Customs excise & service tax appellate tribunal, West Block No. 2, R. K. Puram, New Delhi court-i
The question of Immovability of tower and its relevance
Download 130.46 Kb.
|
The question of Immovability of tower and its relevance :- The appellants contended that (a) set of steel items cleared as towers have suffered duty as “towers”. (b) even after erection at site on a cement concrete foundation they continue to be goods or in other words do not become immovable property. 18. This aspect regarding the material status of towers and shelters have been examined in detail by the Hon’ble Bombay High Court in Bharti Airtel Ltd. (supra). On the first point it is clear even if it is admitted that such towers are cleared in a full sets of angles, channels (in a CKD condition) the classifications still continues to be under Chapter 73 which is excluded from the definition of capital goods. The second question is whether towers and shelters are immovable property or goods for excise purposes. As already stated this aspect was in fact the main issue decided by the Hon’ble Bombay High Court in Bharti Airtel Ltd. (supra). The Hon’ble High Court after elaborate analysis of various relied upon case laws came to the categorical conclusion that towers and parts thereof and shelters are not capital goods and are also not inputs. The Hon’ble High Court observed that towers are immovable structures and ipso facto non-marketable and non-excisable. 19. On the nature of tower being “goods”, learned Counsel argued that the Bombay High Court in Bharti Airtel Ltd. (supra) dealt with an admitted fact of immovability of such towers. In the present appeals no such admission is made by appellants. In fact they are claiming that tower parts in sets are being cleared by the supplier in CKD condition. It was argued that, in modern day technology fabricating a tower at a site, where all components are cut and made to a particular design will involve only a simple integration by bolts and nuts though a base has to be secured to the concrete platform by embedding. The erection at site and embedding the tower in the concrete platform are only for convenience of easy transport. Learned Counsel contended that whether a product or a thing is movable goods or a immovable property is a question of fact. It is submitted that towers in their case are not immovable property and hence continue to be goods for excise purpose. 20. We find here the Hon’ble Bombay High Court while deciding the admissibility of credit on such towers did not go by the concession or admission made by the appellants alone. The nature of tower, its fabrication and the resultant structure has been elaborately discussed as can be seen in the order. It will not be correct to say that the Hon’ble High Court did not examine the relevant criteria or the legal principle in arriving at the finding of immovability in respect of these towers. The fact that towers can be dismantled, moved and re-erected at another location by itself does not make them movable goods. Steel angles, bolts, nuts are brought and fabricated into an embedded tower. These can be dismantled in to angles and channels, nuts and bolts, substantially restoring to the original condition of the raw material. However, what is transported are “angles and channels”. The towers when they are embedded are considered as immovable property. This ratio has, in our considered view, been adopted by the Hon’ble Bombay High Court in Bharti Airtel Ltd. (supra). 21. Learned Counsel relied on the Hon’ble Supreme Court’s decision in CCE, Ahmedabad vs. Solid & Correct Engineering Works reported in 2010 (252) E.L.T. 481 (S.C.). The Supreme Court was examining excise duty liability of asphalt drum hot mix plant. The Court examined Section 3 (26) of the General Classes Act with reference to “Immovable Property”. The term “attached to the earth” has been examined with reference to Section 3 of Transfer of Property Act. The Hon’ble Apex Court concluded that any plant which is fixed by nuts and bolts to a foundation, wherein there is no assimilation of the machinery with a structure permanently and the civil foundation was only necessary to provide a wobble free operation of the machine, the test of permanency would fail. We have carefully perused the Apex court order in this case. The Apex court held that the hot mix plant which is specifically covered under Plant and Machinery Tariff Heading 8474 are manufactured and brought. The point decided by the Apex court was whether setting up of such plant and machinery would amount to manufacture liable to Central Excise. First of all, in the present case we have no admitted capital goods brought for installation or erection in the desired site. The towers and their components cleared as angles and channels or as set of angles in CKD condition are cleared after duty payment by the manufacturer under Chapter 73, which is an excluded chapter for capital goods. As such, there is no movable capital goods which are otherwise eligible for Cenvat credit which are being denied such credit only applying the test of immovability. Tower Parts (MS Channels, Angles etc.) as “Inputs” for availing credit :- An alternate claim has been made by the appellants to allow Cenvat credit paid on structural parts/towers/ shelters treating them as inputs in terms of Rule 2 (k) (ii) which allows credit of all goods used for providing output services. It was argued that there is no bar for goods which do not fall under the category of capital goods to qualify as inputs. Reliance was placed on the Larger Bench decision in Union Carbide India Ltd. vs. CCE, Calcutta – I reported in 1996 (86) E.L.T. 613 (Tribunal). In this ruling, Tribunal considered spare parts of machines to be eligible for credit as inputs under Modvat scheme. In Tata Engineering & Locomotive Co. Ltd. vs. CCE, Pune reported