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TMI Blog2024 (11) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... icated buildings (PFBs) are capital goods or inputs used for providing output service within the meaning of the aforesaid CENVAT Rules, then CENVAT credit can be claimed on these items. It appears that the definition of goods under the Sales of Goods Act, 1930 seems to be the basis of the term goods in other Statutes. Hence, we would primarily rely on the definition given in the Sale of Goods Act - the items in consideration viz., towers and prefabricated buildings are neither actionable claim nor money, nor do they come within the inclusive clause of the definition, viz., stocks, shares, growing crops, grass, and things attached to forming part of the land which are agreed to be severed before sale or under contract of sale. In order to determine whether any property is movable or immovable, this Court, in the light of the statutory provisions has applied certain principles. It has also been noted that such determination may be done not based on a single test but after applying several criteria on the facts of each case. In TRIVENI ENGINEERING INDUS. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2000 (8) TMI 86 - SUPREME COURT] , this Court applied the marketability test, in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dismantled without any damage or without bringing any change in the nature of the goods and can be moved to market and sold, such goods cannot be considered immovable. The PFB houses other BTS equipment and alternative electricity source in the form of diesel generators and other equipment to provide alternative and uninterrupted power supply to the antenna so that in the event of failure of main power supply, the generator can instantly provide backup electricity supply to the antenna and BTS. The PFBs house electric cables, other equipment related to antenna, BTS and generator. Thus, PFBs enhance the efficacy and functioning of mobile antenna as well as BTS and accordingly, PFBs can also be considered as accessories to the antenna and BTS which are capital goods falling under Chapter 85 of the Schedule to the Central Excise Tariff. Having held that the tower and pre-fabricated buildings (PFBs) are goods and not immovable property and since these goods are used for providing mobile telecommunication services, the inescapable conclusion is that they would also qualify as inputs under Rule 2(k) for the purpose of credit benefits under the CENVAT Rules - Appeal disposed off. - WI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buildings (PFBs) etc. can take the benefit of CENVAT Credit under the CENVAT Credit Rules, 2004 (hereinafter referred to as the CENVAT Rules ) for the purpose of payment of service tax on the output services rendered by them. With respect to the same, conflicting views have been given by two High Courts, namely the High Court of Bombay and High Court of Delhi. The Bombay High Court has ruled against the MSPs, favouring the Revenue, holding that MSPs are not entitled to CENVAT credit on mobile towers and prefabricated buildings. Whereas, the Delhi High Court has held to the contrary extending the benefit of CENVAT credit to the MSPs. The decisions of both the High Courts have been challenged before this Court by the respective aggrieved parties, by way of the present set of appeals. 1.1 In the lead judgment of the Bombay High Court which has been challenged before this Court in Civil Appeal No. 10409-10 of 2014, namely Bharti Airtel Limited v. The Commissioner of Central Excise, Pune (Bharti Airtel, for short) rendered on 26.08.2014 in Central Excise Appeal Nos.73 of 2012 and No. 119 of 2012, the Bombay High Court held that mobile towers and other components do not fall within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entitled to input credit on excise duty paid towards installation of mobile towers and PFBs. This judgement of the Delhi High Court has been challenged before this Court in CA Nos. 5032- 5035/2021(Commissioner of Service Tax vs. Indus Towers Ltd.), CA No. 5039-5040/2021 (Commissioner of Service Tax vs. M/s Bharti Infratel Ltd.), CA No. 5038/2021 (Commissioner of Excise vs. Tower Vision India Pvt. Ltd.) and CA No. 5036-5037/2021 (Commissioner of Service Tax vs. Vodafone Mobile Services Ltd.). 1.4 Following the aforesaid decision of the Delhi High Court in the Vodafone (supra), CESTAT, Principal Bench, Delhi in SA Appeal No.52342 of 2015 allowed the CENVAT Credit to the MSPs. This decision of the CESTAT, Delhi has been challenged in CA No.62/2022 (Commissioner Central Excise and Service Tax LTU vs. Mahanagar Telephone Nigam Ltd.) 2. Most of the Assessees before us are mobile service providers (MSPs). The MSPs typically provide sim cards to the subscribers either in physical or electronic form, on activation of which the subscribers are able to enjoy wireless telecommunication service. For rendering these services, the service providers usually own and operate the infrastructure suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damage. 3.2 From the above, what is evident is that to dispense wireless telecom service, the sim cards, antenna, BTS along with other equipment play a critical role. The antenna and BTS are intrinsically linked. Antenna, tower, BTS, generation set, PFBs typically constitute essential components for providing seamless mobile telecommunication service to the consumers/subscribers. 