Custom, Excise & Service Tax Tribunal
M/S. Reliance Infratel Ltd vs Commissioner Of Service Tax, Mumbai-Ii on 26 November, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. ST/88497,85682/2014-Mum. (Arising out of Order-in-Original No. 47/ST/-II/RS/2014 dt. 23.06.2014 & OIO No. 82/ST/-II/RS/2013 dated 29.11.2013 passed by the Commissioner of Service Tax, Mumbai-II) For approval and signature: Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. P.S. Pruthi, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
authorities?
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M/s. Reliance Infratel Ltd.
:
Appellant
VS
Commissioner of Service Tax, Mumbai-II
:
Respondent
Appearance
Shri V.S. Nankani, Sr. Advocate with
Shri Gopal Mundhra, C.A. and
Shri Abhishek Jaju C.A. for Appellant
Shri Devendra Nagvenkar, Additional Commissioner (A.R) for respondent
CORAM:
Mr. Anil Choudhary, Member (Judicial)
Mr. P.S. Pruthi, Member (Technical)
Date of hearing : 26/11/2014
Date of decision : 26/11 /2014
ORDER NO.
Per : P.S. Pruthi
The appellant are in appeal against Order-in-Original Nos. 47/ST/-II/RS/2014 dt. 23.06.2014 & OIO No. 82/ST/-II/RS/2013 dated 29.11.2013 passed by Commissioner of Service Tax Mumbai-II.
2. The facts of the case are that during the course of the audit by the officers of Service Tax Commissionerate-II, Mumbai, it was observed that the assessee had wrongly availed and utilized CENVAT credit on goods viz. Bracket, Mounting Pole, Mount Clamps, Cable, Pre-fabricated Buildings/Shelter/Panel etc. falling under Chapter 39, Chapter 72, Chapter 73, Chapter 87 Chapter 91 and Chapter 94 of the Central Excise Tariff Act, 1985 (CETA) claiming them to be Capital Goods. These goods were used in erection/fabrication of Telecom Towers. Telecom Towers are fixed to earth and become an immovable property which are neither chargeable to excise duty nor payment of service tax. These Telecom Towers are used on shareble basis by various Telecom companies for providing Telecom Service for a consideration. The appellant paid service tax under the category of Business Support Service for providing passive telecom infrastructure by way of Telecom towers, to various cellular telecom operators. It appeared to Revenue that the said goods are not covered in the ambit of Capital Goods in terms of the definition of Capital Goods provided under Rule 2(a)(A) (i) of the Cenvat Credit Rules, 2004 (CCR). Therefore, they were not eligible for CENVAT credit of excise duty paid on such goods claiming them to be Capital Goods. 2.1. Show Cause Notice was issued which was adjudicated by the Commissioner of Service Tax-II, Mumbai vide Order-in-Original No. 82/ST-II/RS/2013 dated 29.11.2013/4.12.2013. which disallowed ineligible Cenvat credit of Rs. 43,78,87,988/- for the period 2007-08 to 2010-2011 and ordered for its recovery along with interest at applicable rate Penalty of Rs.5000/- under Section 77 of the Finance Act 1994 (Act) and Rs.43,78,87,988/- under Rule 15(3) of the CCR read with Section 78 of the Finance Act was also imposed.
2.2. As the noticee continued to avail Cenvat Credit wrongly for the subsequent period also, another Show Cause Notice F. No.V-Adj/ST-II/RTIL/15-83/2013/968 dated 04.12.2013 was issued for the period 2011-12. Vide Order-in-Original No. 47/ST/II/RS/2014 dated 23.06.2014 ineligible Cenvat Credit of Rs. 1,03,99,271/-, was disallowed and its recovery alongwith interest ordered under Rule 14 of the CCR read with Section 75 of the Finance Act and penalties imposed under Sections 77 of the Act and Rule 15 of the CCR read with Section 78 of the Act.
