Customs excise & service tax appellate tribunal, West Block No. 2, R. K. Puram, New Delhi court-i
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- Income Tax
- Colourtax vs. Union of India
- Central Board of Dawoodi Bohra Community vs. State of Maharashtra
- GTL Infrastructure Ltd. (supra) and Reliance Infratel Ltd. (supra)
- Bharti Airtel Ltd. (supra)
- Bharti Airtel Ltd. vs. CCE, Pune – III
- The scope of Cenvat credit scheme
- Towers and Shelters claimed as accessories of other capital goods
- Vandana Global – 2010 (253) E.L.T. 440 (Tri. – LB)
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- Banco Products (India) Ltd. vs. CCE, Vadodara – I
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CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-I Date of hearing: 25th,27th and 28th January 2016 Date of pronouncement: 03/03/2016 Service Tax Appeal Nos. 55227 of 2013, 51115 of 2015, 51211 of 2015, 51721 of 2015, 51729 of 2015, 52377 of 2015, 52378 of 2015, 52382 of 2015, 242 of 2008, 398-399 of 2008, 762 of 2008, 92 of 2009, 162 of 2009, 315 of 2009, 579 of 2009, 768 of 2009, 777 of 2009, 1032 of 2010, 847 of 2012 and 56237 of 2013 M/s Tower Vision India Private Ltd. Appellant vs. CCE (Adj.), Delhi Respondent M/s Indus Towers Limited Appellant vs. CST, Delhi – IV, Gurgaon Respondent M/s Bharti Infratel Ltd. Appellant vs. CST, Delhi – IV, Gurgaon Respondent M/s Idea Mobile Communication Ltd.] M/s Spice Communications Ltd. ] Appellants M/s Idea Cellular Ltd. ] vs. CCE, Rohtak Respondent M/s Bharti Airtel Ltd. ] M/s Vodafone Essar South Ltd. ] Appellants M/s Spice Communication Ltd. ] vs. CCE, Chandigarh/ Meerut ] Respondent M/s Bharti Airtel Ltd. ] M/s Vodafone Essar Digilink Ltd. ] Appellants M/s Bharat Sanchar Nigam Ltd. ]
Appearance: Present S/Shri N. Venkataraman, Senior Advocate, V. Lakshmikumaran, Advocate, Gajendra Maheshwari, Ms. Tripti Dhar, Amuha Sharma, Shri Anurag Soan, R. Satish Kumar, Karan Sachdev and Manish Gaur. Present Shri Amresh Jain, A.R. for the respondent/Revenue Coram: Hon’ble Mr. Justice G. Raghuram, President Hon’ble Mr. S.K. Mohanty, Judicial Member Hon’ble Mr. B. Ravichandran, Technical Member I.Order No. 41 Dated : 03/03/2016. Per. B. Ravichandran :- On 28.7.2015 a Division Bench in interim order No.IO/ST/142-154/2015-CU (DB) recorded a Difference of Opinion on the following issues: a) Whether, Member (Judicial) is correct for holding that post 2006, wherever appellants are paying service tax under the category of “business Auxiliary Services”, or “Business Support Services” for providing passive infrastructure, the appellants are entitled to take Cenvat Credit on towers, pre-fabricated shelters parts thereon etc. in the light of the decision of this Tribunal in the case of GTL Infrastructure Ltd. (supra) and Reliance Infratel Ltd. (supra), or; Member (Technical) is correct in holding that post 2006, wherever appellants are paying service tax under the category of “Business Auxiliary Services”, or “Business Support Services” for providing passive infrastructure, the appellants are not entitled to take Cenvat Credit on towers, pre-fabricated shelters parts thereof etc. in the light of the decision in the case of Bharti Airtel Ltd. (supra) b) Whether Member (Judicial) is correct in holding that in Appeal No.ST/777/2009, the appellant is entitled to take Cenvat Credit to the tune of Rs.2,59,95,327/- on shelters/parts as capital goods wherein the supplier has paid Excise duty on these items by classifying under Chapter 85 of the Central Excise Tariff Act, 1985, or; Member (Technical) is correct in holding that in Appeal No.ST/777/2009, the appellant is not entitled to take Cenvat Credit to the tune of Rs.2,59,95,327/- on shelters/parts as capital goods wherein the supplier has paid Excise duty on these items by classifying under Chapter 85 of the Central Excise Tariff Act, 1985”. 2. By Miscellaneous Order No.52850 to 52853 of 2015 dated 30.7.2015, a Learned Division Bench directed that the appeals in which the difference of opinion dated 28.7.2015 was recorded, be heard by a Larger Bench of three Members and that ST Appeal Nos.55227/2013, 51115, 51211, 51721, 51729, 52377, 52378, 52382/2015, which involve substantially similar issues as arising in the difference of opinion matters, be tagged to be heard by the same Larger Bench. The order dated 30.7.2015 directed that the matters be placed before Hon’ble President for an appropriate decision. 3. When the 21 appeals (13 arising pursuant to the difference of opinion and 8 directed to be tagged along with the 13 appeals) were listed for hearing before the Larger Bench on 3/11/2015, the Respondent/Revenue sought adjournment of the hearing. Hearing of these appeals was therefore adjourned to 8.12.2015. Composition of the Larger Bench had to be reconstituted on account of transfer of one of the Members constituting the Larger Bench to another Regional Bench. Eventually, the Larger Bench heard the respective parties on 25th, 27th and 28th January 2016 and reserved orders on 28.1.2016. 4. We have heard learned Senior Advocate Shri N. Venkataraman and Shri V. Lakshmikumaran, learned Advocate, instructed by Shri Gajendra Maheshwari, Ms. Tripti Dhar, Ms. Amoha Sharma, Shri Anurag Soan, Mr. R. Satish Kumar, Shri Karan Sachdev and Manish Gaur for the several appellants; and the learned A.R. Shri Amresh Jain for the respondent/Revenue. 