4. The mobile towers are bought and brought at the site either in completely knocked down condition (CKD) or semi-knocked down condition (SKD) by the service provider. The tower is installed at an appropriate site based on technological viability. It is on this mobile tower that the antenna which receives and transmits the electromagnetic signal is hoisted and fixed at an appropriate height as may be technically determined. The mobile tower, in turn, is fixed to the ground or on the top of a building to provide stability and make it wobble free as the antenna cannot function effectively if the same is not kept at a particular height and is not stable and prevented from shaking due to wind, rain or any other reason. 5. The MSPs or the infrastructure providers purchase these items from the manufacturers for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst Schedule to the Excise Tariff Act; (ii) pollution control equipment; (iii) components, spares and accessories of the goods specified at (i) and(ii); (iv) moulds and dies, jigs and fixtures; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; and (vii) storage tank, used (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service. Rule 2(k) 2(k) input means- (i) 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 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; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.04.2006 issued by the Commissioner of Excise to M/s. Bharti Airtel Limited, an MSP (Assessee) alleging inter alia, that the Assessee had wrongly taken and utilised CENVAT Credit on certain goods which do not qualify as capital goods within the meaning of CENVAT Credit Rules, 2004 and thus, availing such credit was contrary to the definition under Rule 2(a)(A) and Rule 4 of the CENVAT Rules. The goods mentioned in the said show cause notice include amongst others: (i) towers and parts of towers; (ii) prefabricated building (PFB) used as a shelter for protecting transmission devices which are the primary concern of these proceedings. 9.1 In the said show cause notice, it was alleged that a tower, after erection, becomes immovable property having been fixed to the earth and thus, cannot be considered to be a good and hence was not capital good within the meaning of the CENVAT Rules. It was alleged that the tower even in CKD or SKD condition would fall under Chapter 7308 of the Central Excise Tariff Act, 1985 which does not find mention either in clause (i) or clause (ii) of Rule 2(a)(A) or in Rule 2(k) of the CENVAT Rules. It was also alleged that tower or parts of the tower canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the CENVAT Rules, the tower, being a part of BTS/antenna will be also deemed as capital good by virtue of sub-clause (iii) of Rule (a)(A). Since these goods, namely tower, BTS and antenna are used for providing output telecom service to the subscribers/consumers, the mobile service provider will be entitled to claim CENVAT credit not only on BTS and antenna but also on tower, being an accessory to capital goods in the form of BTS and antenna. 9.7 The Assessee further contended that for effective and uninterrupted transmission and receipt of electromagnetic radio signals by the antenna which is installed on the mobile tower, additional peripheral equipment such as battery back-up, rectifier, UPS, gensets etc., are also necessary which are purchased by the service provider and brought at the site and installed and housed in the prefabricated shelters or buildings without which the antenna installed on the mobile tower and BTS will become inoperative. Thus, apart from mobile tower, the prefabricated building/shelter, where these ancillary items which are indispensable components of the mobile telephone system are securely housed, becomes an integral part of the mobile telephone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court, while examining the aforesaid issues framed the following questions of law:- 1. 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, 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 Bombay High Court decided all the above questions of law against the Assessee and in favour of the Revenue. 9.13 In deciding the abovementioned issues, the Bombay High Court considered the following aspects: (i) That the aforesaid goods are not capital goods within the meaning under Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne AP 956, (2011) 23 STR 341 (AP). (iv) Bannari Amman Sugars Ltd. v. CCE, 2009 SCC OnLine Kar 814, (2010) 250 ELT 326 (Kant). (v) CCE v Hindustan Sanitaryware Industries, (2002) 7 SCC 515. (vi) CCE v. N.R.C. Ltd., 2008 SCC OnLine Bom 1894. (vii) Commr. of Customs v. Rupa and Co. Ltd., (2004) 6 SCC 408. (viii) Deepak Fertilizers Petrochemicals Corpn. Ltd. v. C.C.E., Belapur, 2012 SCC OnLine CESTAT 3055. (ix) Commr. of C.Ex., Jaipur v. Rajasthan Spinning Weaving Mills Ltd., (2010) 12 SCC 186. 9.16.2 The Bombay High Court, however, held that the aforesaid decisions are not applicable to the present case and proceeded to examine the plea of the Assessee that since the antenna is fitted onto the tower and shelter is used for providing telecommunication services, they would qualify as inputs under Rule 2(k) of the CENVAT Credit Rules. In support of this contention, the Assessee had placed reliance on the following decisions:- (i) Industrial Machinery Manufacturers (P) Ltd. v. State of Gujarat, 1963 SCC Online Guj 84:(1965) 16 STC 380 (Guj). (ii) Board of Revenue v. Phelps Co. (P) Ltd., (1972) 4 SCC 121. (iii) J.K. Cotton Spg. Wvg. Mills Co. Ltd. v. STO, AIR 1965 SC 1310. (iv) Indus Tower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accessories of the goods specified in Clauses (i) and (ii) of Rule 2(a)(A). As tower is not a capital good under the aforesaid clauses, duty paid on its parts, therefore, is not admissible for availing CENVAT credit. iv) Only those articles which go into composition of another article can be considered as components or parts of the latter. Though GSM and the network antenna are specified under Tariff Chapter Heading 8517, tower on which the antenna is placed is not classified as such under the said Tariff chapter Heading 8517. Thus, tower cannot be considered to be a component to the antenna within the meaning of Rule 2(a)(A)(iii) as it does not enter into the composition of the antenna. v) As regards, availing the CENVAT credit in respect of input , it was submitted by the Revenue that only a manufacturer can avail such credit and not a service provider. 