Central Excise Appeal No. 73 of 2012 and Central Excise Appeal No. 119 of 2012. Case: Bharti Airtel Ltd. Vs The Commissioner of Central Excise. High Court of Bombay (India)
| Case Number | Central Excise Appeal No. 73 of 2012 and Central Excise Appeal No. 119 of 2012 |
| Counsel | For Appellant: V. Sridharan, Senior Advocate, Prakash Shah and Ashish P. Abrahim i/b. PDS & Associates and For Respondents: Kevic Setalwad, Addl. Solicitor General and Pradeep Jetly i/b. J.B. Mishra and N.V. Kalantri, Advs. |
| Judges | S. C. Dharmadhikari and G. S. Kulkarni, JJ. |
| Issue | Additional Duties of Excise (Goods of Special Importance) Act, 1957 - Section 3; Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 - Section 3; Andhra Pradesh Value Added Tax Act, 2005 - Section 2; Central Excise Act, 1944 - Sections 11AC, 2(d), 3, 35G; Central Sales Tax Act, 1956 - Sections 7(1), 8(1), 8(1)(3)(b), 8(3)(b); ... |
| Judgement Date | August 26, 2014 |
| Court | High Court of Bombay (India) |
Judgment:
G. S. Kulkarni, J.
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Both these appeals under Section 35G of the Central Excise Act 1944 arise out of the common orders dated 6.1.2012 of the Customs, Excise & Service Tax Appellate Tribunal (Tribunal), West Zonal Bench at Mumbai (for brevity 'the Tribunal') in Appeal nos. ST/49/2007 and ST/145/2009. The Appellant has raised the following substantial questions of law:-
"1. Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that the Appellant was not entitled to credit of duty paid on tower parts, green shelter, printers and office chairs?
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Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that the Appellant was not entitled to credit of duty paid on tower parts, green shelter on the ground that tower/green shelter is "immovable property" and hence, do not qualify as "capital goods" or "inputs" as defined under the Cenvat Credit Rules, 2004?
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Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that tower would not qualify as "part" or "component" or "accessory" of the capital goods i.e. antenna?"
The appeal is admitted on the above substantial questions of law. By consent of the Learned Counsel for the parties and at their request we have taken up these appeals for final hearing.
The relevant facts are:-
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The appellant is engaged in providing cellular telephone services and is paying applicable service tax on the cellular telephone services. The appellant, inter alia, availed Cenvat credit on excise duty paid on towers parts and shelters/prefabricated buildings purchased by them and alleged to be used for providing output service. The credit so availed was utilised for payment of service tax on output service viz. Cellular Mobile Service being provided by the appellant.
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The genesis of the issue is a show cause notice dated 25.4.2006 issued by the revenue to the appellant, inter alia, recording that the appellant had wrongly taken and utilised Cenvat credit in contravention of the provisions of Rule 2(a)(A) of Cenvat Credit Rules, 2004 (hereinafter referred to as "Credit Rules"). The appellant was called upon to show cause as to why (i) the Cenvat credit amounting to Rs. 2,04,39,093/- taken and utilized wrongly should not be recovered from them under the provisions of Rule 14 of the Credit Rules, read with Section 73 of the Act; (ii) penalty should not be imposed under provisions of Rule 15(1) of the Credit Rules on account of Cenvat Credit wrongly taken and utilized; (iii) penalty should not be also imposed on under provisions of Rule 15(2) of the Credit Rules read with Section 11AC of Central Excise Act, 1944 for Cenvat credit wrongly taken and utilized on account of suppression of the facts; (iv) all such goods (as detailed in annexure-B to this notice) should not be confiscated under the provisions of Rule 15(1) of the Credit Rules; and (v) interest should not be recovered from the Appellant from the date on which the Cenvat credit has been wrongly taken till the date of recovery of the said credit, under provisions of Rule 14 of the Credit Rules read with Section 75 of the Act.
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To the show cause notice was enclosed Annexure "A", in which it was stated that the Central Excise Officers had developed an intelligence to the effect that the appellant has wrongly taken and utilised Cenvat Credit on certain goods which do not qualify as capital goods within the meaning of Credit Rules. It was stated that after verification of documents and records relating to Cenvat credit on account of capital goods for the period October, 2004 to September, 2005, it was observed that the credit availed by the appellant was not in accordance with the provisions of Credit Rules and same was in contravention of the Rules. The relevant Rule being Rule 2(a)(A) of the Credit Rules which defined "Capital goods". It was stated that while availing Cenvat credit in respect of any goods as "Capital goods" the requirement of Rule 2(a)(A) of the Credit Rules stipulates satisfaction of following two conditions:-
(a) The goods should fall under particular CSH or description specified for the purpose;
(b) That in case of the service provider, the goods should be used for providing output service.
