By TIOL News Service

MUMBAI, APR 08, 2015: THE appellants are rendering Telecommunication Service. The issue is denial of CENVAT credit availed on towers, towers parts, cabin, cabin parts, medi-claim services and goods other than towers, pre-fabricated buildings and shelters during the period April 2004 to March 2011.

Seven appellants, seventeen appeals, four stay applications and two miscellaneous applications against the Order in originals passed by CST, Mumbai/Pune are before the CESTAT, Mumbai.

Miscellaneous applications have been filed for producing additional evidences and are in form of expert opinion issued by the Professor of Indian Institute of Technology; various case laws and also photographs of the dismantling of towers; agreement for Infrastructure sharing i.e, sharing of towers and cabins for rendering various services, i.e. "Passive Infrastructure Sharing" and which revenue is subjected to service tax under the category of "Business Support Services".

The Bench allowed the miscellaneous applications negating the objection of the AR to take on record the additional evidences by observing that the same may be of help to the Bench for arriving at a conclusion on the issue.

On the subject matter, the appellants made elaborate submissions and defended their action in taking CENVAT credit. Plethora of case laws also made their appearance.

The AR rebutted the submissions made by the appellants by pressing upon the point that the towers and shelters are immovable properties and hence CENVAT credit cannot be allowed. It is mentioned that a similar issue was decided by the Tribunal in the case of Mundra Port & Special Economic Zone Ltd. - 2008-TIOL-1691-CESTAT-AHM where the Tribunal had categorically held that once the goods become immovable, CENVAT credit cannot be availed on the inputs have brought into existence the structures though they may be used for providing taxable output services. It is further submitted that the Bombay High Court decision in Bharti Airtel Ltd., - 2014-TIOL-1452-HC-MUM-ST squarely covers the issue in favour of Revenue.

The Bench after considering the submissions made by both sides observed -

In our considered view, the ratio of the decision of the Hon'ble High Court of Bombay in the case of Bharti Airtel Ltd., (supra) as regards the eligibility to avail Cenvat credit would be directly applicable in all these cases.

After extracting paragraphs 30, 31, 32 & 34 of the High Court decision in Bharti Airtel, the Bench observed that the issue is squarely covered in favour of Revenue by the decision of the jurisdictional High Court and which is binding on the Bench.

On the distinction sought to be made by the appellant vis-à-vis the Bombay High Court decision, the Bench observed that the arguments advanced are not tenable. The CESTAT observed -

"…In our considered view the immovable property which comes into existence at time even if it is subsequently dismantled or disassembled and shifted to other places would be having the same characteristic as it was having earlier. In our considered view, judgement of the High Court of Bombay in the case of Bharti Airtel Ltd., has specifically considered this issue in para (f) wherein their Lordship reproduced the ratio of the judgements of the Hon'ble High Court in the case of State of Andhra Pradesh Vs. Bharat Sanchar Nigam Ltd. and observed that telecommunication towers are held to be immovable property."

The Bench also distinguished the decision of apex court in case of Triveni Engineering Industries case - 2002-TIOL-14-SC-CX sought to be relied upon by the appellant by observing -

"27. We find no merits in this argument as the Hon'ble Apex Court in the case of Triveni Engineering Industries case was considering an issue of excisability of the plant and machinery wherein generator and turbine were connected to form a functional power plant. In the case in hand, we are concerned with the eligibility to avail Cenvat Credit on the towers and pre-fabricated buildings/shelters which is covered by the direct decision of the jurisdiction High Court in the case of Bharti Airtel Ltd."

The reliance placed by the appellants on the decisions in Sai Sahmita Storages Ltd. - 2011-TIOL-863-HC-AP-CX, SG Navaratna Highway - 2012-TIOL-1245-CESTAT-AHM and GTL Infrastructure Ltd. - 2014-TIOL-1768-CESTAT-MUM were also rejected by observing -

"…In our considered view, we find arguments put forth by the learned Counsel needs to be rejected at the out set itself, inasmuch as the first and foremost in all these three cases, the issue before the Hon'ble High Court and the Tribunal was that the appellants therein were providers of storage and warehousing services; immovable property service and business auxiliary service, for which they need to have infrastructure in its place. In the cases in hand, with which we are dealing with are the telecommunication companies providing cellular services, we find that basically all the appellants herein are providers of telecommunication/cellular services and the facility created by them in form of towers and pre-fabricated buildings are for their own use. Predominantly, the towers and pre-fabricated buildings/shelters were utilised by the appellants herein for rendering their own telecom/cellular services. In view of this, ratio laid down in the case of Sai Sahmita Storages Ltd., SG Navratna and GTL Infrastruture Ltd., (supra) may not apply, as the facts in those cases are totally different than the facts in these bunch of appeals. Be that as it may, we find that as the issue involved in this case is covered by the direct judgement of the jurisdictional High Court, judicial discipline demands that ratio of jurisdictional High Court is to be followed by this Bench."

CENVAT credit availed on Insurance service was allowed by observing that such group insurance was for employees and it is settled that credit is available thereon.

The issue of the demands being hit by limitation was accepted by the Bench by observing -

"…No collusion, fraud, misstatement, suppression of facts or contravention of any statutory provisions or rules made there under, with intent to evade payment of duty is forthcoming these cases. It is evident and not in dispute that not only returns were filed periodically but audit was also conducted by the department. Even in the audit though returns were available, issues raised herein were not raised in few cases. In one of the cases Tribunal cannot lose the sight of the vital fact that final audit report during the concerned period did not indicate wrong availment of Cenvat credit on towers and pre-fabricated buildings. The omission which is subsequently alleged therefore, cannot be said to be beyond the department's knowledge. The facts in all these cases clearly show that appellants conduct was bonafide and there was no design to commit any fraud or to evade any duty. The issue is mainly of interpretation without involving suppression of material facts with intent to evade duty. In all these cases it is not the case of revenue that appellants have failed to disclose any material information which was statutorily prescribed to be disclosed in their periodical returns. In our view once the assessee has regularly filed service tax returns disclosing all the requisite particulars and additionally even audit has taken place, allegation of suppression of facts with intent to evade duty cannot be sustained. It was for the authorities to properly verify the returns and seek information or put queries, if not done so assessee cannot be penalised and more so with allegation of suppression of facts. In all these cases the appellants have not failed to disclose any particulars which were legally required to be disclosed and revenue also did not ask any further details during the relevant period …."

In the matter of imposition of penalties, the Bench observed that since the issue concerned interpretation of admissibility of CENVAT credit, the appellants could have entertained a bonafide belief and, therefore, by exercising the powers u/s 80 of the FA, 1994, the penalties were set aside.

Conclusion:

i) The confirmation of demand of ineligible Cenvat credit and interest thereof on towers and pre-fabricated buildings within the limitation period are upheld in respect of all the appellants.

ii) Demand of ineligible Cenvat credit which is confirmed along with interest, by invoking extended period is set aside in respect of all the appellants.

iii) All the penalties are set aside.

(See 2015-TIOL-628-CESTAT-MUM)