3. Heard both sides.
4. The Ld. Counsel for the appellant referred to the judgment of the Tribunal in the case of GTL Infrastructure Ltd. 2014 TIOL1768CESTATMum. in which it was held that Cenvat Credit is allowed on various items such as Cement, Tower parts, Structural steel etc. used in providing service of Passive Telecom Infrastructure under the category of Business Auxiliary Service in terms of Rule 2 (k) (ii) of the Cenvat Credit Rules. According to him, the present case is identical in facts to the case of GTL except that in the case of GTL the output service is BAS i.e. Business Auxiliary Service whereas in their case it is BSS i.e. Business Support Service.
4.1. The Ld. Counsel also referred to the Bombay High Court judgment in the case of M/s. Bharti Airtel Ltd. Vs. Commissioner of Central Excise, Pune-III 2014-TIOL-1452-HC-MUM-ST in which the Honble High Court held that Cenvat Credit on parts of Tower cannot be allowed either as capital goods specified in Rule 2(a) (A) or as inputs defined in Rule 2(k) of the Cenvat Credit Rules as ultimately the tower and parts thereof are fastened and fixed to the earth and after their erection become immoveable and therefore, cannot be termed as goods. The Ld. Counsel said that three propositions are set out in the case of Bharti Airtel Ltd. (supra), and distinguished the propositions from the present case. The first proposition is that the Honble High Court examined the position on the basis that the tower and parts are fastened and fixed to the earth and become immovable. He referred to paras 23 & 24 of the Honble High Court judgment as extracted below:
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 antennas fall under chapter 85 of the schedule to the Central Excise Tariff Act and hence being capital goods used for providing cellular service falling under rule 2(a)(A)(iii) as part of capital goods falling under rule 2(a)(A)(i) towers become accessories of antenna and should be held as capital goods for availing of credit of duty paid. Ld. Counsel distinguished this proposition by stating that they are not seeking input credit under Rule 2(a) (A) i.e. on capital goods.
4.2. The second proposition is the judgment of the Honble Andhra Pradesh High Court in the case of Sai Sahmita Storages Pvt. Ltd. Vs. Commissioner of Central Excise 2011-TIOL-863-HC-AP-CX. In the case of Bharti Airtel Ltd. (supra) Honble Mumbai High Court distinguished the judgment of Sai Sahmita Storages (P) Ltd. holding that 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 stands 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 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, are 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.
According to Ld. Counsel, the facts of their case are similar to the case of Sai Sahmita Storages (P) Ltd. as they claimed Cenvat Credit on inputs for providing output service in terms of Rule 2(k) (ii). They have not claimed Cenvat Credit on towers as capital goods.
4.3. The third proposition is that in the Bharti Airtel Ltd. case, credit was claimed for parts of towers as the antenna and BTS are fitted into the tower and qualified as inputs for providing the output service i.e. Telecommunication service. The High Court held that the towers are not directly used for output services namely telecommunication services and hence not falling within the definition of input as defined under Rule 2(k) of the Cenvat Credit Rules. According to Ld. Counsel, in their case the situation is different. They are not using towers as inputs for providing Telecommunication Service. According to him the fundamental distinction in their case is that they are not providing Telecommunication Service as output service. They are providing Business Support Service in the form of Passive Telecom Infrastructure on which any telecom operator can install their antennas. Further, that they are making a direct claim for credit on inputs used for providing output services in terms of Rule 2(k) (ii) of the Rules.
5. The Ld. AR appearing for Revenue emphasized that initially the appellant took Cenvat Credit on goods and termed them as capital goods. But the Chapter Heading of these goods, as declared in their Cenvat register, such as Rack (Chapter heading 7308), Pipes (Chapter Heading 3917), Pre-fabricated Shelter (Chapter Heading 9406) do not fall in the ambit of capital goods as defined in Rule 2 (a) (A). He relied on the case of Bharti Airtel Ltd. (supra) and emphasized that as there is no excise liability on towers, being immoveable property, therefore, no credit is admissible on the inputs such as steel which go into the making of the tower which being immovable is not goods. He added that the promoters of the appellant had two group companies, namely, the Telecommunication Operator and Reliance Infratel Ltd. The latter company i.e. the appellant, install communication towers but other telecom operators can also put their antennas on the towers owned by appellant. Therefore, according to him, there is no difference between the case of Bharti Airtel Ltd. and the present case. In conclusion he reiterated the findings of the Commissioner.