in 1994 (70) E.L.T. 70 (Tribunal), the Tribunal held that credit on the machines which stand excluded is available under input category. We have examined the appellant’s plea in the light of decided cases. In the present case, duty paid items are MS Angles and Channels/Shelters which are brought to the site installed/erected and further put to use for mounting/installing telecommunication antenna and other equipment. It is necessary to decide whether duty paid MS angles/shelter are used by infra companies for providing business support service to telecom companies or for providing telecom service by telecom operators. This will bring us to the next question relevant to decide this issue. Question of nexus and Cenvat credit flow :- The duty payment is on MS angles, channels (or towers in CKD as claimed by the appellants) and pre-fabricated shelters. The credit of this duty is claimed. The admitted basic requirement for eligibility of any duty credit is that goods on which duty is paid (credit of which is claimed) should have a connection or nexus to the output service. The credit availed on input is used for discharging tax on output service. In the present case, the duty paid MS angles, channels etc. are brought to the site, fabricated into towers on a concrete platform. Similarly, the duty paid pre-fabricated shelters are brought and fixed to the ground base firmly. On such towers, the antenna or dish are fixed and connected by cables to electronic equipment housed in the pre-fabricated shelter on the ground. It is apparent that these duty paid items are not used for providing telecommunication service. The telecommunication service is provided by using erected and fixed towers and shelters. The inputs like MS Angles and Channels have gone into the making of such towers which in turn are used for providing infra-support service/telecom service. To apply the term “used for” in the definition for inputs, there should be a nexus between the inputs goods and the output service. In the present case the manipulation/fabrication of raw materials involved in erection and installation, fixing of towers and shelters will render such nexus tenuous. If the claim of the appellant is to be accepted, the credit can be even extended to duty paid MS Ingots if procured by the appellants to get the MS Angles manufactured which in turn used for erection of tower which in turn is used for providing telecom service. It is clear that such far remote linkages are not within the scope of the term “used for”. 22. Learned Counsel also relied on decision of Hon’ble Supreme Court in Hyundai Unitech Electrical Transmission Ltd. reported in 2015 – VIL – 104 – SC – CE. In the said case the Hon’ble Supreme Court held that doors and electrical boxes are components and/or parts of wind operated electricity generators. Learned Counsel submitted that towers of wind mill generator stand on a similar footing to the towers now in dispute and these should be considered as parts of overall BTS. We have examined the said decision as well as the Tribunal’s decision which was considered by the Supreme Court. It is clear that the Tribunal was considering the scope of terms “wind operated electricity generator, their components and parts thereof”. Applying the principle in a Customs case of import of such towers, the Tribunal held the assessee eligible for exemption on such towers as parts. The Tribunal in Customs case Bharat Heavy Electricals Ltd. vs. CC, Chennai reported in 1999 (108) E.L.T. 448 (Tribunal) examined the technical literature of imported wind mill generator/tower to arrive at the decision. Here, it is the assertion of appellants that the tower should be considered as part of BTS. The integrated BTS is never cleared as excisable item. The various tower structures are erected at site and integrated to create the required infra-structure. Hence, the decision of the Hon’ble Supreme Court that doors and electrical boxes are to be considered as parts of electricity generator is not of any help to appellants. Applicability of ratio followed for telecom companies to infrastructure companies :- On the above analysis, the first point for difference of opinion referred to this Larger Bench relating to non-applicability of the decision of the Hon’ble Bombay High Court in Bharti Airtel to infrastructure companies to provide business support service to telecom operators can be examined. We find in the normal course the nature of output service should not have any bearing to decide credit eligibility on capital goods now under dispute. A distinction was sought to be made that the decision of Hon’ble Bombay High Court was applicable only to active telecom service providers and not to providers of passive infrastructural support to such telecom operators. Reliance was sought to be placed on the decision of the Tribunal in GTL Infrastructure Ltd. vs. CST, Mumbai reported in 2015 (37) S.T.R. 577 (Tri. – Mumbai) and Tribunal’s final order No. A/382-383/2015 dated 26/11/2014 in Reliance Infratel Ltd. vs. CST, Mumbai – II reported in 2015 (38) S.T.R. 984 (Tri. – Mumbai). We have perused the GTL Infrastructure Ltd. decision. In the said decision it was mentioned that towers/BTS Cabins were used for providing business auxiliary service and, hence, Cenvat credit cannot be denied. Further, reliance placed by the Original Authority on Explanation II and Rule 2 (k) (i) was found to be incorrect as the same dealt with a manufacturer and not a service provider. The Tribunal was referring to its earlier order in Bharti Airtel Ltd. vs. CCE, Pune reported in 2013 (29) S.T.R. 401 (Tri. – Mumbai) and observed that the said case dealt with facts which are totally different. It was found that since appellants were allowing the operators right to install antenna and BTS equipments and rendering an output service under business auxiliary service they were eligible for credit. We find that this decision of Tribunal is not based on a proper appreciation of the ratio of the Hon’ble Bombay High Court. The Hon’ble Bombay High Court order in Bharti Airtel Ltd. (supra) was not available to the Tribunal while deciding GTL Infrastructure Ltd. The tower and BTS Cabin are used for providing output service, here business auxiliary/support service but the question is, is there any duty claimed as credit paid on tower or BTS Cabins as installed at site. These items cannot be considered as inputs as they were held to be immovable property. The inputs which suffered duty like MS angles and pre-fabricated shelters, per se, were not used for providing output service. In other words there is a tower and cabin structure erected and embedded before such support service could be provided to the telecom operators. 