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TMI Blog2025 (2) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held 'We, therefore, agree with the conclusion arrived at by the Delhi High Court that towers and shelters (PFBs) support the BTS/antenna for effective transmission of mobile signals and thus enhance their efficiency and since these articles are components/accessories of BTS/antenna which are admittedly "capital goods" falling under Chapter 85 within sub-clause (i) of Rule 2(a)(A) of CENVAT Rules, these items consequently are covered by the definition of "capital goods" within the meaning of sub-clause (iii) read with sub-clause (i) of Rule 2(a)(A) of CENVAT Rules.' - there are no reason for the denial of the said credit. Admissibility of Cenvat credit of input service used for erection of such tower - HELD THAT:- As the Hon'ble Supreme Court has considered these goods as capital goods/inputs in the provision of output service the credit in respect of erection of these goods could not have been denied. As the services have been used for provision of output services either directly or indirectly the CENVAT credit could not have been denied - these services are squarely covered by Rule 2 (l) of the CENVAT Credit Rules, 2004 and hence the credit of service tax paid in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 As per this decision the Cenvat credit in respect of the said items is admissible to the Appellant. * with regards to the admissibility of Cenvat credit in respect of services received by the Appellant for erection of these towers. Revenue has sought to deny the credit for the reason that these are used for construction of immovable property. The said view cannot survive in view of the decision of the Hon'ble Supreme Court holding that these tower shelters are capital goods/input for provision of output to Appellant. * The appeal filed by the revenue has no legs to stand, as the Appellant have already reversed certain credit even prior to the issuance of the Show Cause Notice, the Show Cause Notice itself should not have been issued in terms of Rule 73 (3) of the Finance Act. As such Appeal of the Revenue lacks merits. 3.3 Learned Authorized Representative has reiterated the grounds taken in the appeal of the Revenue and also the findings recorded in the impugned order for denial of Cenvat credit. 4.1 We have considered the impugned orders alongwith the submissions made in the appeal and during the course of the argument. 4.2 The issue in respect of admissibility of Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods" if used for providing output service within the meaning 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et it is necessary and helps in keeping the antenna at proper height and in a stable position so that 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Subsystem ("BSS") whereas the core network is denoted as Mobile Switching and Management Subsystem ("SMSS"). BSS is responsible for 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 Pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle. Thus, structures in question in the said case did not satisfy the description of 'component'. 11.11.9 While there can be no dispute about the aforesaid proposition, we are of the view that it cannot be the 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 us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of "capital goods" within the meaning of sub-clause (iii) read with sub-clause (i) of Rule 2(a)(A) of CENVAT Rules. Further, since these are used for providing output service, i.e., mobile telecommunication service, and since these are "capital 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. 11.13 For the foregoing reasons, we agree with the conclusions arrived at by the Delhi High Court and uphold the judgment rendered by it in Vodafone (supra) and dismiss the connected appeals …. 11.14 For the same reasons, we are unable to agree with the view of the Bombay High Court and accordingly, set aside the judgment in Bharti Airtel (supra) rendered by it and allow the connected appeals, …..." 4.5 Taking note of the above we do not find any reason for the denial of the said credit which we hold by following the above decision is admissible to the Appellant. Impugned orders to this extent are set aside. 4.6 Coming to the second issue with regards to the admissibility of Cenvat credit, input service used for erection of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the MSPs. 11.12.2 It may be also noted that there must be "use" of such goods to qualify as "inputs". Without stretching too much the meaning of the words "use" and "input", it can be said, without any doubt, that tower and PFBs are used for providing output service by way of inputs. The use of tower and PFB cannot be said to be so remotely connected with the output of service that these goods will go beyond the ordinary meaning of "use". Their usage in providing the output service is not remote but proximate. In fact, without the use of tower and PFB, it is inconceivable that the service provider can provide mobile services effectively. Rather, towers and PFBs are indispensable being accessories of antenna for providing mobile services. In this regard one may refer to the decision in Member, Board of Revenue, West Bengal Vs. M/s. Phelps & Co. (P) Ltd., (1972) 4 SCC 121 wherein it was held that, "6. We have now to find out what exactly is the meaning of the expression "for use by him in the manufacture of goods for sale". Identical words are used in Section 8(b) of the Central Sales Tax Act 1956. This court was called upon to find out the scope of that expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manufacture of final product or for any of other purpose. However, as mentioned above when "input" has been defined with reference to providing output service, the definition clauses does not explain it so elaborately but merely uses the simple expression i.e. "used for providing any output service". In our view, even if the definition of "input" with reference to output service may not have been explained in an expansive manner as in the case of manufacture of final product under Rule 2(k)(i), the definition of "input" with reference to providing output service under Rule 2(k)(ii) need not be given a restrictive meaning as sought to be done by the CESTAT by holding that tower is not used directly for transmission of signal. In our view since the subject matter is same, i.e., what amounts to "input" though the end use is for two different products, one tangible, in the form of final manufactured product, and one intangible i.e., output service, applying similar tests to determine what amounts to "input" would not be impermissible. 11.12.4 We have also noted that the Bombay High Court had taken the view that it cannot be said that it is impossible to provide the service witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the factory of the manufacturer, the CESTAT held that these items are not inputs. However, in our view, invoking Explanation-2 is neither appropriate nor necessary as sub-clause (ii) of Rule 2(k) itself clearly provides that "input" means 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. Even though tower and the PFBs are not electrical items/equipment in the sense that these do not transmit signals, yet these are indispensable for the effective functioning of antenna by which the radio signals are received and transmitted and accordingly, used for providing the mobile telephonic services to the subscribers. Thus, towers and PFBs, though are not electrical equipment for transmission of signals, yet these are used for transmission of signal by the antennas. Therefore, there can be no denying of the fact that there is a close proximity and nexus between their functioning and the ultimate transmission of radio signals which is the output service rendered by the MSPs. Hence, the view of the CESTAT which has not been disturbed by the Bombay High Court does not commend our acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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