9.17.1 In support of the contentions, the Revenue cited a number of judgments before the Bombay High Court, some of which are referred as below: (i) Vandana Global Ltd. v. Commissioner of Central Excise, Raipur, 2010 (253) E.L.T. 440 (Tri.-LB). (ii) Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, (1995) 2 SCC 372. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on do not fall within the definition of capital goods , since towers and parts thereof, once fastened and fixed to the earth, post their erection, become immovable and therefore cannot be classified as goods. Consequently, they cannot be considered capital goods as defined under Rule 2(a)(A). Hence, the Assessee cannot claim the credit of duty paid on these items. The Court further clarified that only items specified as capital goods under Rule 2(a)(A) would be eligible for CENVAT credit. 9.21 The Bombay High Court further held that the goods in question would not be capital goods for the purpose of CENVAT Credit as they are neither components, spares or 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 . Thus they are not covered by sub-clause (iii) of Rule 2(a)(A). 9.22 The Bombay High Court repelled the contention of the Assessee that tower is an accessory of antenna and without tower, antenna cannot be installed and as such the antenna cannot function and that the tower should be treated as a part of antenna. The Bombay High Court held that towers are structu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods in the premises of the service provider under Rule 4(1). 10.4 Further, the plea of the Assessee was that BTS constitutes an integrated system for the purpose of providing the benefits of mobile service and is classified under Heading 85.25 of Central Excise Tariff Act, 1985 (CETA) which also comprises of the tower as one of its parts, without which the output service cannot be provided. Hence, it was contended that the tower and parts thereof are parts of eligible capital good , i.e. BTS which are used for providing output services. Hence, excise duty paid on tower and its parts were eligible for the credit. 10.5 On similar lines, it was contended that a PFB is purchased for housing electrical equipment i.e. transformers/batteries/stabilizers, rectifiers etc. which are necessary to enable the antenna to provide uninterrupted signals. The aforesaid configuration is supported by a Diesel Generating Set (Genset) to be used as a backup source of electricity supply in case of failure of the main power supply. It was contended that since BTS as a whole is to be treated as a single integrated system which is classified under Chapter Heading 85.25 of CETA, and thus, BTS being an eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt examined the aforesaid issues framed, in the following manner: 10.9.1 As regards the first issue as to whether towers, shelters and accessories used by the Assessee for providing business support services were immovable property or not, the Delhi High Court, after examining the relevant statutory provisions under Section 3(36) of the General Clauses Act, 1897 and Section 3 of the Transfer of Property Act, 1882, elaborately discussed the concept of immovable property, referring to a number of decisions including in Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works Ors (2010) 5 SCC 122; Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad, (1998) 1 SCC 400; Narne Tulaman Manufacturers Pvt. Ltd. Hyderabad v. Collector of Central Excise, Hyderabad, 1989 (1) SCC 172; Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, U.P. (1995) 2 SCC 372 1995 and Mittal Engineering Works (P) Ltd. v. Collector of Central Excise, Meerut, (1997) 1 SCC 203; Triveni Engineering Indus Ltd. v Commissioner of Central Excise, (2000) 7 SCC 29 and other decisions rendered by the Delhi High Court, and applied the permanency test to come to the definitive f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... components, spares and accessories of such capital goods under Chapter 85, would also be treated as capital goods since CENVAT credit is available to accessories of capital goods. 10.9.5 As to what amounts to an accessory, the Delhi High Court, after analysis of the relevant rules and case laws, took the view that an accessory is an article or device that adds to the convenience or effectiveness but is not essential to the main machinery. It was held that tower has to be considered as an essential component/part of the capital good being BTS and the antenna. The Antenna which receives and transmits signals and used for providing output mobile service cannot be installed high above the ground without the tower. 10.9.6 It was also held that BTS is an integrated system which includes antenna, and each component in the BTS has to work in tandem to provide cellular connectivity to phone users to provide efficient services. 