5. At the hearing of the appeals, Shri Amresh Jain, learned A.R. raised preliminary oral objections, on two counts. It is firstly contended that when a difference of opinion is recorded by a Division Bench the same must invariably be referred for resolution of the difference, to a Third Member and cannot be heard by a Larger Bench comprising three Members. Secondly it is contended that the eight appeals in which no difference of opinion was recorded cannot be tagged to be heard by the Larger Bench constituted for hearing the difference of opinion. Before we proceed to analyze the issues referred and calling for resolution by this Larger Bench, in the several appeals including those that are tagged, we dispose of the preliminary objections orally asserted by the learned A.R. 6. Before the Division Bench on 30.7.2015, Learned A.R. conceded the position that the difference of opinion could be referred to a Larger Bench (and not invariably to a third Member), for resolution. This fact is recorded in para 3 of the order dated 30.7.2015. The only contention that was pressed on behalf of Revenue at that hearing was regarding the necessity of tagging the eight appeals (which are not involved in the difference of opinion) for hearing by a Larger Bench. This aspect also stands considered and answered in paragraph 5 of the order dated 30.7.2015. Further the provisions of Section 129 C of the Customs Act, 1962 read with provisions of Section 35 D(1) of the Central Excise Act, 1944 and Section 86(7) of the Finance Act, 1994 clearly inhere a plentitude of power, authority, discretion and concomitant jurisdiction for constitution of Benches of appropriate strength, reference of appeals to such Benches and tagging connected appeals to be heard together. The decision of the Apex Court in Income Tax Appellate Tribunal vs. Dy. CIT (Assts.) III, Hyderabad 1 is conclusive on this aspect. The observations of the Supreme Court in para 14 of this judgment being apposite, are reproduced: 14. Consequently, the Division Bench of the High Court with respect was in error when it took the view that a Special Bench can be constituted by the President only pursuant to a judicial order and not in exercise of his administrative powers. It is of course true that in any pending matter before a Bench of two learned members, if it is felt by the learned members that a Special bench is required to be constituted, they can pass a judicial order in the light of the procedure laid down by Regulation 98(A). But such a situation had never arisen on the facts of the present case. We have already seen above that the two learned members had recommended to the President to constitute a Special Bench for resolving the controversy centering round the construction of Section 115-J of the Income Tax Act by their communication dated 25th September 1992. That was styled as a reference under Section 255(3) of the Income Tax Act. It was merely a recommendation for invoking the administrative powers of the President under Section 255(3) for constituting Special Bench. It was certainly not a reference under Section 255(3) read with Regulation 98(A). We fail to appreciate how the High Court in exercise of its power under Article 226 of the Constitution could sit in appeal or judgment over the administrative decision of the President who might have felt that the case was of all India importance and was required to be decided by a larger Bench of three members. Such an administrative order is not open to scrutiny under Article 226 of the Constitution of India except in extraordinary cases wherein the order is shown to be a mala fide one. No such allegation was made by the Department against the President of the Tribunal on the facts of the present case. It may be that the President of the Tax Bar Association might have initially moved in the matter or it may be that the two learned members of the Tribunal might have suggested to the President to place listed four matters before a Special Bench. But being so apprised of the situation if the President felt that the present three matters moved by the concerned three respondents in these proceedings involved the same points and which were required to be thrashed out by a Special Bench we do not see any reason for holding that the constitution of a Special Bench by the President for deciding present three matters was an illegal or unjudicious exercise or an exercise based on whims and fancies the President. The Division Bench of the High Court on the facts of this case appears to have been uncharitable to the President of the Tribunal when it observed as aforesaid. It is also difficult for us to appreciate how the High Court could persuade itself to hold that when none of the Benches of the Tribunal had made any reference by judicial order the President of the Income Tax Tribunal was not competent to constitute a Special Bench. As we have already noted above Special Benches can be constituted by the President both in exercise of his administrative powers under Section 255(1) read with Section 255(3) as also on the basis