5.1 On the judgment of the Honble Andhra Pradesh High Court in the case of Sai Sahmita Storages Ltd. Ld. (supra), Ld. A.R. said that it is open for the Tribunal to consider this decision per incuriam. Ld. AR also relied on the judgments in the case of City Reality Development Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-III 2014-TIOL-1929-CESTAT-MUM, in which appellants were directed to make pre-deposit on inputs and capital goods used in constructing a mall. He further placed reliance on the judgment of the Tribunal in case of Mundra Port & Special Economic Zone Ltd. Vs. CCE, Rajkot 2009 (13) STR 178 (Tri.-Ahm.)
6. We have considered the submissions made by both sides. In an identical case of GTL Infrastructure Ltd.(supra), the Tribunal held that Cenvat Credit on steel and other items is admissible. Tribunal held that:
To conclude the issue in hand, first we have to examine the provisions of Cenvat Credit Rules for availment of Cenvat Credit, as the appellant has contended that they are claiming that Cenvat Credit be allowed on the goods in question as inputs. Therefore, we are not discussing the issue whether the appellants are entitled to Cenvat Credit as capital goods. In these circumstances, we may examine the definition of inputs which has been described under Rule 2(k) of the Cenvat Credit Rules, 2004.
(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 petrol and motor vehicles, used for providing any output 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 manufacturer; [but shall not include cement, angles, channels, Centrally Twisted the deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods];
On going through the above said provision of Rule 2(k)(i) ibid we find it deals with manufacturing activity. Admittedly, the appellants are providing output service, therefore, Rule 2k(ii) ibid is relevant to the facts of the case in hand, wherein, it has been said that 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. The adjudicating authority has heavily relied on Explanation-2 to the said Rules as same has been discussed by the Tribunal in the case of Bharati Airtel Ltd. (supra). In fact, the explanation also clarified that inputs includes goods used in manufacture of capital goods which are further used in the factory of the manufacturer. But in the case in hand, the appellant is a service provider. Therefore, the said explanations has no relevance to the facts of this case. As per Rule 2(k) (ii) of the Cenvat Credit Rules, 2004 all goods are entitled for Cenvat Credit which are used for providing any output service. In this case nowhere it is disputed by any of the parties that the tower/BTS cabins were not used by the appellant for providing service namely Business Auxiliary Service. Therefore, the Cenvat Credit cannot be denied. These facts have not been appreciated by the adjudicating authority and the adjudicating authority heavily relied on the definition of inputs as per Rule 2(k) (i) and Explanation-II to the said Rule. We also find that before discharging their service tax liability, the appellant narrated activity undertaken by them to the Revenue and Revenue directed the appellant to pay service tax under the category of Business Auxiliary Service on the said activity. In that case the Cenvat Credit taken on the inputs for providing that service is entitled for Cenvat Credit as per Rule 2(k) (ii) of the Cenvat Credit Rules, 2004. Further, we find that the adjudicating authority has heavily relied upon the decision of Bharti Airtel Ltd. (supra); in the said case the facts are totally different to the facts of the case in hand. In fact in that case appellant was engaged in providing cellular telephone service and as per Board Circular No. 137/315/2007 CX-4 dt. 26.2.2008, it is clarified that no Cenvat Credit on towers and BTS cabin is permissible for Cellular Phone Service Provider. In the instant case, the towers and the cabins are used by the appellant as Passive Telecom Infrastructure for providing output service namely Business Auxiliary Service as declared by the appellant to the department in 2005 and agreed to by the department in their reply dt. 20.9.2005.