10.9.7 Further, it was held that the tower is part of the active infrastructure as the antenna cannot be placed at the appropriate altitude to generate uninterrupted frequency without the support of the tower and the PFBs are accessories for the placement of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of these utility and functions, these items would be considered to be inputs within the ambit of Rule 2(k) of the CENVAT Rules. 10.9.13 As regards the question as to whether the CESTAT erred in applying the nexus test with reference to MS angles and channels, the Delhi High Court found fault with the finding of the CESTAT that there was no nexus between the input and output service and held that CESTAT had erroneously ignored the decision of the Andhra Pradesh High Court in the case of M/s Indus Towers Ltd. vs. CTU, Hyderabad, 2012 SCC OnLine AP 628 which held that towers and shelters are indeed used and are integrally connected to the rendition of telecommunication services. The channels, which according to the Assessee, were in fact towers, shelters and accessories, were bought and brought to the site in CKD/SKD condition and put to use for mounting/installing telecommunication antenna and other equipment for providing output telecom services. However, the Revenue contended that these goods were used for assembling towers and shelters and do not fall within the definition of Rule 2(a)(A) i.e. capital goods and that these are items falling under Chapter 73 and the same is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Delhi High Court on analysis of the case laws cited on behalf of the respective parties held that the definition of input does not contain any condition relating to emergence of immovable property rendering it ineligible for taking credit and eligibility of credit must be determined at the time of receipt of goods in terms of Rule 4(1) of the CENVAT Rules and as such credit cannot be denied. 10.9.19 The Delhi High Court held that denial of CENVAT credit to the Assessee on the premise that the towers, on erection, resulted in an immovable property is erroneous and contrary to the judgment of this Court in the case of Solid and Correct Engineering (supra). The towers which are received in CKD condition are re-assembled and erected at the site, subsequently giving rise to a structure that remains immovable so long it is used for the reason of safety, stability and commercial reasons of use. 10.9.20 The Delhi High Court clarified that entitlement of CENVAT credit is determined at the time of receipt of the goods and the fact that such goods are later on fixed/fastened to the earth for use would not make them non-excisable commodities when received. 10.9.21 As regards the fifth que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court took the contrary view that towers, parts thereof and prefabricated buildings are not immovable property and these can be considered as capital goods as defined under the CENVAT Rules. Since these are capital goods , these are liable to excise duty, of which the service provider can take CENVAT credit. The Delhi High Court also held that these goods can be said to be inputs for providing output service and hence eligible for CENVAT credit. Analysis by this Court : 11. From the above discussion, what is evident is that the entire controversy revolves around the core issue as to whether the mobile service providers (MSPs) are entitled to claim CENVAT credit on excise duties paid on mobile tower, its parts thereof and prefabricated buildings (PFBs) in terms of the Rule 3 of the CENVAT Rules and whether the credit so claimed can be used to pay service tax for the output services rendered by the MSPs. 11.1 As discussed above, Rule 3(1) of the CENVAT Rules enables a provider of taxable service to claim CENVAT credit on duties paid on any capital goods or input received in the premises of the service provider. Thus, if the mobile towers and prefabricated buildings, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of supply. (iii) The Central Sales Tax Act, 1956 Section 2(d): goods includes all materials, articles, commodities and all other kinds of movable property, but does not include [newspapers] actionable claims, stocks, shares and securities. (iv) The Customs Act, 1962 Section 2(22): goods includes (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of movable property. (v) Competition Act, 2002 Section 2(i): goods means goods as defined in the Sale of Goods Act, 1930 (8 of 1930) and includes (A) products manufactured, processed or mined; (B) debentures, stocks and shares after allotment; (C) in relation to goods supplied, distributed or controlled in India, goods imported into India. (vi) The Motor Vehicles Act, 1988 Section 2(13): goods includes live-stock, and anything (other than equipment ordinarily used with the vehicle) carried by a vehicle except living persons, but does not include luggage or personal effects carried in a motor car or in a trailer attached to a motor car or the personal luggage of passengers travelling in the vehicle. (vii) The Micro, Small And Medium Enterprises Development Act, 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Clause Act and thus will be goods within the meaning of Section 2(7) of the Sale of Goods Act, 1930 and hence may qualify as capital goods within the meaning of Rule 2(a)(A) subject to fulfilling other conditions mentioned therein. 11.3.3 As to what is immovable property has been explained under Section 3 of the Transfer of Property Act, 1882 which specifies that immovable property does not include standing timber, growing crops or grass . 11.3.4 It has been also defined under Section 3(26) of the General Clauses Act, though not exhaustively, but in an inclusive manner by providing that immovable property shall include land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth . 11.3.5 Therefore, we have to consider whether these items are attached to the earth or are permanently fastened to anything attached to the earth, for if these are found to be so, these will be immovable properties and hence cannot be goods and consequently, cannot be capital goods within the scope of the CENVAT Rules. 11.4 As to what amounts to attached to earth as mentioned under Section 3(26) of the General Clauses Act, has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that such determination may be done not based on a single test but after applying several criteria on the facts of each case. We will now refer to some of the decisions relied upon by the contesting parts. 11.7.1 This Court, in Solid and Correct Engineering (supra), applied the intendment and functionality test to determine whether any article is movable or immovable. The issue in the said case was whether the asphalt drum/hot mix plant, though apparently appearing to be immovable and fixed to the structure embedded to the earth, can be considered to be movable. After examining the expression attached to the earth as mentioned in Section 3 of the Transfer of Property Act, the observations of this Court were as follows: 25. It is evident from the above that the expression attached to the earth has three distinct dimensions viz. (a) rooted in the earth as in the case of trees and shrubs, (b) imbedded in the earth as in the case of walls or buildings, or (c) attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached. Attachment of the plant in question with the help of nuts and bolts to a foundation not more than 1 ft deep intended to provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able or marketable as they were at the time of their purchase. Once such a machine is fixed, embedded or assimilated in a permanent structure, the movable character of the machine becomes extinct. The same cannot thereafter be treated as movable so as to be dutiable under the Excise Act. But cases in which there is no assimilation of the machine with the structure permanently, would stand on a different footing. 44. In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute permanent fixing embedding or attachment in the sense that would make the machine a part and parcel of the earth permanently. In that view of the matter we see no difficulty in holding that the plants in question were not immovable property so as to be immune from the levy of excise duty. 11.7.3 While deciding the said issue, the Court referred to Triveni Engineering (supra), S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows : - 21. The marketability test requires that the goods as such should be in a position to be taken to the market and sold and from the above findings it follows that to take it to the market the turbo alternator has to be separated into its components turbine and the other alternator but then it would not remain turbo alternator, therefore, the test is incorrectly applied. Though, there is no finding that without fixing to the platform such turbo alternator would not be functional, it is obvious that when without fixing, it does not come into being, it can hardly be functional. 11.7.6 In the case of Sirpur Paper Mills Ltd. (supra), this Court again applied the test of marketability. The issue which arose for consideration in the said case was whether paper machines assembled at site were liable for duties under the Excise Act. It was the plea of the Assessee that since the machine was embedded in concrete base, it became an immovable property though embedding was for providing a wobble-free operation of the machine. This Court rejected the plea and held that merely because the machine was attached to the earth for efficient working and wobble- free operation, it did not per se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marketability was also applied in the case of Mittal Engg. Works (P) Ptd. (supra). 11.7.9 Much reliance was placed by the Revenue on the T.T.G. Industries Ltd. (supra) in which this Court, by relying on the permanency test as also applied in the Municipal Corporation of Greater Bombay (supra) held that if the article cannot be shifted without first being dismantled and thereafter re-erected at another site, it cannot be considered to be a movable property but an immovable property. In the aforesaid case, the machinery was erected at the site on a specially made concrete floor at a very high level of 25 feet from the ground level and the sheer weight, even without being fastened by nuts and bolts, rendered it incapable of being shifted to another site without dismantling and re-erecting. Given these facts, this Court held that it can be said to be immovable property. In Municipal Corporation of Greater Bombay (supra) this Court observed as follows: 32. The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being shifted from placed to place. Permanency is the test. The chattel whether is movabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mudgun and the drilling machines are really a component of the plant and machinery of the steel plant, but we are satisfied that having regard to the manner in which these machines are erected and installed upon concrete structures, they do not answer the description of goods within the meaning of the term in the Excise Act. It may be noted that while this Court invoked permanency test in T.T.G. Industries Ltd. (supra), what was also observed was that if the machinery cannot be shifted and re-erected without dismantling, it would show that it is an immovable property. 