23. It is necessary to note that before infrastructure companies came into the picture, telecom operators themselves were putting up such infrastructure and using the same to provide telecom service. In other words, in the absence of infrastructure companies as an intermediary, telecom companies themselves created such infrastructure and “provided” such business support service to self. The issue of service tax liability in such situation on business support service is not raised because there are no two persons as a provider or recipient of such service. In a sense such service was to the self. Considering such factual matrix, we find that no distinction could be made between the telecom operators and the infrastructure companies in deciding the eligibility of Cenvat credit on the impugned items now under consideration. 24. Further, it was contended by the appellants that even if towers shelters and other materials are held to be immovable property, credit cannot be denied on them. Reliance was placed on the decision of Hon’ble Andhra Pradesh High Court in CCE, Visakhapatnam – II vs. Sai Sahmita Storages (P) Ltd. reported in 2011 (270) E.L.T. 33 (A.P.), Hon’ble Gujarat High Court decision in Mundra Ports and Special Economic Zone Ltd. reported in 2015 – TIOL – 1288 HC AHD ST and Hon’ble Punjab & Haryana High Court decision in Belsonica Auto Components India P. Ltd. reported in 2015 VIL 300 (P&H – ST). In Sai Sahmita Storages (P) Ltd. (supra), the Hon’ble Andhra Pradesh High Court held that there is no dispute that the assessee used cement and TMT bar for providing storage facility without which storage and warehousing services could not have been provided. The question relating to creation of an immovable asset and the implication of Cenvat credit flow in such situation was not examined in detail in the said order. Similarly, the Hon’ble Gujarat High Court also arrived at similar conclusion. It is seen the Hon’ble Punjab & Haryana High Court in Belsonica Auto Components India P. Ltd. (supra) was dealing with credit availability on input service paid on construction of civil structure. In the present case, we are dealing with credit eligibility of goods, either as inputs or as capital goods. Further, with due respect to these decisions, it is to be noted that the very same matters covered in the present appeals are discussed elaborately on a similar set of facts by the Hon’ble Bombay High Court in Bharti Airtel Ltd. (supra). When there is a detailed examination and ruling on identical set of facts by the Hon’ble High Court, the same are to be followed. Further, the Hon’ble Bombay High Court reiterated their findings arrived in Bharti Airtel Ltd. (supra) in the case of Vodafone India Ltd. in their order dated 01/09/2015 in civil appeal No. 126/2015 and others. The Hon’ble Bombay High Court examined various contentions now raised in these appeals and reiterated their findings recorded earlier in Bharti Airtel Ltd. (supra). 25. In such a situation and in the absence of any material before us to distinguish the said ratio vis-à-vis the fact of the present case we find the ratio of the Hon’ble Bombay High Court as laid down in Bharti Airtel Ltd. (supra) and Vodafone India Ltd. (supra) should be followed. Hence, first point of difference is answered against the appellant and in favour of Revenue. 26. The second point of difference of opinion referred to the Larger Bench is regarding the eligibility of the appellant to the credit on shelters and parts as capital goods. We find that our preceding analysis regarding ineligibility of credit on towers and shelters is equally applicable to the said items. The only reason for claiming the credit on shelters and parts is their classification under Chapter 85. We find that a particular classification of duty paid item by itself does not make the item eligible for Cenvat credit. The eligibility of credit is determined by the provisions of Cenvat Credit Rules. By classifying a product and paying duty under a particular heading, an automatic claim for such credit for that item cannot be made. The eligibility of any item for credit is to be decided as per provisions of Cenvat Credit Rules, 2004. As discussed elaborately hereinabove shelters were found to be not eligible for Cenvat credit either as capital goods or as inputs and as such some supplier classifying the product under Chapter 85 by itself does not make them eligible for credit if they are otherwise not entitled for the same. Learned Counsel contended that the denial of credit as held by Hon’ble Bombay High Court is only on classification of these shelters. We find that the Hon’ble High Court categorically held that towers and PFB are in the nature of immovable goods and are non-marketable and non-excisable. Further, we find that the analogy drawn by learned Counsel with plant and machinery to the present issue is not correct. The plant and machinery classifiable under specific tariff heading are manufactured and cleared on payment of duty as such machinery. Here, the facts are clearly different. Accordingly, the second point of reference is also answered against the appellant and in favour of Revenue. (S.K. Mohanty) Judicial Member (B. Ravichandran) Technical Member PK