of a judicial order passed by any Bench of the Tribunal making reference to the President in that connection under Regulation 98(A). But it is not as if that such a reference by the members under Regulation 98(A) by passing a judicial order is the only mode and manner in which the President can be moved to constitute a Special Bench. Even independent of such a reference on the judicial side the President can in an appropriate case even suo motu may move in the matter and can constitute a Special Bench of course on appropriate and germane grounds. It is however, true that the President in exercise of its administrative powers under Section 255(3) cannot just constitute a Special Bench without any rhyme or reason. Such an administrative exercise can be demonstrated to be unreasonable, capricious or mala fide on a given set of facts. But in our view present case was not of that type. There was a conflict of opinion between two Benches of the Tribunal, namely, Madras and Hyderabad Bench. It is, however, true that Madras Bench decision was by a single member while the Hyderabad Bench decision was by a Division Bench. Still it could not be said that there was no conflict of decisions between two Benches of the Tribunal. That itself constituted a rational and valid ground for the President to act in exercise of his administrative powers to constitute a Special Bench if he thought it fit to do so. Such an exercise on the facts of the present case cannot be styled as an arbitrary or whimsical or fanciful one as wrongly and uncharitably assumed by the Division Bench of the High Court. 7. Shri Amresh Jain, learned A.R. has placed reliance on decisions of the Gujarat High Court in Colourtax vs. Union of India 2; of the Rajasthan High Court in Mohammad Asgar Mugal vs. Jahuruddin Mugal 3; and the Gujarat High Court in Suo Motu vs. Gujarat High Court Advocates’ Association 4. In these decisions, the observations and conclusions recorded were in the context of the facts and circumstances and in the specific context arising therein. The binding precedents, of the constitution Bench in Central Board of Dawoodi Bohra Community vs. State of Maharashtra 5, Union of India vs. Paras Laminates (P) Ltd. 6; (a decision pronounced in context of the Appellate Tribunal) or in the Income Tax Appellate Tribunal case (supra) were neither adverted to nor distinguished, in the judgments relied upon by Revenue. The decision to tag eight appeals along with appeals involved in the difference of opinion, was pronounced in order dated 30.7.2015. As far as we are advised, the said decision has become final as the same was not reversed by any appellate forum. Pursuant to the order dated 30.7.2015, the President constituted the Larger Bench on 01.09.2015. The composition was thereafter altered since one of the Members of that Bench was transferred to another Regional Bench before effective hearing could take place. 8. For the aforesaid reasons, we reject the preliminary objections. 9. As already mentioned there are two sets of appeals now considered by this Larger Bench. The first one was consequent upon interim order No. 142-154/2015 dated 28/07/2015 referring a difference of opinion between Members of the Division Bench. We take up the issue referred to in the said interim order for decision. Two points for difference of opinion were referred to us. The first one is as below :- “a) Whether, Member (Judicial) is correct for holding that post 2006, wherever appellants are paying service tax under the category of “Business Auxiliary Services”, or “Business Support Services” for providing passive infrastructure, the appellants are entitled to take Cenvat credit on towers, pre-fabricated shelters parts thereon etc. In the light of the decision of the Tribunal in the case of GTL Infrastructure Ltd. (supra) and Reliance Infratel Ltd. (supra), or ; Member (Technical) is correct in holding that post 2006, wherever appellants are paying service tax under the category of “Business Auxiliary Services”, or “Business Support Services” for providing passive infrastructure, the appellants are not entitled to take Cenvat credit on towers, pre-fabricated shelters parts thereon etc. In the light of the decision in the case of Bharti Airtel Ltd. (supra). 10. We have perused the orders prepared by Member (Technical) and Member (Judicial) which led to the above-mentioned difference of opinion. The core issue is the eligibility of the appellants for credit of duty paid on MS Steel Angles/Towers, pre-fabricated shelters and parts thereon. The Division Bench had agreed on the view that the appellants before them were not eligible for credit of duty on towers and cabins if they are providing telecommunication service as output service. This conclusion was following the decision of Hon’ble Bombay High Court in Bharti Airtel Ltd. vs. CCE, Pune – III reported in 2014 (35) S.T.R. 865 (Bom.). However, when the appellants are providing output service of ‘business auxiliary services’ or ‘business support services’ to the telecommunication companies, such credit of duty on tower parts and pre-fabricated shelters is held to be eligible by the Member (Judicial) and as not so, by the Member (Technical). 