We further find that in this case the intention of the appellant and their client (Operators) is to confer the Operators a right to install active infra network equipment including GSM Antenna and BTS equipment, and to extend and receive, highly specialized technical service, which includes the provision of creation and maintenance of highly controlled artificial temperatures and humidity levels at all times and continuous power supply at the prescribed voltage so as to operate the equipment of the operators, and thus be conducive to the functioning of the Operators signal transmission for their ultimate consumers. In these circumstances, we hold that appellant are entitled for input service credit on towers and cabin, which have been used by the appellant for providing output service under the category of Business Auxiliary Service in the facts of the case.
7. It is true that the judgment in the case of Bharti Airtel Ltd. (supra) relied upon by Revenue was delivered later. Therefore, it is necessary to examine the issue at hand with reference to the said judgment. The first point for consideration is whether the facts in the two cases are identical. This is important because the Hon'ble High Court concluded in the judgment in the case of Bharti Aritel Ltd. (supra)that their conclusion was restricted to the facts and circumstances which fell for their consideration. The question finally decided by the Hon'ble High Court was whether the appellant would be entitled to the credit of duty paid on the items in question for the output service, namely, the cellular services.
7.1. The facts in the case of Bharti Airtel Ltd. (supra) are brought out in para 2 of the Judgment as follows:-
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 alleged to be used for providing output service. The credit so availed was utilised for payment of service tax on output service viz. Cellular Mobile Service being provided by the appellant. Further the Hon'ble High Court at para 23 of the judgment outlined the issue which was examined by them .. 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. 7.2. From the above we find that the issue set by High Court for itself for examination was the admissibility of Cenvat Credit on towers parts for providing output service namely telecommunication service. While rejecting the contention of the appellant on admissibility of such Cenvat Credit in the case of Bharti Airtel Ltd. (supra), the Hon'ble High Court distinguished various judgments cited by the learned Counsel for the appellant in that case. In para 25 (II)(a), the Hon'ble High Court held that towers are not directly used for output services namely telecommunication services. In para 25 (II)(e) the Hon'ble High Court held that:
. Inasmuch as the telecommunication services become viable on account of antenna, the towers and PFB are immovable in nature fixed to the earth and cannot be regarded as essential inputs inasmuch as an antenna can be installed irrespective of tower or one tower 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. Again, while distinguishing the case of Singh Alloys & Steel Ltd. in para 27 of its judgment the Hon'ble High Court held 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. 7.3 It is clear from the above findings that the Hon'ble High Court was examining the issue on a different platform of facts. Hon'ble High Court was concerned with admissibility of CENVAT credit of duty paid on tower parts for providing telecom services. The towers and parts were held to be immovable, hence not goods and not excisable and therefore not considered as input goods for providing telecom service. But in the present case the question of nexus between tower parts and output service of telecommunication is not under consideration. In the case of Bharti Airtel Ltd. (supra), Cenvat Credit was denied on inputs and capital goods used for providing the output service namely Telecommunication Service. The Honble High Court came to this decision holding that 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 consisting of tower, GSM or Microwave Antennas, Prefabricated building, isolation transformers, electrical equipments, generator sets, feeder cables etc. and that these systems are to be treated as "composite system" classified under Chapter 85.25 of the Tariff Act and be treated as 'capital goods' and credit be allowed, also is not acceptable. It is clear that each of the component had independent functions and hence, they cannot be treated and classified as single unit. It is clear that all capital goods are not eligible for credit and only those relatable to the output services would be eligible for credit. The goods in question in any case cannot be held to 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. Hence a combined reading of sub-clause (a)(A) (i) and (iii) and sub-rule (2) indicates that only the category of goods in Rule 2(a)(A) falling under clause (i) and (iii) used for providing output services can only qualify as capital goods and none other. Admittedly the goods in question namely the tower and part thereof, the PFB and the printers do not fall within the definition of capital goods and hence the appellants cannot claim the credit of duty paid on these items. Even applying the ratio of the judgments as relied upon by the appellants as observed above the said goods in the present context cannot be classified as capital goods Further Hon'ble High Court held that 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. Thus, it is seen that the High Court essentially rejected the admissibility of Cenvat Credit on the ground that towers and parts thereof are fastened and fixed to the earth and, therefore, cannot be goods and therefore they are not covered by the definition of capital goods and inputs which presuppose the existence of goods. But the facts and circumstances in the present case are different.