11.7.11 In the present case, while mobile tower cannot be shifted to another location without dismantling it, it is to be noted that mobile tower itself was bought and brought in a completely knocked-down (CKD) or semi-knocked-down (SKD) condition and it was erected and installed at the site after assembling the parts. If the said mobile tower is to be shifted to another location, it obviously has to be dismantled and restored to its SKD or CKD condition and thereafter re-erected, which however, would not entail any damage to it. Thus, the present case of the mobile towers differs from the factual matrix of T.T.G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he newly set up BTS/BSC is relocated to another site it may entail certain damages. However, what is important to be noted is that the damage is qua the BTS/BSC or cables connecting the various components, but not the tower itself or PFB with which we are concerned. If the tower or the PFB can be dismantled and relocated in another site without causing any damage to either the tower or PFB, the mobility or the marketability of these items is retained. Thus, as far as the tower and PFBs are concerned, these exhibit the character of a movable property. 11.8 In view of the above decisions, we are of the opinion that merely because certain articles are attached to the earth, it does not ipso facto render these immovable properties. If such attachment to earth is not intended to be permanent but for providing support to the goods concerned and make their functioning more effective, and if such items can still be dismantled without any damage or without bringing any change in the nature of the goods and can be moved to market and sold, such goods cannot be considered immovable. 11.8.1 We may summarise some of the principles applied by the Courts in the decisions referred to above to dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of walls or buildings [sub-clause (b)], or whether these are attached to what is so embedded for the permanent beneficial enjoyment of that to which these are attached to the earth [sub-clause (c)]. The attachment of tower to the earth/building, however, does not partake of the character of walls or buildings imbedded in the earth. 11.9.3 It is on the tower that the antennas are mounted and affixed at proper height, to make these stable. Since the antennas are used for receiving and sending radio signals, these need to be attached at a certain height, and these are required to be stable and wobble-free. It is not in dispute that the mobile tower is attached and fastened to the earth or building to provide stability to the same and to make antennas unshakable due to wind, rain or any other external force(s). 11.9.4 The mobile tower is bought and brought in the CKD or SKD form from the manufacturers and same is installed at the site by assembling the parts which also consists of MS angles and channels. The tower, after being assembled and fixed to the earth or a building can be dismantled without any change in the nature of the tower, and the tower can be removed and shif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the antenna which is fixed on the tower. Thus, based on functionality test it can be said that tower is a movable property, as also held in Municipal Corporation of Greater Bombay (supra). 11.9.8 These items are not embedded in the earth as in the case of walls or buildings so as to fall under clause (b) of the definition of attached to the earth as provided under Section 3 of the Transfer of Property of Act. Neither do these items fall under clause (c) of the definition of attached to the earth and nor are these intended to be for permanent beneficial enjoyment of the building or land to which these are attached. In this regard, it may be apposite herein to mention what was stated in Solid Correct Engg. Works (supra) as follows:- 25. It is evident from the above that the expression attached to the earth has three distinct dimensions viz. (a) rooted in the earth as in the case of trees and shrubs, (b) imbedded in the earth as in the case of walls or buildings, or (c) attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached. Attachment of the plant in question with the help of nuts and bolts to a foundation not more than 1 ft deep intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and PFBs are movable properties and hence, goods . 11.9.10 What we have also noticed is that the Bombay High Court has held that since the towers and parts thereof are fastened and fixed to the earth and after their erection, they become immovable, and therefore, these cannot be classified as goods. While this conclusion is based on the classic definition of immovable property based on one criterion, as noticed earlier, that may not be the sole consideration to determine whether a property is immovable or movable. Even if the property is embedded to the earth and appears ex-facie immovable, if there are other indicators which show the characteristics of a movable property, as for instance, susceptibility to removal of the property from the fixture without causing any damage to its basic structure and change in character, ability of relocation to a new location and if the same can be sold thereby showing marketability, and lack of intention to make it a permanent fixture, in spite of the said property being embedded to the earth by way of fixing, the property may still be considered to be movable as has been held in many of the cases referred to above including in Solid and Correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstood in the excise law. Whether an article is permanently fastened to anything attached to the earth requires determination of both the intention as well as the factum of fastening to anything attached to the earth. And this has to be ascertained from the facts and circumstances of each case. 11.9.14 Hence, it is to be noted that the tower, though appears to be fastened to the earth, cannot be said to be permanently fastened to the earth or a building for the beneficial enjoyment of the land or the building. The tower possesses the characteristics of mobility as the same can be dismantled and relocated to another place or site. Therefore, in our opinion, the decision in Triveni Engineering Industries Ltd. (supra) cannot be applied in the present case, considering the factum and intention behind fastening of the tower for purpose of keeping the antenna stable and wobble free and that it can be relocated. 