I had the benefit of the draft opinion prepared by the Hon’ble Member (Technical) Shri B. Ravichandran, in the batch of thirteen appeals arising pursuant to a difference of opinion recorded in No. I.O./ST/142 to 144/2015-CU (DB) dated 28.07.2015, by a ld. Division Bench of the Tribunal. Eight connected appeals were directed to be tagged to those appeals, for being heard by a larger Bench, by the order dated 30.07.2015. The larger Bench was constituted by the President, CESTAT. 2. I am in respectful agreement with the conclusions recorded in the draft opinion drawn up by the Hon’ble Member (Technical). I however record separate reasons, on some aspects and in brief, for doing so. 3. The essential issue involved in all appeals (those arising out of the difference of opinion and those tagged to be heard along therewith, as well) is regarding entitlement to avail Cenvat credit on telecom towers, shelters and parts or components thereof, for remittance of service tax on the taxable output services provided by appellants. The appellants provide telecom towers and shelters to telecom services providers, on lease basis. Whether appellants are entitled to avail Cenvat credit of excise duty paid on telecom towers, shelters and parts for remittance of service tax on the taxable services of, “Business Auxiliary Service” (BAS) or “Support Services of Business or Commerce” (BSS) as the case may be, to telecom service providers, is thus the core issue that falls for our determination. 4. In Bharti Airtel Limited vs. CCE, Pune-III – 2014 (35) STR 865 (Bom.) followed in the decision in Vodafone India Ltd. vs. CCE (Appeal No. 126/2015), the Hon’ble Bombay High Court concluded (in the context of availment of Cenvat credit of duty, paid on towers shelters and parts, by telecom service providers, for remittance of service tax on the rendition of telecom service), that towers and shelters have become immovable property and whether they be treated as components, parts or accessories, credit cannot be availed. 5. In these appeals, ld. Counsel for the several appellants urge that there is a clear distinction between availment of Cenvat credit on towers, shelters and parts by active telecom service providers (as was the case in the rulings of the Bombay High Court in Bharti Airtel Limited and Vodafone India Limited) and the facts in the present batch of appeals, since appellants, herein are all passive infrastructure providers, i.e., provide the infrastructure of towers and pre-fabricated shelters, on a tenured lease basis to telecom service providers, for eventual rendition by the later of the taxable telecom services and in the process provide the taxable “BAS” or “BSS”, as the case may be, to telecom companies. 6. During the period in issue, the relevant provisions of Cenvat Credit Rules, 2004 defined “capital goods”, to the extent material and relevant, as: All goods falling under Chapters 82, 84, 85 and 90 of the First Schedule to the Excise Tariff Act (rule 2(a)(A)(i)]; and Components, spares and accessories of the goods specified in clause (i) (rule 2(a)(A)(iii)]. “Input” is defined to mean all goods, except light diesel oil etc. used in providing any output service (rule 2(k)(iii)]. Rule 3 of the 2004 rules authorises a provider of taxable service to take credit of specified duties paid on any input or capital goods received in the premises of the provider of the output service. 6. For entitlement of credit on towers, shelters or parts thereof, it is therefore essential that these should be goods and should fall, either within the ambit of capital goods specified in Rule 2(a)(A)(i) of the rules, namely goods falling under Chapters 82, 84, 85 or 90 or to components, spares or accessories of goods specified in sub-clause (i). Even for availing credit as “inputs”, towers, shelters or components thereof should be goods and used for providing an output service. These are conditions precedent for availment of Cenvat credit, on duty paid on these goods, for remittance of service tax on the output services rendered, whether the output service is “BAS” or “BSS” (in the case of passive infrastructure providers) or “Telecom Services” (in the case of active infrastructure providers, namely where the telecom companies themselves own the infrastructure used for rendition of telecom services). 7. The seminal issue is thus whether M.S. steel angles / towers, pre-fabricated shelters and parts thereof, on which duties are paid (admittedly) continue to be goods, notwithstanding their erection at a site / location, with a view to provide infrastructural support for BTS, for rendition of telecom services. Integral to this issue is whether towers and shelters continue to bear the character of goods even after erection and installation at the site, by affixture by bolts or foundation plates to concrete foundations. In what circumstances, conditions or factual matrixes plant, equipment or machinery cease to be goods and transmutes to immovable property, we notice a divergence in curial interpretation. 