Custom, Excise & Service Tax Tribunal
M/S. Bharti Airtel Ltd vs Commissioner Of Gst, Central Excise on 7 March, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. ST/244 and 301/2010
(Arising out of Order-in-Original No. 68 to 70/2009 dated 26.11.2009 passed by the Commissioner of Service Tax, Chennai)
M/s. Bharti Airtel Ltd. Appellant
Vs.
Commissioner of GST, Central Excise
Chennai South Commissionerate Respondent
Appeal No. ST/Misc./40824/2017 and ST/610/2010 (Arising out of Order-in-Original No.8/2010 dated 30.6.2010 passed by the Commissioner of Central Excise & Service Tax, Coimbatore) Commissioner of GST, Central Excise Chennai South Commissionerate Appellant Vs. M/s. Vodafone Essar Cellular Ltd. Respondent Appeal No. ST/634/2010 (Arising out of Order-in-Original No.8/2010 dated 30.6.2010 passed by the Commissioner of Central Excise & Service Tax, Coimbatore) M/s. Vodafone Essar Cellular Ltd. Appellant Vs. Commissioner of GST, Central Excise Chennai South Commissionerate Respondents Appearance Shri Raghavan Ramabhadran, Advocate for the Appellant Ms. P. Hemavathi, Commissioner (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing / Decision: 07.03.2018 Final Order Nos. 40585-40588 / 2018 Per Bench The issue arising for consideration in all these appeals being same, they were heard together and are disposed by this common order.
2. The appellants are engaged in providing mobile phone services and are registered with the Service Tax Department under Telecommunication Services. During the course of audit, it was noticed that they availed credit on inputs and capital goods as well as duty paid on towers and shelters and credit availed on various input services. It was also noticed that they had wrongly availed exemption under Notification No. 4/2004-ST dated 31.3.2004 on Telecom Services provided to SEZ units. Show cause notices were issued proposing to recover wrongly availed credit along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and penalties and hence these appeal.
Appeal No. ST/244 and 301/2010
3. The details of the show cause notices, period /issues involved, the period of dispute and amount involved is shown in the Table below:-
Nature of Demand SCN Date of Notice Period Period Amount (Rs.) Amount time barred Rs. Demand within time Rs. INPUT / CAPITAL GOODS CREDIT Credit of duty paid on towers & shelters 146/08 12.5.008 10/04 to 12/07 160,721,636 94,722,210 65,999,426 218/09 8.9.09 1/08 to 9/08 8,748,579 8,748,579 Sub-total 169,470,215 94,722,210 74,748,005 INPUT SERVICES Other input services construction, rent a cab, catering, ASS etc. 146/08 21.10.08 10/04to 12/07 1,026,616 0.00 1,026,616 Other input services construction, renta cab, tour operators 218/09 8.9.09 1/08 to 9/08 673,313 0.00 673,313 Pertaining to towers and shelters 218/09 8.9.09 1/08 to 9/08 2,225,538 0.00 2,225,538 Sub total 3,925,467 3,925,467 Telecom services provided to SEZ Units Demand denying exemption under 4/04 ST dt. 31.3.04 146/08 21.10.08 4/07 to 9/07 806,158 0.00 806,158 218/09 8.9.09 10/04 to 12/07 2,488,524 0.00 2,488,524 Sub Total 3,294,682 0.00 3,294,682 Grand Total 176,690,364 94,722,210 3,294,682
4. On behalf of the appellants, ld. Counsel Shri Raghavan Ramabhadran reiterated the grounds of appeals. He fairly conceded that the issue whether the appellant is eligible for credit on inputs and capital goods has been decided against the appellants by the Tribunal in the case of Bharti Airtel Vs. CCE 2012 (4) TMI 362 CESTAT Mumbai. He submitted that, however, part of the demand would fall within the extended period of limitation. The issue whether credit is admissible on duty paid on inputs and capital goods for erection of mobile towers was contentious during the relevant period. The appellant had availed credit on the bonafide belief that credit is admissible on the angles, channels etc. used for erecting structures/towers. The Tribunal in the appellants own case for earlier period had set aside the demand on the ground of limitation as well as the penalties for the normal period. He prayed that similar view may be taken in these appeals also.