11. Learned Counsel for the appellants submitted elaborately on this issue. The submissions covered all issues including on the above-mentioned difference of opinion. The summary of various contentions is as below :- (i) Towers, Shelters and Tower materials are all parts of Base Transmission System (BTS) classifiable under Tariff Heading 8517 and, hence, all components, spares and accessories thereof would qualify as capital goods in terms of Rule 2 (a) (A) (iii), whether or not such components, spares and accessories only fall under Chapter 85. The towers and shelters are all components of BTS ; (ii) Credit on towers and shelters and other materials cannot be denied on the ground of immovability. As per Rule 3 of Cenvat Credit Rules, credit is admissible on all inputs and capital goods which are received in the premises of service provider. In the present case, towers and shelters are received in the premises of service providers. Later on when the towers are embedded in earth the eligibility of credit will not change ; (iii) credit of input services cannot be denied on the ground of immovability ; (iv) Credit in case of pre-fabricated buildings/shelters classified under Chapter 85 would qualify as capital goods. The duty paid documents clearly indicated the classification and, as such, the credit cannot be denied at the recipients end ; (v) Towers and shelters would qualify as ‘inputs’ themselves. This is made as an alternate submission. Rule 2 (k) (ii) defines inputs as “all goods used for providing output services”. There is no bar to indicate that goods which do not fall under the category of capital goods would not also qualify as inputs ; (vi) Towers and shelters are to be considered as ‘accessories’ of capital goods. For an item to fall under the category of ‘components’, ‘spares’ and ‘accessories’ it must be either a component or a spare or an accessory and the classification of such item is immaterial. The towers and shelters would qualify as accessories. Without the tower the active infrastructure, namely antenna, cannot be placed on that altitude to generate uninterrupted frequency ; (vii) There is no breaking of Cenvat chain as the appellants are paying duty on towers and shelters in CKD condition. These are simply installed on a foundation by contractors. These contractors issue invoices for payment of service tax. There is no loss of identity of goods during the course of erection. 12. The learned Counsels representing the various appellants placed reliance on the decisions of Hon’ble High Courts and Hon’ble Supreme Court in support of their various above assertions. These are examined later in this order. 13. The learned AR appearing on behalf of Revenue submitted that :- (a) the issue relating to eligibility of towers and shelters for Cenvat credit has been clearly settled by the Hon’ble Bombay High Court in Bharti Airtel Ltd. (supra). The categorical finding after elaborate analysis by the Hon’ble High Court has not been deviated by any other High Court or over ruled by Hon’ble Supreme Court ; (b) The Central Excise duty paid on MS Angles, Channels and pre-fabricated buildings are claimed as credit by the appellants. These items have no direct nexus to the output service of either telecommunication service or business support service. It cannot be said that iron and steel articles are used for providing telecommunication service. It is the immovable tower which is used for providing telecommunication service or business support service ; (c) The CBEC vide Circular dated 04/1/2008 clarified that input of credit of service tax can be taken only if the output is a service liable to Service Tax or goods liable to excise duty. Since immovable property is neither service nor goods no credit can be taken. 14. The learned AR also relied on certain case laws in support of his afore-mentioned assertions. These are examined later in this order. 15. We have heard both the sides elaborately and perused the appeal records as well as various decisions relied upon by both the sides. The first point for decision is whether credit of Central Excise duty paid on MS steel parts/towers and pre-fabricated shelters are available to infrastructure companies providing output service of “business support service” or “business auxiliary service” to telecommunication companies, which in turn provide telecommunication service. The first issue to address is whether the legal principles and ratio applicable to decide such credit availability will be same for both categories of providers namely those who provide telecommunication service [cellular mobile service companies] and those who provide merely infrastructure support by way of taxable service falling under ‘business support service’ or business auxiliary service. Schematically the position can be shown as below :- M.S. Angles Tower (a) Tower owned used for providing Channels etc. erected by telecom telecom service   at site operators (service tax paid on
 by contractors telecom service)