8. In the factual context of towers and shelters owned by active infrastructure service providers, the Mumbai Bench of the Tribunal in Bharti Airtel Limited vs. CST, Pune – 2013 (20) STR 401 (Tri. Mum.) ruled that Cenvat credit could not be availed. This ruling was predicated on the position admitted by appellants therein that towers and shelters are immovable property. This conclusion was upheld by the Hon’ble Bombay High Court in Bharti Airtel Limited vs. CCE, Pune-III – 2014 (35) STR 865 (Bom.). In Central Excise Appeal No. 126/2015 in Vodafone India limited and batch, the High Court followed its earlier decision in M/s Bharti Airtel Limited (supra). Cenvat credit was however allowed by the Mumbai Bench of the Tribunal in GTL Infrastructure Limited vs. CST, Mumbai – 2015 (37) STR 577 (Tri. Mum.); in M/s Reliance Infratel Limited vs. CST, in Service tax Appeal Nos. 88497 and 85682/2014 and in Essar Telecom Infrastructure Limited and Reliance Communication Infrastructure Limited vs. CST, Mumbai-I – 2015-TIOL-1132-CESTAT-Mum. Earlier, in CCE, Mumbai-IV vs. Hutchison Max Telecom Private Limited – 2008 (224) ELT 191 (Bom.), the Hon’ble High Court concluded that towers are immovable property. 9. In State of A.P. vs. BSNL – 2012 (25) STR 321 (A.P.) the issue was regarding validity of levy of sales tax, under the provisions of the A.P. VAT Act, 2005, inter-alia on sharing of telecom infrastructure. On facts, in the A. P. Case, some telecom companies erected towers on sites and permitted other similar service providers to fix their antennas on the towers and thus shared the infrastructure, for which a monthly infrastructure share fee was received, towards consideration. In para 44 of this judgment, Hon’ble High Court concluded that since telecommunication towers of a height of around 90 mtrs. are embedded either to the earth or to the rooftop of a building and fastening of such huge structures was necessitated, these are excluded from the ambit of “goods “and constitute “immovable property”; and since transfer of the right to use immovable property does not fall within the scope of the VAT Act, there is no liability to tax thereunder. This decision did refer to the decision of the Supreme Court in Solid & Correct Engineering Works – (2010) 5 SCC 122, to conclude that to constitute immovable property there should be no mobility and the test of permanency is whether the chattel is movable to another place of use in the same position, or is liable to be dismantled or re-erected at a later place. The High Court concluded that 90 mtrs. huge towers can be erected at another place only after being completely dismantled at the existing site and cannot be moved to another place of use in the same position; and consequently are immovable property but not goods, liable to tax under the A.P. VAT Act. 10. Ld. Counsel for the assessees before us, strenuously contended that decisions, of the A.P. High Court in BSNL, of the Bombay High Court in Bharti Airtel Limited and in Vodafone India Limited have incorrectly appreciated and applied the ratio regarding the character of towers and shelters (as not amounting to immovable property), deducible from the judgment in Solid & Correct Engineering Works (supra). 11. In Solid & Correct Engineering Works, the decision was rendered on the basis of a contention by the assessees therein that manufacture of parts and components for road and civil construction machinery and equipment, like asphalt drum/ hot mix plants and asphalt paver machines etc. are not excisable to the levy of excise duty since even though the setting up of the plant may amount to manufacture of a plant and the plant may be machinery covered by entry 8474, manufacture of the same would not amount to manufacture of “excisable goods” since such plant or machinery need to be permanently embedded in the earth, and are thus immovable property. Whether annextiation of these goods to the earth by fixation on foundations, for ensuring stability of the plant and avoidance of vibration during operations, transform these goods into immovable property and what constitutes immovable property in the circumstances, was therefore the core issue before the Apex Court. To the extent relevant and material for our discussion, the relevant portion of the analysis by the Supreme Court in Solid & Concrete Engineering Works, is reproduced below: “18. It is not the case of the respondents that plants in question are per se immovable property. What is argued is that they become immovable as they are permanently imbedded in earth in as much as they are fixed to a foundation imbedded in earth no matter only 1½ feet deep. That argument needs to be tested on the touch stone of the provisions referred to above. Section 3 (26) of the General Clauses Act includes within the definition of the term “immovable property” things attached to the earth or permanently fastened to anything attached to the earth. The term “attached to the earth” has not been defined in the General Clauses Act, 1897. Section 3 of the Transfer of Property Act, however, gives the following meaning to the expression “attached to the earth”. “(a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls and buildings; (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached. 19. 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 embedded 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 no more than 1½ feet deep intended to provide stability to the working of the plant and prevent vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses extracted above. That is because attachment of the plant to the foundation is not comparable or synonymous to trees and shrubs rooted in earth. It is also not synonymous to imbedding in earth of the plant as in the case of walls and buildings, for the obvious reason that a building imbedded in the earth is permanent and cannot be detached without demolition. Imbedding of a wall in the earth is also in no way comparable to attachment of a plant to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation. So also the attachment of the plant to the foundation at which it rests does not fall in the third category, for an attachment to fall in that category it must be for permanent beneficial enjoyment of that to which the plant is attached. 20. It is nobody’s case that the attachment of the plant to the foundation is meant for permanent beneficial enjoyment of either the foundation or the land in which the same is imbedded. 