Bharti Hexacom Limited vs Commissioner Of Central Excise And Customs, Central Goods And Service Tax Jaipur-I

Show Cause Notice,Period,CENVAT Credit

13.04.2006,"October, 2004 to September, 2005","14,77,71,154/-

18.10.2007,"April, 2006 to August, 2007","11,27,48,506/-

25.09.2008,"September, 2007 to March, 2008","21,96,99,445/-

07.08.2009,"April, 2008 to December, 2008","61,16,224/-

18.09.2012,"April, 2011 to March, 2012","5,70,264/-

29.03.2013,"January, 2009 to March, 2011","52,25,457/-

,Total,"49,21,31,050/-

support services’ are immovable property is correct or not?,,

The finding recorded by the Delhi High Court is as follows:,,

“38. A machine or apparatus annexed to the earth without its assimilation by fixing with nuts and bolts on a foundation to providing for,,

stability and wobble free operation cannot be said to be one permanently attached to the earth and therefore, would not constitute an",,

immovable property. Thus, the tribunal erred in relying on the Bombay High Court and the judgment was delivered, the whole case",,

proceeded on the presumption that these are immovable properties. The tribunal failed to appreciate the “permanency test†as laid,,

down by the Supreme Court in Solid and Correct Engineering (supra).â€​,,

(emphasis supplied),,

It is seen that the decision of the Bombay High Court in Bharti Airtel was considered by the Delhi High Court.,,

Question No.2 framed by the Delhi High Court is whether the assessees are entitled to claim CENVAT credit on the towers and shelters either as,,

capital goods or inputs in terms of Rule 2 (a) and (k) of the CENVAT rules and whether towers and shelters would qualify as “accessoriesâ€​?,,

The finding recorded by the Delhi High Court on this issue is as follows:,,

“53. On examination of the definition and the decisions, the court is of the considered opinion that the term “all goods†mentioned in",,

Rule 2(k) of the Credit Rules would cover all the goods used for providing Output Services, except those which are specifically excluded in",,

the said Rule. Therefore, the definition is wide enough to bring all goods which are used for providing any output service. Further, from the",,

decisions of the Supreme Court and other judgments referred to previously, the test applicable for determining whether inputs are used in",,

the manufacture of goods is the “functional utility†test. If an item is required for providing out the output services of the service,,

provider on a commercial scale, it satisfies the functional utility test. In the facts of the present case, what emerges is that, BTS is an",,

integrated system and each of its components have to work in tandem with each other in order to provide the required connectivity for,,

cellular phone users and for efficient telecommunication services. The towers and pre-fabricated shelters form an essential in the provision,,

of telecommunication service. The CESTAT-in the opinion of this court-failed to appreciate that it is well settled that the work “usedâ€,,

should be understood in a wide sense, so as to include passive as well as active use. The towers in CKD condition are used for the purpose of",,

supplying the service and therefore, would qualify as “inputsâ€​. There is actual use of tower and shelters in conjunction with the Antenna",,

and the BTS equipment in providing the output service, which also includes provision of the Business Support Service. The CESTAT has",,

failed to appreciate that the towers and the parts thereon and the pre-fabricated shelters are inputs, in accordance with the provisions of",,

Rule 2(k) of the Credit Rules. The CESTAT has erred in holding that there is no nexus between the inputs and the output service. The,,

CESTAT also failed to consider the decision of the Andhra Pradesh High Court in the case of the M/s Indus Towers Ltd. vs. CTO,",,

Hyderabad, (2012) 5 VSR 447, which clearly ruled that the towers and shelters are indeed used and are integrally connected to the",,

rendition of the telecommunication service.,,

(emphasis supplied),,

The third question framed by the Delhi High Court is whether the Tribunal erred in applying the nexus test with reference to MS angles and,,

channels as according to the appellant what was bought to the site were towers, shelters and accessories in CKD/SKD conditions for providing",,

services?,,

The finding on this issue is contained in paragraph 56 of the judgment of the Delhi High Court and it is as follows:,,