3.1 With regard to the credit of duty paid on Towers and Shelters, he submitted that the said issue also stands covered and submitted that appellant had availed credit only on bonafide belief that credit is admissible and there was no suppression of facts with intent to evade payment of duty. He submitted that the issue in these appeals stand decided by the Larger Bench in the case of Tower Vision India Pvt. Ltd. reported in 2006 (42) STR 249 (Tri. LB). Similar view was taken by the Honble High Court of Bombay in Bharti Airtel reported in 2014 (35) STR 865 (Bom.). The Tribunal in the case of Vodafone Essar South Ltd. and ors. Vide Final Order No. 40194 to 40207/2018 dated 22.1.2018 had applied the very same decision to confirm the demand for normal period but set aside the demand for the extended period and the penalties were also set aside.
3.2 With regard to the demand in respect of input services, he submitted that the appellant had availed credit on various input services such as construction, rent-a-cab service etc. which were used for providing the output service. The period involved is prior to 1.4.2011 and therefore the said credit is eligible as these services have been availed for providing output services. These services are nothing but activities relating to business of the appellant. Further, the Tribunal in the Final Order cited supra has allowed credit on the very same services.
3.3 With regard to the denial of exemption under Notification No.4/2004, the ld. Counsel submitted that the department has sought to deny the exemption alleging that service had not been consumed within the SEZ. He argued that the mobile subscriptions have been availed within SEZ unit itself. Though the facility of such mobile phones may be used outside the SEZ, the same cannot be a ground to deny the benefit of exemption as per the notification. He adverted to the notification, and submitted that the said notification exempts service tax payable on services provided to SEZ units and therefore the demand raised on this count cannot sustain.
4. The ld. Commissioner (AR) Ms. Hemavathi reiterated the findings in the impugned order. She argued that the appellants have wrongly availed credit of duty paid on inputs and capital goods. The fact would not have come to light but for the intervention of the department and therefore the show cause notice issued invoking the extended period is correct and proper.
4.1 In regard to the credit availed on input services, she submitted that the authorities below has rightly disallowed the credit holding that there is no nexus between the input services and the output service provided by the appellants.
4.2 In regard to the issue of telecom service provided to SEZ units by the appellant, she submitted that the appellant is not eligible for the exemption under Notification No. 4/2004 for the reason that the services have been used by the mobile phone users outside the SEZ also.
5. Heard both sides.
6. The first issue for consideration is whether the credit availed on inputs/capital goods as well as towers and shelters is eligible or not. The said issue stands covered by the decision of the Larger Bench and Honble High Court of Bombay cited supra as well as the appellants own case cited supra. Following the same, we hold that credit is not eligible. The appellant has argued that the demand raised invoking extended period cannot sustain for the reason that the appellant had availed credit on bonafide belief that such credit is admissible. On perusal of records as well as after hearing the submissions, we find that the issue whether credit is admissible on inputs / capital gods as well as towers / shelters was contentious for a long time and had travelled upto the Larger Bench of the Tribunal and thereafter to higher fora. Taking note of these facts, we find invocation of extended period is without grounds. There is nothing to establish that appellant had availed credit suppressing facts with intent to evade duty. All along the issue was being litigated before various authorities. The Tribunal in the Final Order dated 22.1.2018 cited supra, has set aside the demand for the extended period as well as the penalties for the normal period. Following the same, we are of the considered opinion that the demand on this count for the extended period requires to be set aside which we hereby do. Thus the demand for the normal period will sustain, however, the penalties for the normal period are set aside.
6.1 With regard to disallowance of credit on input services, the issue stands covered by the decision in the case of Vodafone Essar South Ltd. (supra). The Tribunal in the said decision analysed the eligibility of credit on the very same services. The various services were used for providing output services. Further, the period is prior to 1.4.2011 when the definition of input services had a wide ambit as it included the words activities relating to business. Following the above decision in Vodafone Essar South Ltd., we hold that credit is admissible.