21. In English law the general rule is that what is annexed to the freehold becomes part of the reality under the maxim quidcquid plantatur solo, solo cedit. This maxim, however, has no application in India. Even so, the question whether a chattel is imbedded in the earth so as to become immovable property is decided on the same principles as those which determine what constitutes an annexation to the land in English law. The English law has evolved the twin tests of degree or mode of annexation and the object of annexation. In Wake V. Halt (1883) 8 App Cas 195 Lord Blackburn speaking for the Court of Appeal observed: “The degree and nature of annexation is an important element for consideration; for where a chattel is so annexed that it cannot be removed without great damage to the land, it affords a strong ground for thinking that it was intended to be annexed in perpetuity to the land.” 22. The English law attaches greater importance to the object of annexation which is determined by the circumstances of each case. One of the important considerations is founded on the interest in the land wherein the person who causes the annexation possesses articles that may be removed without structural damage and even articles merely resting on their own weight are fixtures only if they are attached with the intention of permanently improving the premises. The Indian law has developed on similar lines and the mode of annexation and object of annexation have been applied as relevant test in this country also. There are cases where machinery installed by monthly tenant was held to be moveable property as in cases where the lease itself contemplated the removal of the machinery by the tenant at the end of the tenancy. The mode of annexation has been similarly given considerable significance by the courts in this country in order to be treated as fixture. Attachment to the earth must be as defined in Section 3 of the Transfer of Property Act. For instance a hut is an immovable property, even if it is sold with the option to pull it down. A mortgage of the super structure of a house though expressed to be exclusive of the land beneath, creates an interest in immovable property, for it is permanently attached to the ground on which it is built. 23. The courts in this country have applied the test whether the annexation is with the object of permanent beneficial enjoyment of the land or building. Machinery for metal-shaping and electro-plating which was attached by bolts to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth, must be for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by tenant, are not affixtures. 24. Applying the above tests to the case at hand, we have no difficulty in holding that the manufacture of the plants in question do not constitute annexation hence cannot be termed as immovable property for the following reasons: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be “attached to the earth” within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. 25. We may, at this stage, refer to the decisions of this Court which were relied upon by learned counsel for the parties in support of their respective cases. 26. In Sirpur Paper Mills Ltd. (supra) this Court was dealing with a near similar situation as in the present case. The question there was whether the paper machine assembled at site mainly with the help of components bought from the market was dutiable under the Central Excise Act, 1944. The argument advanced on behalf of the assessee was that since the machine was embedded in a concrete base the same was immovable property even when the embedding was meant only to provide a wobble free operation of the machine. Repelling that contention this Court held that just because the machine was attached to earth for a more efficient working and operation the same did not per se become immovable property. The Court observed: “5 Apart from this finding of fact made by the Tribunal, the point advanced on behalf of the appellant, that whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a householder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of the water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the paper-making machine can be sold in the market. The Tribunal has found as a fact that it can be sold. In view of that finding, we are unable to uphold the contention of the appellant that the machine must be treated as a part of the immovable property of the company. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property.” 27. In M/s. Narne Tulaman Manufacturers Pvt. Ltd. Hyderabad (1989 (1) SCC 172), this Court was examining whether the assembly of parts of machine by an assessee to bring into existence a weighbridge as a complete machine amounted to manufacture hence liable to duty even when its parts are separately taxable. Answering the question, in the affirmative this court held that the assembling of the components of the weighbridge brought into existence a complete weighbridge which had a distinctive name, character, and use hence excisable to duty. The fact that the assessee was himself manufacturing only one part of the component used in the erection of a weighbridge did not mean that the complete machine once the same was assembled by using duty paid parts was not excisable to excise duty. 28. In Triveni Engineering’s case (supra), the question that fell for consideration was whether a turbo alternator comprising two components (i) steam turbine and (ii) complete alternator and fixing the same on a platform brought about a new dutiable product. The Court held that the process of fixing the same on a platform and aligning them in a specified manner that turbine was nothing but a manufacturing process and a new commodity come into existence in the said process. The machine so manufactured