It was stated that the Cenvat Credit availed by the appellant during the period October, 2004 to September, 2005 in respect of the following items was in contravention of Rule 2(a)(A) of the Credit Rules:-
"(i) Tower and Parts of tower,
(ii) Prefabricated building,
(iii) Printer,
(iv) Office chairs."
It was stated that from the Cenvat Credit returns filed by the appellant for the said period it was found that the appellant had failed to give any 'chapter heading' under Central Excise Tariff nor the use of said goods in providing output service. Subsequently, information about use of the goods and Chapter heading under the Central Excise tariff was called for from the appellant. The same was, thereafter, furnished by the appellant vide its letter dated 8.3.2006. It was, alleged that the appellant had suppressed material facts and knowingly, willfully and wrongly had taken and utilized Cenvat credit on the said items. It was alleged that the Cenvat credit amounting to Rs. 2,04,39,100/- was taken and utilized on account of the goods which are not capital goods within the meaning of Rule 2(a)(A) of the Credit Rules and hence, the said amount was liable to be recovered from the appellant under Rule 14 of the Credit Rules read with Section 73 of the Central Excise Act. It was also alleged that on account of these acts and omissions the appellant had rendered itself liable for penalty under Rule 15(1) and (2) of the Credit Rules and the subject goods were also liable for confiscation under rule 15(1) of the Credit Rules. It was alleged that the appellant was also liable to pay interest at stipulated rates from the date of wrong availment of the Credit till the date of payment of service tax in terms of Rule 75 of the Act.
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The appellant by its reply to the show cause notice dated 15.9.2006 denied the allegations and the stand of the revenue. The appellant stated that the towers and parts of tower are capital goods and that credit is admissible on towers and parts of towers also as inputs. As regards the prefabricated buildings (PFB) the appellant stated that they are eligible for capital goods credit and in any case were eligible for input credit. Similar stand was taken in respect of printers. The appellant placed reliance on the Credit Rules introduced by the Central Government with effect from 10.9.2004 and more particularly Rule 3(1) which defines the term "Cenvat Credit", Rule 2(a)(A) which defines "Capital goods" and Rule 2(k) which defines "input". It was the appellant's case that Rule 3(1) of the Credit Rules allows the service provider to take credit of the excise duties paid on any "inputs" and "capital goods". That the definition of the term "capital goods" and "input" was clear to include the said goods for availing credit of the duty paid. The appellant stated that for the goods to mean "capital goods" under the Credit Rules, the essentials were that they must be goods; the goods must belong to any category as specified under Rule 2(a)(A)(i) to (vii) of the Credit Rules and that goods must be used providing output service. It was stated that the appellant was a service provider and in so far as service provider is concerned, clause (ii) of sub-rule (k) of Rule 2 of the Credit Rules is applicable. It was stated that under the said clause all goods except LDO, HSD and motor spirit are inputs provided they are used for providing output service. The appellant also placed reliance on Rule 4 of the Credit Rules to contend that the credit in respect of "inputs" can be availed of immediately on receipt of the goods in the premises of the service provider. It was stated that credit of "inputs" can be taken in time and in any manner and non availment of whole or part of input credit immediately on receipt of inputs in the factory will not vitiate the right of the manufacturer or output service provider to take un-availed credit later. Further case of the Appellant was that the tower is part of the 'Base Transceiver Station (BTS)', which is an integrated system. It was stated that the BTS was classifiable under heading 85.25 of Central Excise Tariff Act which comprises of the tower also as one of its parts, without which the output service cannot be provided. It was, therefore, submitted that the towers are part of the eligible capital goods viz. BTS and are used for providing output services, as also the towers were eligible for capital goods credit. The appellant placed reliance on whole architecture of BTS in a GSM network in support of this submission. That the appellant had imported number of BTS for installation at various sites and that the BTS equipments are classified under heading No. 85.25 of the Central Excise Tariff Act (CETA) when they were imported. Depending on the site condition, additional peripheral equipments such as battery back up, rectifier, UPS were also purchased by the appellant. All these equipments are brought to the site and they were housed/installed in a prefabricated room or a building. Subsequently, installation of various equipments at the site is undertaken in accordance with the Radio Frequency Design Plan. It was Appellant's case that in accordance with the site lay out, report of the structural consultant, the material is ordered from various vendors. All the material is supplied by the vendors on payment of applicable duty when clearing from their factories. Thereafter, erection of the tower for supporting antennas is undertaken. That the tower comprises of poles for mounting of GSM and Microwave antenna. The poles are given necessary angular supports to ensure their stable positioning. Antenna...
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