11.9.15 Reliance has been also placed by the Revenue on Quality Steel Tubes (P) Ltd. (supra) by drawing our attention to para 5 and 6 of the judgment which read as follows: 5. In several decisions rendered by this Court commencing from Union of India v. Delhi Cloth and General Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical crystalliser has to be assembled, erected and attached to the earth by a foundation at the site of the sugar factory. It is not capable of being sold as it is, without anything more. As was stated by this Court in the case of Quality Steel Tubes (P) Ltd. [(1995) 2 SCC 372] the erection and installation of a plant is not excisable. To so hold would, impermissibly, bring into the net of excise duty all manner of plants and installations. 10. The Tribunal took an unreasonable view of the evidence. It was the case of the appellants, not disputed by the Revenue, that mono vertical crystallisers were delivered to the customers in a knocked-down condition and had to be assembled and erected at the customers' factory. Such assembly and erection was done either by the appellants or by the customer. Where it was done by the appellants, fabrication materials of the customer were used and the customer sent to the appellants debit notes in regard to their value. Where the assembly and erection was done by the customer, there was no occasion for it to send to the appellants a debit note. The fact that there was no debit note in respect of one customer could not reasonably have led the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. (emphasis added) The aforesaid proposition of law was reiterated in Commissioner of Central Excise, Mumbai, Vs. Hindoostan Spinning and Weaving Mills Ltd. anr, (2009) 14 SCC 221. 11.9.22 In a recent judgment in Ranadey Micronutrients Ors. v. Collector of Central Excise, (2022) 18 S.C.R. 28, it was held that while the departmental circulars in operation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of CENVAT Rules. Therefore, we have to examine whether towers and PFBs which on their own are not capital goods within the scope of either of the sub-clauses (i) and (ii) can be considered to be capital goods under sub-clause (iii) by virtue of being accessories of any of the capital goods mentioned under sub-clauses (i) and (ii) of Rule 2(a)(A). 11.11.1 It is also not the case of the Assessees before us that mobile towers and PFBs are goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 68.02 and sub-Heading No. 6801.10 of the First Schedule to the Central Excise Tariff Act so as to be deemed as capital goods. It is the case of the Assessees that the mobile tower is an accessory of antenna which is part of BTS and since antenna and BTS fall under Chapter 85 which are capital goods , mobile tower being accessory of antenna and BTS is to be treated as capital good by virtue of sub-clause (iii) of Rule 2(a)(A). Similar is the case with PFBs. 11.11.2 Since, we have already held that mobile towers and PFBs are not immovable properties and can be treated as goods , we have to examine whether these are to be treated as accessories of antenna and BTS (which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the antenna can transmit signals for ensuring uninterrupted and seamless services to the subscribers. It is with the aid of the tower that the potential of the antenna is fully realised, making it function optimally. Without tower, antenna cannot effectively function for the purpose it is used. Hence, there can be no doubt that tower is to be considered as an accessory of antenna. 11.11.6 Similarly, the PFB houses other BTS equipment and alternative electricity source in the form of diesel generators and other equipment to provide alternative and uninterrupted power supply to the antenna so that in the event of failure of main power supply, the generator can instantly provide backup electricity supply to the antenna and BTS. The PFBs house electric cables, other equipment related to antenna, BTS and generator. Thus, PFBs enhance the efficacy and functioning of mobile antenna as well as BTS and accordingly, PFBs can also be considered as accessories to the antenna and BTS which are capital goods falling under Chapter 85 of the Schedule to the Central Excise Tariff. 