was, however, erected on a platform, specially constructed for that purpose which made the machine immovable in character. The Court declared that while determining whether an article is permanently fastened to anything attached to the earth both the intention as well as the factum of fastening has to be ascertained from the facts and circumstances of each case. The following passage is apposite in this regard: “There can be no doubt that if an article is an immovable property, it cannot be termed as “excisable goods” for purposes of the Act. From a combined reading of the definition of “immovable property” in Section 3 of the Transfer of Property Act, Section 3 (25) of the General Clauses Act, it is evident that in an immovable property there is neither mobility nor marketability as understood 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.” (emphasis supplied) 29. Applying the above test to the case at hand, the plants in question were neither attached to earth within the meaning of Section 3 (26) of the General Clauses Act nor was there any intention of permanently fastening the same to anything attached to the earth. 30. Reliance was placed by Mr. Bagaria upon the decision of this Court in Quality Steel Tubes (P) Ltd. Vs. CCE, U.P. – 1995 (75) E.L.T. 17 (S.C) and Mittal Engineering Works (P) ltd. v. CCE, Meerut – 1996 (88) E.L.T. 622 (S.C.). In Quality Steel Tubes case (supra) this Court was examining whether ‘the tube mill and welding head’ erected and installed by the assessee for manufacture of tubes and pipes out of duty paid raw material was assessable to duty under residuary Tariff Item No. 68 of the Schedule being excisable goods. Answering the question in negative this Court held that tube mill and welding head erected and installed in the premises and embedded to earth ceased to be goods within the meaning of Section 3 of the Act as the same no longer remained moveable goods that could be brought to market for being bought and sold. We do not see any comparison between the erection and installation of a tube mill which involved a comprehensive process of installing slitting line, tube rolling plant, welding plant, testing equipment and galvanizing etc., referred to in the decision of this Court with the setting up of a hot mix plant as in this case. As observed by this Court in Triveni Engineering & Industries case (supra), the facts and circumstances of each case shall have to be examined for determining not only the factum of fastening/attachment to the earth but also the intention behind the same. 31. In Mittal Engineering Works case (supra), this Court was examining whether the mono vertical crystallisers erected and attached by a foundation to the earth on the site of the sugar factory could be treated as goods within the meaning of Central Excise Act, 1994. This Court on facts noted that mono vertical crystallisers are fixed on a solid RCC slab having a load bearing capacity of about 30 tonnes per sq. mt. and are assembled at site with bottom plates, tank coils, drive frames, supports, plates, distance places, cutters, cutter supports, tank ribs, distance plate angles, water tanks, coils, extension pipes, loose bend angles, coil supports, railing stands, intermediate platforms, drive frame railing and flats, oil trough, worm wheels, shafts, housing, stirrer arms and support channels, pipes, floats, heaters, ladders, platforms, etc. The Court noted that the mono vertical crystallisers have to be assembled, erected and attached to the earth on a foundation at the site of the sugar factory and are incapable of being sold to consumers in the market as it is without anything more. Relying upon the decision of this Court in Quality Steel Tubes case (supra), the erection and installation of mono vertical crystallisers was held not dutiable under the Excise Act. This Court observed that the Tribunal ought to have remembered that mono vertical crystallisers had, apart from assembly, to be erected and attached by foundation to the earth and, therefore, were not, in any event marketable as they were. This decision also, in our opinion, does not lend any support to the case of assessee in these appeals as we are not dealing with the case of a machine like mono vertical crystallisers which is permanently embedded in the structure of a sugar factory as was the position in the Mittal Engineering Works case (supra). The plants with which we are dealing are entirely over ground and are not assimilated in any structure. They are simply fixed to the foundation with the help of nuts and bolts and in order to provide stability from vibrations during the operation. 32. So also in T.T.G. Industries Ltd. v. CCE Raipur – 2004 (167) E.L.T 501 (S.C.), the machinery was erected at the site by the assessee on a specially made concrete platform at a level of 25 ft. height. Considering the weight and volume of the machine and the processes involved in its erection and installation, this Court held that the same was immovable property which could not be shifted without dismantling the same. 33. It is noteworthy that in none of the cases relied upon by the assessee referred to above was there any element of installation of the machine for a given period of time as is the position in the instant case. The machines in question were by their very nature intended to be fixed permanently to the structures which were embedded in the earth. The structures were also custom made for the fixing of such machines without which the same could not become functional. The machines thus becoming a part and parcel of the structures in which they were fitted were no longer moveable goods. It was in those peculiar circumstances that the installation and erection of machines at site were held to be by this Court, to be immovable property that ceased to remain moveable 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 moveable 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. 