Case Law Details
Bharti Airtel Limited Vs The Commissioner of Central Excise, Customs & Service Tax (CESTAT Bangalore)
Credit on Tower Materials and Prefabricated Buildings or Shelters admissible on the basis of permanency test
Conclusion: In present facts of the case, the Hon’ble Tribunal provided relief to the Appellant by allowing the CENVAT credit on tower materials and prefabricated buildings or shelters by relying on the Judgment of Vodafone pronounced by Hon’ble Delhi High Court, which have relied on the Judgment of Solid and Correct Engineering Works which laid down the permanency test.
Facts: In present facts of the case, the appellant claims that for the purpose of setting up, operation and maintenance of the telecom network throughout the country, it set up Mobile Towers and Shelters. The appellant further claims that in order to build the infrastructure facilities, it procured various telecommunication equipments that were imported or indigenous, other goods and iron and steel angles, bars and beams and used them for providing output services. The appellant reimbursed/paid service tax, excise duty and countervailing duty (CVD) on these goods and availed CENVAT credit on Capital Goods, Input and Input Services under the CENVAT Credit Rules, 2004. When these Rules were introduced w.e.f. 10.09.2004, in super session of the erstwhile CENVAT Credit Rules, 2002, and Service Tax Credit Rules, 2002, the appellant started availing CENVAT credit of the excise duty paid on towers/tower materials. During the period from September 2004 to December 2007, for determining the CENVAT credit available for meeting the requirement to pay service tax on the output service, the appellant considered the entire credit on input service and only 50% of the credit on ‘capital goods’.
This show cause notice was issued on the ground that the definition of ‘capital goods’ in terms of rule 2 (a) of the Credit Rules does not include goods falling under Chapter 72 and 73 and Tower/Tower materials cannot be considered as components/spares and accessories of the capital goods; that the angles, channels and beams, prima facie, cannot be treated as inputs; that the angles, channels, beams etc., are used to fabricate the tower and the activity of erection of towers does not amount to manufacture as the tower is in the nature of immovable fixture; and that the tower in itself is not treated as excisable goods and hence not entitled to be treated as input for the purpose of availing CENVAT credit.
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