6.2 With regard to the denial of exemption under Notification No.4/2004 dated 31.3.2004 alleging that the telecom services are not consumed wholly within the SEZ Unit, we find that the mobile services are provided by the appellant to SEZ units. The department does not have a case that the subscribers are outside SEZ units. Merely because the facility of the mobile phone is used outside the SEZ unit also, the exemption in terms of Notification No. 4/2004 cannot be denied. Further, the period involved is after 10.2.2006 when the SEZ Act 2005 came into existence. Section 26 of the Act grants various exemptions from taxes and duties to SEZ. Section 51 of the Act provides that the Act shall have overriding effect. Taking into consideration all these aspects, we are of the considered opinion that the denial of exemption is unjustified. The demand raised on this count therefore cannot sustain and requires to be set aside which we hereby do.
7. In the result, we uphold the denial of credit on inputs / capital goods and towers/shelters used for setting up of telecommunication towers. The demand so raised will be restricted only to the normal period with no penalties. The demand for the extended period is set aside. In respect of the input services, the credit is held to be eligible and allowed. In respect of denial of exemption under Notification No.4/2004- the demand on this count is set aside. The appeals are partly allowed in the above terms.
Appeal Nos. ST/610/2010 and ST/634/2010
8. The parties herein are hereafter referred to as assessee and department for sake of convenience.
9. Show cause notice was issued proposing to deny credit on inputs, capital goods as well as towers and shelters used for setting up towers used for providing telecommunication services. The credit availed on duty paid pertaining to towers / shelters were also proposed to be disallowed. After due process of law, the original authority disallowed the credit and confirmed the demand in respect of credit availed on inputs / capital goods and towers / shelters. The demand in respect of input services also was confirmed. However, while confirming the demand in respect of input services, with regard to an amount of Rs.10,69,684/-, the Commissioner invoked the provisions relating to inputs to deny the credit. Against this finding of the Commissioner, invoking wrongly the provisions of inputs to deny credit availed on input services, department has filed Appeal No. ST/610/2010. Aggrieved by the disallowance of credit and confirmation of demand on inputs, capital goods as well as input services, the assessee has filed appeal No. ST/634/2010. For convenience, the details of show cause notice, period of dispute and the amount involved is given in the Table.
Nature of Demand SCN Date of Notice Period Period Amount (Rs.) Demand within time Rs.
INPUT / CAPITAL GOODS CREDIT Credit of duty paid on towers & shelters 13/09 22.9.09 4/08 to 3/09 6,127,526 6,127,526 INPUT SERVICES Pertaining to towers and shelters 13/09 22.9.09 4/08 to 3/09 2,444,173 2,444,173 Grand Total 8,571,699 8,571,6999
10. The issue for consideration in these appeals are identical to the issue in Appeal Nos. ST/244 and 301/2010. Therefore, adopting the same discussions we hold that the credit availed under the category of inputs / capital goods of the duty paid on MS angles, channels etc. as well as towers and shelters are not eligible. The demand being entirely within the normal period, however, for the very same discussions made above and following the decisions in Vodafone Essar South Ltd. Final Order No. 40194 to 40207/2018 dated 22.1.2018, the penalties are set aside.
11. With regard to the demand raised on input services, the facts reveal that the various input services on which assessee has availed credit are erection and installation services, construction etc. These were used for erecting the towers and shelters and PFBS for the period April 2008 to March 2009. The period involved being prior to 1.4.2011, we hold that the services would fall within definition of input services. The disallowance of credit is unjustified. The impugned order to extend disallowing of credit on input services is set aside. However, while disallowing the credit on input services, the Commissioner has wrongly involved the provisions pertaining to inputs for which reason alone the department has filed appeal No. ST/610/2010. This finding of the Commissioner though erroneous for wrong invocation of legal provision cannot sustain on merits. The department appeal is accordingly disposed.
12. In the result, Appeal Nos. ST/244 & 301/2010 are partly allowed.
Appeal No. ST/634/2010 is partly allowed Appeal No. 610/2010 is disposed.
13. Miscellaneous application filed by the department for change of cause title is allowed.
(Operative portion of the order was
pronounced in open court)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
Rex
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