“56. The inputs such as MS angles and channels are used for the providing infra-support service/telecom service. To apply the term,,

“used forâ€​ the definition of inputs, there should be a nexus between the inputs goods and the output service. In the opinion of this court,",,

clearly goods in question have gone into the making of such towers which in turns are used for providing infra-support service/telecom,,

service. It is therefore, held that the CESTAT erred in applying the nexus test and therefore, credit has to be extended to the duty paid MS",,

angles and channels.â€​,,

(emphasis supplied),,

Question No. 4 framed by the Delhi High Court is whether the appellant was justified, in terms of rule 4(1) of the CENVAT Rules, in claiming",,

CENVAT credit of excise duty paid by the manufacturer of towers and shelters after receipt of such towers and shelters at the premises?,,

The finding on this issue is contained in paragraph 68 of the judgment and it is as follows:,,

“68. On the basis of the above reasoning, the Tribunal had denied CENVAT credit to the assessee on the premise that the towers erected",,

result into an immovable property, which is erroneous and contrary to the judgment of the Supreme Court in the case of Solid and Correct",,

Engineering (supra). The towers which are received in CKD condition, are assembled/erected at the site subsequently giving rise to a",,

structure that remains immovable till its use because of safety, stability and commercial reasons of use. The entitlement of CENVAT credit is",,

to be determined at the time of receipt of goods. The fact that such goods are later on fixed/fastened to the earth for use would not make,,

them a non-excisable commodity when received. Therefore, this question is answered in favour of the assessee and against the Revenue.â€​",,

(emphasis supplied),,

Question No. 5 as framed by the Delhi High Court is whether emergence of immovable structure at intermediate stage (assuming without,,

admitting) is a criterion for denial of CENVAT credit?,,

The finding is contained in paragraph 73 of the judgment of the Delhi High Court and it is as follows:,,

“73. The conclusion of CESTAT, denying the assessee CENVAT credit on the premise that the towers erected result in immovable",,

property, is erroneous and plainly contrary to Solid and Correct Engineering (supra). The towers that are received in CKD condition, are",,

erected at site, subsequently, giving rise to a structure that remains, safe and stable (commercial reasons of use). The fact that in the",,

intermediate stage, an immovable structure emerged, is of no consequence, in the facts of the present case. It is a settled principle of law",,

that entitlement of CENVAT credit is to be determined at the time of receipt of the goods. If the goods that are received qualify as inputs or,,

capital goods, the fact that they are later fixed/fastened to the earth for use would not make them a non-excisable commodity when received.",,

The CESTAT failed to consider the fact in the event antennae and BTS are to be relocated, the assessee also has to relocate the tower and",,

the pre-fabricated shelters, thereby, implying that the towers and the per-fabricated shelters, are not immovable property. Therefore, the",,

CESTAT erred in relying upon the decision of the Bharti Airtel (supra).â€​,,

(emphasis supplied),,

It is seen from the aforesaid judgment of the Delhi High Court in Vodafone Mobile Services that towers and pre-fabricated shelters form an,,

essential ingredient in the provision of telecommunication service as they are used for the purpose of supplying the service and would qualify as,,

‘inputs’ and, therefore, CENVAT credit can be availed.",,

Though the Delhi High Court in Vodafone Mobile Services has considered the judgment of the Bombay High Court in Bharti Airtel, but even",,

otherwise in view of the decision of a Larger Bench of the Tribunal in Collector of Central Excise, Chandigarh vs. Kashmir Conductors, 1997 (96)",,

E.L.T. 257 (Tri.), the view taken by the jurisdictional High Court on a proposition of law has to be followed by the Tribunal.",,

The Commissioner, therefore, committed an error in denying CENVAT credit to the appellant.",,

Thus, for all the reasons stated above, the order dated 13.02.2017 passed by the Commissioner cannot be sustained. It is, accordingly, set aside,",,

and the appeal is allowed.,,

(Order pronounced on 25.05.2021),,