8. It is crucial to note that the High Court restricted its conclusion to the facts and circumstances which fell for their consideration. To quote from the last para 33 of the judgment, Honble High Court said that in any case towers and PFB are in the nature of immovable goods and are non-marketable and non-excisable . If this be the position then towers and parts thereof cannot be classified as inputs so as to fall within the definition of Rule 2(k) of the credit rules. We clarify that we are not deciding any wider question but restricting our conclusion to the facts and circumstances which have fell for our consideration in these appeals. In view of the clear finding of the High Court it is necessary to see facts in the present case. The facts in the present case are essentially different. In the present case the output service is Business Support Service and not Telecommunication Service. The show cause notice itself states that appellant are paying service tax on Business Support Service. The appellant in the present case is also not in argument that telecom towers becomes part of antenna for providing output Telecommunication Service. In fact, Cenvat Credit on antennas is not claimed at all. The appellant is only providing Business Support Service in the form of Passive Telecom Infrastructure. This Passive Telecom Infrastructure enables all Telecom Operators to install their Antennas. The intention of the appellant is to give the Operators the opportunity to install active infra network equipment including GSM Antennas and BTS equipment, and to extend highly specialized technical service, which includes the provision of creation and maintenance of highly controlled artificial temperatures and humidity levels at all times as well as continuous power supply at the prescribed voltage, so as to operate the equipment of the operators, and thus be conducive to the functioning of the operators signal transmission for their ultimate consumers. Whereas the Honble High Court, in the case of Bharti Airtel Ltd., was examining a different output service. Before coming to its conclusion the High Court, in para 31, defined the point it would examining as follows:
In the light of the aforesaid discussion we examine whether on the rules as they stand the appellants would be entitled to the credit of the duty paid on the item in question on the output service namely, the cellular service.
But what we have to examine within the four corners of law is whether Cenvat Credit would be admissible on inputs such as steel, structural, racks etc. which become the basis i.e. input goods for providing Business Support Service under Rule 2(k) (ii) of Cenvat Credit Rules, 2004.
8.1 At this stage, it would be appropriate to refer to the various judgments relied upon the Ld. ASG appearing for Revenue in the Bharti Airtel Ltd. case. The Ld. ASG referred to the case of Vandana Global Ltd. Vs. Commissioner of C. Ex. Raipur, 2010 (253) E.L.T. 440 (Tri.-LB) which held that 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."
But we find that the appellant in the present case is not placing reliance on Explanation 2 to Rule 2(k).
8.2 Similarly, the Ld. ASG placed reliance on Quality Steel Tubes (P) Ltd. Vs. Collector of Central Excise 2002-TIOL-25-SC-CX in which it was held that Learned counsel for the revenue urged that even if the goods were capable of being brought to the market it would attract levy. True, but erection and installation of a plant cannot be held to be excisable goods. If such wide meaning is assigned it would result in bringing in its ambit structures, erections and installations. That surely would not be in consonance with accepted meaning of excisable goods and its exigibility to duty."
We note that in the present case the appellant is taking the plea that inputs are brought for providing Business Support Service.
