Petronet Ltd [2013 (32) STR 510 (T-Ahd)]} c. Larger Bench decision of Tribunal has in case of Tower Vision [2016 (42) STR 248 (T-LB)], distinguished the decision of Punjab and Haryana High Court in case of Bellsonica, on the ground that the said decision is in respect of input services and not in respect of inputs. Hon ble Delhi High Court has in case of Vodafone Mobile Service Ltd [2018-TIOL-2409-HC-DEL-ST] has set aside the decision of larger Bench in case of Tower Vision and held that the credit of input cannot be disallowed merely on the ground that the immovable structure emerges at intermediate stage. d. Definition of input services as it existed upto March 2011 permitted credit in respect of the input services used for setting up of premises for providing the output services. e. Hon ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. Bombay High Court has in case of Bharti Airtel did not found the decision of Sai Samhita applicable and has in para 27 held that Tower and parts are not integral part of output service hence functional utility is not applicable. Further in para 32 it has been held that tower and parts, fastened and fixed to earth after erection become immovable hence are not goods as such rule 2K(2) not applicable. iv. In case of Ultratech Cement in para 29 it is observed that if the activity is not integrally connected with the business of the manufacture of final product the service would not qualify as input service. v. In Maruti Suzuki 2016(42) STR 527 (T-Del)] proportional CENVAT Credit availed on input service of transportation of gas to the power plant, attributable to input service relatable to electricity sold outside was denied. The contention that nexus test as applicable to inputs would not be applicable to Input services has been rejected and said decision has been upheld by Punjab and Haryana High Court. vi. In case of City Centre Mall Nashik, Bench denied the credits in respect of inputs relying on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal; Post 01.04.2011, the definition of input services was amended and read as follows: (l) input service means any service, - (i) used by a provider of taxable service for providing an output service; or (ii) used by a manufacturer, ., and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 along with 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. 25. In the context of the aforesaid rules and the issue as falling for consideration in these appeals we examine the various decisions as relied upon by the appellants. (I) That towers and parts thereof and PFB are not immovable properties : (a) In the case of Commissioner of Central Excise, Bangalore-II v. SLR Steels Ltd. [2012 (280) E.L.T. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 input and input service under the Credit Rules and in that context it was observed in paragraph (7) that the definition of input and input services would show that, unless excluded, all goods used in relation to manufacture of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for Cenvat credit. The Court considered the decision of the Supreme Court in the case of Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III [(2009) 9 SCC 193 = 2009 (240) E.L.T. 641 (S.C.)] , wherein the definition of input as defined in Rule 2(g) of Cenvat Credit Rules, 2002 was considered and it was observed by the Supreme Court that the crucial requirement of the Rule is that all goods used in or in relation to the manufacture of final products qualify as input . It was observed that this presupposes that element of manufacture must be present. In noting the following observations of the Supreme Court, the Division Bench of the Andhra Pradesh High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 could not have been provided. However, in the present case the facts are distinct. The towers are admittedly immovable structures and non-marketable and non-excisable. We therefore, of the clear opinion that this judgment of the Division Bench of Andhra Pradesh High Court is inapplicable in the facts of the present case. (d) The case of Bannari Amman Sugars Ltd. v. Commissioner of Central Excise, Mysore [2010 (250) E.L.T. 326 (Kar.)] as decided by the Division Bench of Karnataka High Court concerned with credit of inputs used in manufacturing of storage tank by the assessee. .. As storage tank by a notification was declared as a capital goods the inputs used in the manufacture of storage tank were held to be admissible. In the present case the output service is telecommunication service, this analogy therefore is inapplicable. (e) The decision of the Supreme Court in the case of C.C.E., New Delhi v. Hindustan Sanitaryware Industries [2002 (14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell for consideration was under the Bengal Finance (Sales Tax) Act, 1941. ... As this decision concerned the manufacturing of excisable goods which is different from the present context of a excisable service namely telecommunication service, the same is of no avail to the appellant. (c) The decision of the Supreme Court in the case of Commissioner of Customs, Kolkata v. Rupa and Co. Ltd. [2004 (170) E.L.T. 129 (S.C.)] the facts were that under Notification No. 29/97-Cus., dated 1-4-1997 exemption from customs duty was granted to capital goods, components and spares thereof, etc., imported under the Export Promotion Capital Goods Scheme (EPCG Scheme). Under the EPCG Scheme the capital goods imported were exempted from payment of customs duty and so much of the additional duty as was in excess of the amount calculated at the rate of 10% of the value of the goods. Under the proviso, if the capital goods were imported for manufacture of items mentioned therein then they were exempted from payment of whole of the additional duty. Thus, in the facts of the case, if the capital goods were imported for the manufacture of textile garments then under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of J.K. Cotton Spg. Wvg. Mills Co. Ltd. v. Sales Tax Officer, Kanpur [1997 (91) E.L.T. 34 (S.C.)] the issue arose under the Central Sales Tax Act, 1956 in respect of the business of the assessee dealing in manufacture of cotton textiles, tiles and other commodities for sale. The assessee was dealing in the goods which were ordinarily purchased in the course of inter-State trade for which it had sought registration as dealer under Section 7(1) of the Central Sales Tax Act, 1956 in respect of the items viz. coal. In the registration certificate the Sales Tax Officer cancelled the specification and issued a show cause notice as to why