11.11.7 That tower is to be treated as an accessory of antenna or BTS and their relationship has been highlighted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monitoring and controlling the air interface. BSS consists of two different components, namely Base Transceiver Station ( BTS ) and Base Station Controller ( BSC ). BTS stands for base station . It contains transmitter and receiver equipment as well as an antenna. The base station is equipped with very limited capabilities for signalling a protocol processing. The bulk of the work, for example, allocation and release of channels is done by the BSC. The BSC is mainly responsible for control and execution of handover, a function which is needed to keep a circuit-switched connection if the subscriber moves between base stations. Therefore, each BSC controls several base stations, which are connected to the BSC via fixed lines or radio link systems. On the other hand, mobile Switching and Management System is a fixed network of switching nods and databases for establishing connections from and to the mobile subscriber. HLR and VLR are two important databases which are the foundation of the Numbering Plan in MSC. The switching components are the Mobile Switching Centre ( MSC ) and the Gateway MSC ( GMSC ). The MSC connects a number of BSCs. to the network for the purposes of localizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only criterion to determine what amounts to component of another article. In order for any article to be considered a component of another article, it does not necessarily mean that it has to be consumed or used up for producing the said another article as in the case of a manufacturing process. In our considered opinion, a component of any good would also mean to include those which make the good fully functional and make such a good more effective as observed in M/s. Annapurna Carbon Industries Co.(supra), wherein this Court held that an accessory would mean an object or a device that is not essential in itself but that adds to the beauty or convenience or effectiveness of something else or is supplementary or secondary to something of greater or primary importance, which assists in operating or controlling the said good, and thus serves as its accessory. It was thus held in Annapurna Carbon Industries Co. (supra) that, 10. We find that the term accessories is used in the schedule to describe goods which may have been manufactured for use as an aid or addition. A sense in which the word accessory is used is given in Webster's Third New International Dictionary as follows: An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital goods received in the premises of the provider of output service as contemplated under Rule 3(1)(i), the Assessees would be entitled to CENVAT credit on the excise duties paid on these goods. 11.12 The alternative plea taken by the Assessee is that these items, viz., mobile tower and the prefabricated buildings (PFBs) are inputs used for providing output service of telecommunication and hence, being inputs under Rule 2(k) which are used for providing output service i.e., mobile service, CENVAT credit will be available in terms of Rule 3(1) which provides that a provider of a taxable service shall be allowed to take credit on duties paid on any input received in the premises of that provider of output service on or after 10th September, 2004 and this may be utilised for payment of service tax on any output service under Rule 3(1) read with Rule 3(4) of the CENVAT Rules. 11.12.1 Input has been defined under Rule 2(k) to mean all goods used for providing any output service. We have already held that tower and the prefabricated buildings (PFBs) are not immovable property but are goods / capital goods within the meaning of Rule 2(a)(A)(iii) and since these are used for providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture or processing of goods would be commercially inexpedient, goods required in that process would, in our judgment, fall within the expression in the manufacture of goods. In the present case the assessee company has sold the goods in question to certain manufactures who were manufacturing iron steel materials. It is also clear from question no. (i) that those gloves were to be used by workmen who were engaged in hot jobs or in handling corrosive substances in the course of manufacture. That being so it cannot be denied that those gloves had to be used in the course of manufacture. 11.12.3 It may be noted that in the definition of input under Rule 2(k) when it relates to providing output service it has been simply defined as all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and the motor vehicles used for providing any output service. However, when the word input is defined relating to manufacture of product, it has been defined in a broad and expensive manner to mean all goods except light diesel oil, high speed diesel oil and motor vehicle spirit commonly as petrol, (i) used in or in relation to the manufacture of final produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctioning of antenna for providing mobile telecommunication service and it cannot be said that the nexus between antenna and tower is remote. Rather, in our view, their relationship is quite proximate and inseparable for proper functioning of antenna. In this regard, we have noted the decision of the Gujarat High Court in Industrial Machinery Manufacturers Pvt. Ltd. vs. State of Gujarat, (1965) 16 STC 380 (Guj) wherein the Gujarat High Court held that humidifiers which are used by the textile mills for improving the quality of the yarn produced in general, and even though humidifiers were essentially electric motors and not directly connected with the manufacturing process of yarns, yet these were considered to be machineries for use in the manufacture of yarn. The said finding by the Gujarat High Court was based on the essentiality of the humidifiers. By applying the same principle in the present case, towers and PFBs though themselves are not electrical equipment, are essential for proper functioning of antenna. Thus tower being essential to rendering of output service of mobile telephony, these items certainly can be considered to be inputs akin to antenna. Without the towers an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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