By TIOL News Service

NEW DELHI, MAR 03, 2016: THE  dispute involved is whether the appellant is eligible for CENVAT Credit on Telecom Towers. During the course of extension of Stay already granted, the appellant stated that in another case (Idea Mobile) involving the same issue there is a difference of opinion between the Members of the Division Bench.

After considering the submissions, the Division Bench decided that the difference of opinion in the case of Idea Mobile may be referred to a Larger Bench of 3 Members and the present appeals should be allowed to be tagged therewith to be heard by the same Larger Bench.

We reported this order as 2015-TIOL-1895-CESTAT-DEL.

The Larger Bench heard this case on 03.11.2015 and what transpired is captured in the following headnote –

Service Tax - Admissibility of CENVAT Credit on Telecom Towers - Revenue seeking an adjournment on the ground that the decision of the Mumbai Regional Bench in the case of   GTL Infrastructure Ltd.- 2014-TIOL-1768-CESTAT-MUM and Reliance Infratel Ltd. - 2015-TIOL-516-CESTAT-MUM allowing credit was appealed against by Revenue before the Bombay High Court and is listed for pre-admission hearing on 16.11.2015 – on the presumption that adjournment would be granted, Revenue representative unprepared to proceed with hearing. Held: Although there is no justifiable reason to adjourn the hearing of the matter merely on account of pendency a pre-admission hearing before the Hon'ble High Court, Bench adjourns the hearing to 08.12.2015 peremptorily: CESTAT LB [para 4] [See 2015-TIOL-2613-CESTAT-DEL-LB]

The Larger Bench has pronounced its decision today and is almost on expected lines.

Expected, because in the case of Bharti Airtel Ltd. vs. CCE, Pune III - 2014-TIOL-1452-HC-MUM-ST, the Bombay High Court had already held (on 26.08.2014) that Cellular Mobile Service provider is not entitled to avail CENVAT credit on Tower Parts & Pre-fabricated buildings and thus upheld the CESTAT decision 2012-TIOL-209-CESTAT-MUM.

Incidentally, the CBEC was also quick to realize the potential of this favourable High Court decision and, therefore, came out with an Instruction F. No. 267/60/2014-CX.8 dated 11.11.2014, extracting the paragraphs 33 & 34 of the order & proudly proclaiming that the Hon'ble Bombay High Court has held in favour of revenue.

Moreover, in the case of Vodafone India Ltd. - 2015-TIOL-2098-HC-MUM-ST, the Bombay High Court had also held –

ST -  Bharti Airtel's case 2014-TIOL-1452-HC-MUM-ST does not need a relook - subsequent Bench cannot come to the opinion that a particular provision was misinterpreted and under that pretext seek to reinterpret it again - CENVAT credit on Tower Parts & Pre-fabricated buildings is not admissible: High Court

Be that as it may, the CESTAT Larger Bench has pronounced its decision today and it goes in favour of the Revenue.

Opinion of Member (Technical):-

++ It is to be noted that the very same matters covered in the present appeals are discussed elaborately on a similar set of facts by the Hon'ble Bombay High Court in BhartiAirtel Ltd. (supra). When there is a detailed examination and ruling on identical set of facts by the Hon'ble High Court, the same are to be followed. Further, the Hon'ble Bombay High Court reiterated their findings arrived in BhartiAirtel Ltd. (supra) in the case of Vodafone India Ltd. in their order dated 01/09/2015 in civil appeal No. 126/2015 and others. The Hon'ble Bombay High Court examined various contentions now raised in these appeals and reiterated their findings recorded earlier in BhartiAirtel Ltd. (supra).

++ In such a situation and in the absence of any material before us to distinguish the said ratio vis-à-vis the fact of the present case we find the ratio of the Hon'ble Bombay High Court as laid down in BhartiAirtel Ltd. (supra) and Vodafone India Ltd. (supra) should be followed. Hence, first point of difference is answered against the appellant and in favour of Revenue.

++ The only reason for claiming the credit on shelters and parts is their classification under Chapter 85. We find that a particular classification of duty paid item by itself does not make the item eligible for Cenvat credit. The eligibility of credit is determined by the provisions of Cenvat Credit Rules. By classifying a product and paying duty under a particular heading, an automatic claim for such credit for that item cannot be made.

++ We find that the Hon'ble High Court categorically held that towers and PFB are in the nature of immovable goods and are non-marketable and non-excisable. Accordingly, the second point of reference is also answered against the appellant and in favour of Revenue.

The lead opinion by the Member (Technical) was concurred with by the President.

Findings of President :

++ The challenge to the ratio and conclusions of the High Court's decisions in BhartiAirtel Limited and Vodafone India Limited, on the ground that these are predicated on an incorrect and impermissible interpretation of the rationes in Solid & Concrete Engineering Works, must await an appellate consideration, when and if challenged, by the Hon'ble Supreme Court. It is outside the province and jurisdiction of this Tribunal to analyse and record a ruling on a superior Court's analyses and elucidation of other binding precedents.

++ Nevertheless, the Hon'ble High Court was pleased to reiterate and affirm its earlier decision in BhartiAirtel Limited, to conclude in conformity therewith. If the Hon'ble High Court was not persuaded to reconsider, while adjudicating the lis in Vodafone India Limited , its earlier decision in BhartiAirtel Limited on a premise that its earlier decision might have been incongruous with the ratio of the Apex Court's decision in Solid & Correct Engineering Works, it is clearly beyond the province of this Tribunal to embark upon such an exercise, on any grounds, including the per-incuriam principle.

++ We conclude that the Hon'ble Bombay High Court judgments in BhartiAirtel Limited and Vodafone India Limited, which are directly on the issue of the character of towers and shelters and parts, and held to be immovable property, constitute the binding law, insofar as we are concerned. Since the provision of towers and shelters as infrastructure used in the rendition of an output service is common to both passive and active infrastructure providers, whether of “BAS” or “BSS” in one case and “telecom service” in the other, consequences of the application of the above Hon'ble High Court's rulings, would not be different.

And so, the Larger Bench Ruling is–

+ The two issues on which difference of opinion had arisen vide the interim order dated 28/7/2015 and stand referred for resolution by this Larger Bench, are answered in favour of Revenue and against assessees.

(See 2016-TIOL-539-CESTAT-DEL-LB)