registration should not be amended so as to exclude certain items. The assessee in reply to the show cause notice contended that all the articles specified in the certificate were required in the manufacture and processing of goods for sale. By an order passed by the Sales Tax Officer, certain items under the certificate of registration were deleted. Against this action on the part of the Sales Tax Officer, the assessee had approached the Allahabad High Court. The High Court held that drawing instruments, photographic materials, colours, chemical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r can install number of antennas for different service providers and hence, the same cannot be regarded as integral part of the output services as being provided by the appellants. (f) The appellants then placed reliance on the decision of Andhra Pradesh High Court in the case of Indus Towers Ltd. v. CTO, Hyderabad [(2012) 52 VST 447] , on the basis of which the appellant contend that the towers and the PFB being employed in erection and maintenance of cell phone towers are integral to telecommunication network and hence qualify as inputs under the Credit Rules. The issue in the case of Indus Towers arises in the context of adjudication of a sales tax dispute under the Central Sales Tax Act more particularly in regard to the construction of Section 8(1)(3)(b) and (d) and (4) of the Central Sales Tax Act, 1956, in regard to purchase of goods by the dealer from the outside State comprising of goods specified in the certificate of registration under the Central Sales Tax Act granted to it against the issue of C form and were goods employed for erection and maintenance of cell phone towers which were contended to be integral to communication network. The Division B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 v. 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 an 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 interpretation under the provisions of Section 8(1) and Section 8(3)(b) of the Central Sales Tax Act cannot ipso facto be made applicable in the context of the Credit Rules as arising in the present appeals and more p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 27. The reliance of the appellants on the decision of the learned Single Judge of the Calcutta High Court in the case of Singh Alloys Steel Ltd. v. Assistant Collector of Central Excise [1993 (66) E.L.T. 594 (Cal.)] to contend that it is impossible to conceive that telecommunication service can be provided without towers and shelters and functional utility test is required to be applied, is also misplaced. The issue in this judgment concerns the construction of Rule 57A of Central Excise Rules, 1944 in respect of credit of duty paid on excisable goods used as inputs on the manufactured item. The question was whether dolopatch mix, magnesite peas and ramming mass were input of steel ingots. In the context of Explanation to Rule 57A, Kolkata High Court in Paragraphs 6 and 7 has observed as under :- 6. The object of the Legislature appears to be to exclude from the genus of inputs, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods. It is contended that when an item is required for providing output services of the service provider on commercial scale, it satisfies the functional utility test, and therefore, it ought to be held that the towers and shelters are inputs used for providing output services as also on the basis of functional utility test. We are afraid that this contention on behalf of the appellants cannot be accepted for the reason that the tower and parts thereof and PFB cannot be regarded as inputs as defined under Rule 2(k) of the Credit Rules and that they are not integral part of the output services viz. telecommunication services as provided by the appellants. To consider the towers and parts thereof and PFB as inputs would clearly go contrary to the clear reading of Rule 2(k) read with definition of excisable goods as defined in Section 2(d) of the Central Excise Act, 1944. 32. As regards second contention of the appellants that the tower and part thereof, the PFB and the printers would also falls under the definition of input as defined under Rule 2(k) also cannot be sustained. The definition of inputs as defined under Rule 2(k) includes all go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of input services, Rule 2(l) of CENVAT Credit Rules, 2004 as it existed prior to 01.04.2011, the input services have been defined as the services used by the provider of taxable service for providing the output services and includes Clearly 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 the telecom towers, which have been held by the High Court as immovable property and hence not goods. 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 reason and logic applied by the High Court for denying the credit in respect of the inputs used for telecom towers and shelter will apply on equal footing to the input services used in the same process. Hence we do not find any merits in submissions made in this respect. 4.7 Appellants have brought to our notice that tribunal has in their own case allowed the CENVAT Credit in respect of the various input services used for erection and commissioning of telecom towers. Learned single member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ]. This decision also follows the Bombay High Court in case of Bharti Airtel for disallowing the credit in respect of inputs and the decision of Idea Cellular Ltd [2016-TIOL-2486-CESTAT-MUM] for allowing the credit in respect of input services used for erection and commissioning of telecom towers by the telecom service providers. In this case bench has also referred to the decision of Chandigarh Bench in case of BSNL [2017 (47) STR 246 (T-Chan)] wherein the issue has been considered and decided by the single member in following manner- 4 .It is an admitted fact on record that the appellant is a service tax assessee, duly registered under the Service Tax statute for providing the telecom services. Installation of telecom towers are for the purpose of providing the output service by the appellant. The fact is not under dispute that the services in question are not confirming to the definition of input service defined in Rule 2(l) of the Cenvat Credit Rules, 2004. Since the disputed services have been used by the appellant for erection of the telecom towers, which is used for providing the taxable output service, in my opinion, it will not be appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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