8.3 Similar reliance was placed by the Government Counsel on various other decisions such as Commissioner of C. Ex. Mumbai Vs. Hutchison Max Telecom P. Ltd. 2008 (224) E.L.T. 191 (Bom). We have taken the liberty of referring to the judgment in the case of Bharti Airtel Ltd. (supra) in some detail because we find that the whole case of Revenue in that case was based on the sole and most important contention that the towers are immoveable property and therefore cannot be goods. But the facts as well as contention of appellant are different in the present case. The facts of this case are identical to the case of Sai Sahmita Storages Ltd. (supra). Just as credit was held admissible on cement and TMT bars used for making warehouse to provide storage and warehousing services, similarly, in the present case, credit will be admissible on steel structurals etc. cleared under duty paid invoices for erecting towers which provide the Business Support Service of passive telecom infrastructure.
9. As regards the judgment of the Tribunal in the case of Mundra Port & Special Economic Zone (supra), wherein the Tribunal rejected credit on cement and steel used for construction of jetties further used for providing port services, it is noted that in the case of Adani Petronet Port Pvt. Ltd. Vs. Commissioner, Ahmadabad (Order No M/12912-12-913/2014 dated 17.06.2014) the same Bench stayed recovery in a similar case relying on the case of Sai Sahmita Storages Ltd. (supra).
10. The learned AR contended that decision in Sai Sahmita (supra) be considered per incuriam. We find that Hon'ble Bombay High Court in the case of Bharti Airtel Ltd. found the Sai Sahmita distinguishable on facts and did not disagree with the judgment on merits. We have explained above how the present case is based on similar circumstances as Sai Sahmita.
11. We find that the appellant is solely emphasizing on the provisions of Rule 2(k) (ii) which defines input as under:
"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 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 maanufacture;"
We note that the appellant is also not relying on Explanation 2. The contention of Ld. Counsel is that all goods used for providing output service are eligible for Cenvat Credit. There is no denying the fact that the resultant output service provided by them is a Passive Telecom Infrastructure i.e. Business Support Service. Therefore, there is direct nexus of the output services and the credit taken on the goods procured such as steel, racks, bolts etc. which are excisable and were cleared under Central Excise invoices showing payment of Central Excise duty. The payment of Central Excise duty on these goods and their assessment has not been questioned at the end of the supplier. Without use of these duty paid towers/parts as inputs, the Business Support Service in the firm of Passive Telecom Infrastructure could not have been provided. The appellant availed credit under Rule 3(1)(i) which allows Cenvat credit on any inputs or capital goods received by the provider of output service. The appellant received inputs such as structural steel for providing Passive Telecom Infrastructure. In fact, in Rule 2(k) (ii) there is no restriction on the coverage of inputs except for oil and petrol. In the present case the inputs namely tower parts are cleared as goods from the supplier. Therefore, credit on them is admissible under Rule 2(k) (ii) for providing output service i.e. Business Support Service. The inputs are not immoveable when they are purchased and then brought to the site for creation of towers. Merely because the tower parts etc. are assembled together, it would be totally unreasonable to suggest that Cenvat Credit on them is not admissible despite Rule 2 (k) (ii). This Rule has to be interpreted as it stands. Reliance is placed on the High Court of HP judgment in case of Gujarat Ambuja Cement 2008-TIOL-683-HC-HP and the Tribunal decision in the case of Commissioner of Central Excise Raigad Vs. JSW Ispat Steel Ltd. 2013-TIOL-1758-CESTAT-MUM.in which it was held that excise duty paid on parts of components would be admissible even if they are assembled into goods which are immoveable or exempted. By analogy in the present case Cenvat Credit would be admissible under Rule 2 (k) (ii) ibid Ld. AR contended that the appellant had claimed Cenvat Credit on capital goods in their returns. We note that if law provides credit on inputs under Rule 2(k) (ii) they cannot be precluded from availing this statutory right. As analysed above, the facts and circumstances in this case are different and distinguishable. Therefore, we hold that the appellant is entitled to Cenvat Credit. In turn, the question of penalties does not arise.
12. The appeal is allowed and impugned orders are set aside.
(Pronounced in court) (Anil Choudhary) Member (Judicial) (P. S. Pruthi) Member (Technical) Sm ??
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