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”. (emphasis is added). 12. Assessees contend before us that in the facts before us, as in the case of Solid and Correct Engineering Works there is no permanent affixation of towers and the pre-fabricated shelters to the earth, permanently. These are fixed to foundations by nuts and bolts, not with the intention to permanently attach them to the earth or for the beneficial enjoyment thereof, but only since securing these to a foundation is necessary to provide stability and wobble/vibration free operation and to ensure stability. Since affixation of towers and shelters is without the necessary intent of making these a non-temporal part and parcel of the earth to which these are temporally fixed, these continue to be movables and goods; and do not normatively, undergo transformation as immovable property, is the core contention. 13. An empirical and normative analyses of M.S. steel angles and other parts used to construct towers or shelters or affixation of towers obtained in CKD condition and pre-fabricated shelters and the process employed for their erection at a site; the degree of permanency that results from their attachment to the site by bolting them on to concrete foundations; whether the intendment in so embedding these to the site, is for permanent and beneficial enjoyment of the earth and other relevant and cognate fact specific aspects, by applying the nuanced tests of immovability expounded in Solid & Correct Engineering Works, may perhaps lead to a different conclusion then the one emerging from the Hon’ble Bombay High Court’s rulings in Bharti Airtel Limited and Vodafone India Limited or the Andhra Pradesh High Court’s judgment in BSNL. 14. In our respectful view however the challenge to the ratio and conclusions of the High Court’s decisions in Bharti Airtel Limited and Vodafone India Limited, on the ground that these are predicated on an incorrect and impermissible interpretation of the rationes in Solid & Concrete Engineering Works, must await an appellate consideration, when and if challenged, by the Hon’ble Supreme Court. It is outside the province and jurisdiction of this Tribunal to analyse and record a ruling on a superior Court’s analyses and elucidation of other binding precedents. The A. P. High Court’s judgment in BSNL, in the context of levy of VAT, concluded that towers are immovable property, after noticing and adverting to the judgment in Solid & Correct Engineering Works. Though, the Solid & Concrete Engineering Works ruling of the Hon’ble Supreme Court was neither specifically referred to nor analysed in the Bharti Airtel Limited ruling, it was specifically considered in the later decision in Vodafone India Limited. Nevertheless, the Hon’ble High Court was pleased to reiterate and affirm its earlier decision in Bharti Airtel Limited, to conclude in conformity therewith. If the Hon’ble High Court was not persuaded to reconsider, while adjudicating the lis in Vodafone India Limited, its earlier decision in Bharti Airtel Limited on a premise that its earlier decision might have been incongruous with the ratio of the Apex Court’s decision in Solid & Correct Engineering Works, it is clearly beyond the province of this Tribunal to embark upon such an exercise, on any grounds, including the per-incuriam principle. 15. On the above analyses, we conclude that the Hon’ble Bombay High Court judgments in Bharti Airtel Limited and Vodafone India Limited, which are directly on the issue of the character of towers and shelters and parts, and held to be immovable property, constitute the binding law, in so far as we are concerned. Since the provision of towers and shelters as infrastructure used in the rendition of an output service is common to both passive and active infrastructure providers, whether of “BAS” or “BSS” in one case and “telecom service” in the other, consequences of the application of the above Hon’ble High Court’s rulings, would not be different. 16. I, therefore, agree with the judgment of my ld. brother, the Hon’ble Member (Technical) Shri B. Ravichandran on the issues referred for resolution; and hold that our answers to the issues referred are a fortiori applicable to the appeals tagged to be heard by this larger Bench. I also find no substance in the preliminary objections raised by Revenue regarding the constitution or composition of the larger Bench, for reasons eminently recorded in the lead judgment. (Justice G. Raghuram) President 27. In the light of the above analyses and conclusions recorded in the lead opinion by Hon’ble Mr. B. Ravichandran and the concurrent opinion recorded by the Hon’ble President, the two issues on which difference of opinion had arisen vide the interim order dated 28/7/2015 and stand referred for resolution by this Larger Bench, are answered in favour of Revenue and against assessees. Regarding the 8 tagged appeals, we are of the considered view that the referred issues and conclusions recorded by us on these, in the appeals arisen pursuant to the difference of opinion recorded, will govern resolution of these issues presented in the tagged appeals, as well. Therefore the 8 tagged appeals are remitted to the appropriate Division Bench for determination on merits, i.e. ST Appeal No.55227/2013 and ST Appeal Nos.51115, 51211, 51721, 51729, 52377, 52378 and 52382 of 2015. All the appeals are disposed of as above. No costs however. (Pronounced in the open court on 03/03/2016.) (Justice G. Raghuram) President (S.K. Mohanty) Judicial Member (B. Ravichandran) Technical Member 1 1996 (82) ELT 4 (SC) 2 2006 (198) ELT 169 (Guj.) 3 2010 (257) ELT 492 (Raj.) 4 2015 (320) ELT 564 (Guj.) 5 (2005) 2 Supreme Court Cases 673 6 1990 (49) ELT 322 (SC) Download 130.46 Kb. Share with your friends:
|