(Central (service tax (b) Tower owned used for Business Telecom excise on erection by infra- Support Service service d (service tax (service tax paid on BSS) paid on tele- com service) The scope of Cenvat credit scheme :- The Cenvat credit scheme as envisaged under Cenvat Credit Rules, 2004 is essentially to avoid cascading effect of taxation i.e. not to levy tax on tax. In other words, tax is sought to be levied on the quantum of value addition at each stage of manufacturing or/and service chain. A manufacturer of dutiable goods or a provider of taxable service can avail credit of duty/tax paid on ‘inputs’, ‘capital goods’ or ‘input services’. These three terms are defined in the Rules and the credit availability is predicated on fulfillment of conditions mentioned therein for goods or services to fall in one of these categories. Credit taken on these goods/services can be used to discharge tax on output services. Credit on Capital Goods :- Rule 2 (a) defines ‘capital goods’. It is apparent that capital goods as understood in commercial parlance or industrial circles cannot be automatically considered as capital goods for the purpose of Cenvat Credit Rules. To be ‘capital goods’ the goods should fall in any one of the categories mentioned in the definition. The definition relevant to the issue now under consideration, is “all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the 1st Schedule to the Central Excise Tariff Act”; and “components, spares and accessories of these goods”. It is clear that capital goods should fall under the specified tariff classification for eligibility to duty credit. However, there is no such restriction for the components, spares and accessories of such capital goods. 16. The central point of dispute is that the appellants are getting duty paid MS Angles, Channels etc. to the required site and getting them erected into a tower on a concrete foundation. It is the contention of the appellants that they are buying the towers in a CKD condition. It is an admitted position that MS angles and channels coming as MS angles/channels or cleared as a set of CKD towers, as claimed by the appellant, fall to be classified under Chapter 73. On this basis, these are excluded from the definition of capital goods. Similarly, pre-fabricated shelters falling under Chapter 94 also fall outside the purview of the definition of capital goods. Towers and Shelters claimed as accessories of other capital goods :- An alternate argument Counsel for the appellant is that towers and pre-fabricated shelters ought to be considered as “Accessories” of overall Base Transmission System (BTS) which is classified under Tariff Heading 8517. Learned Counsel during oral argument and in written submissions, elaborated on this aspect with the support of interpretative Rules for the Tariff and Section Notes. We find that the question whether this alternate argument is legally tenable has already been examined by the Hon’ble Bombay High Court in Bharti Airtel Ltd. (supra). A distinction is sought to be made now that the Hon’ble High Court had inter-changeably referred to parts, components and accessories which does not reflect the correct scope of these terms. Learned Counsel urged that an ‘accessory’ is having a different scope than a ‘component’ or ‘a part’. We have examined this aspect as analyzed by the Hon’ble Bombay High Court. The High Court observed that all the three terms – “components”, “spares” and “accessories” – used in sub-Clause (A) (iii) of clause (a) of Rule 2 should be understood as standing for movables only. It was held by the Larger Bench of this Tribunal in Vandana Global – 2010 (253) E.L.T. 440 (Tri. – LB) that “capital goods” defined under the Cenvat Credit Rules must be excisable goods. Hence, the Hon’ble High Court concluded that the argument of the learned Counsel with reference to the term ‘accessory’ cannot be accepted. We further note that the Hon’ble High Court examined the decision of the Hon’ble Supreme Court in CCE, Raipur vs. Rajasthan Spinning & Weaving Mills Ltd. reported in 2010 (255) E.L.T. 481 (S.C.), Saraswati Sugar Mills vs. CCE, Delhi – III reported in 2011 (270) E.L.T. 465 (S.C.), Annapurna Carbon Industries Co. vs. State of Andhra Pradesh reported in (1976) 2 SCC 273, the Larger Bench decision in Banco Products (India) Ltd. vs. CCE, Vadodara – I reported in 2009 (235) E.L.T. 636 (Tri. – LB) to conclude that tower being admittedly an immovable structure cannot be an accessory of any kind of instrument. 17. Apart from the above ratio, we find that to become an accessory of a capital goods there should identified capital goods. The claim of the appellant is that BTS is a capital goods and the towers and shelters would be it’s accessory. We find that no BTS as identified capital goods emerges in the present case. Towers and shelters are erected and fixed at the desired site. The BTS electronic equipment is brought and installed in the site. These towers and shelters no doubt become part of the overall infrastructure created at site. However, to term the tower and shelter as an accessory of BTS is not sustainable. Various accessories can be considered alongwith BTS to become part of overall capital goods. Such proposition is not however applicable to towers and shelters as they are erected at site, installed as permanent structures and are used for installing/housing the telecom equipment. Download 130.46 Kb. Share with your friends:
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