In case of M/s Bharti Airtel Ltd. vs The Commissioner of Central Excise, Pune III, Bombay High Court has rejected the appeal regarding availability of CENVAT Credit of duty paid on Tower Parts & Pre-fabricated buildings to a Cellular  Mobile Service Provider.
It has been observed by the Bombay High Court that appellant is a service provider and not a manufacturer of capital goods. The appellant can avail the credit of the duty paid only if the subjected items fall within the ambit of the definition of capital goods under Rule 2(a)(A) or inputs under Rule 2(k) of the Credit Rules. The Tower Parts & Pre-fabricated buildings are in the nature of immovable goods and are non- marketable and non-excisable.Thus it was held that the  subjected items were neither capital goods nor inputs and hence CENVAT credit of the duty paid thereon was not admissible to the appellants.

Cellular Mobile Service Provider is not entitled to avail Cenvat credit on Tower Parts and  Pre-fabricated buildings

The Central Board of Excise and Customs (“the Board”) has issued an Instruction F. No. 267/60/2014-CX.8 dated November 11, 2014to all Commissioners and above, inviting the attention of the officers to the Judgment of the Hon’ble High Court of Bombay in the case of Bharti Airtel Ltd. Vs. Commissioner of Central Excise, Pune III[2014-TIOL-1452-HC-MUM-ST] wherein the Hon’ble High Court denied availability of Cenvat credit on Tower Parts and Pre-fabricated buildings to the Cellular Mobile Service Providers.

The Hon’ble High Court relying upon the decision of the Hon’ble Supreme Court in the case of Saraswati Sugar Mills Vs. Commissioner of Central Excise, Delhi [2011 (270) ELT 465],held that the Towers and Pre-fabricated buildings are in the nature of immovable property and are non-marketable and non-excisable. Hence, they can neither be regarded Capital goods nor can be categorized as input under Rule 2 of the Cenvat Credit Rules, 2004. Accordingly, Cenvat credit of the duty paid thereon are not admissible.

Full text of the Instruction is as follows :-

INSTRUCTION No. F. No. 267/60/2014-CX.8,

Dated- 11th November, 2014 

Ministry of Finance

Department of Revenue

Central Board of Excise and Customs

Subject:  Judgement of Hon’ble Bombay High Court in the case of M/s Bharti Airtel Ltd. vs The Commissioner of Central Excise, Pune III in Central Excise Appeal No. 73 of 2012 and 119 of 2012 (reported as 2014-TIOL-1452-HC-MUM-ST) – reg.

Attention is invited to the judgement of Hon’ble Bombay High Court in the case of M/s Bharti Airtel Ltd. vs The Commissioner of Central Excise, Pune III in Central Excise Appeal No. 73 of 2012 and 119 of 2012 (reported as 2014-TIOL-1452-HC-MUM-ST), wherein regarding the issue whether Cellular Mobile Service Provider is entitled to avail CENVAT credit on Tower Parts & Pre-fabricated buildings, the Hon’ble Bombay High Court has held in favour of revenue. While relying on the decision of the Hon’ble Supreme Court in the case of Saraswati Sugar Mills vs CCE Delhi, (2011(270)ELT 465) = 2011-TIOL-73-SC-CX, the Hon’ble Bombay High Court has, inter-alia, observed as under:

“It would be misconceived and absurd to accept that tower is a part of antenna. An accessory or a part of any goods would necessarily mean such accessory or part which would be utilized to make the goods a finished product or such articles which would go into the composition of another article. The towers are structures fastened to the earth on which the antennas are installed and hence cannot be considered to be an accessory or part of the antenna. The position in this regard stands fortified from the decision of the Supreme Court in the case of “Saraswati Sugar Mills vs CCE Delhi, (2011 (270) ELT 465) = 2011-TIOL-73-SC-CX“. From the definition of the term ‘input’ as defined in 2 (k) of the Credit rules it is clear that the Appellant is a service provider and not a manufacturer of capital goods. A close scrutiny of the definition of the term capital goods and input indicates that only those goods as used by a manufacturer would qualify for credit of the duty paid. As observed hereinabove a service provider like the appellant can avail of the credit of the duty paid only if the goods fall within the ambit of the definition of capital goods as defined under Rule 2(a)(A) of the Credit Rules. The contention of the appellant that they are entitled for the credit of the duty paid towers and PFB and printers is defeated by the very wording of the definition of input. In any case towers and PFB are in the nature of immovable goods and are non-marketable and non-excisable. If this be the position then towers and parts thereof cannot be classified as inputs so as to fall within the definition of Rule 2(k) of the credit rules. We clarify that we are not deciding any wider question but restricting our conclusion to the facts and circumstances which have fell for our consideration in these appeals.

We therefore find no infirmity or illegality in the findings as recorded by the tribunal in holding that the subject items are neither capital goods under Rule 2(a) nor inputs under Rule 2(k) of the Credit Rules and hence CENVAT credit of the duty paid thereon was not admissible to the appellants. The appeals are devoid of merit and accordingly stand rejected. No orders as to costs.”

  1. The above decision of the Hon’ble Bombay High Court is brought to notice of all concerned for compliance.

Yours faithfully,

(Vikas Kumar)

Director (CX-8)

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(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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0 Comments

  1. Vijay Patil says:

    The above findings of the decision have given a rise to below point:

    please read below line of decision:
    “In any case towers and PFB are in the nature of immovable goods and are non-marketable and non-excisable. If this be the position then towers and parts thereof cannot be classified as inputs so as to fall within the definition of Rule 2(k) of the credit rules”

    I think if the towers and PFB are immovable goods then it must not have been charged with Excise duty and so the question of credit must not have been arisen.

    please comment over this…
    Regards,

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