The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi Bench observed that Cenvat Credit is allowable on Setting Up of Towers, Shelter and Parts under ‘Passive Infrastructure Sharing Agreement’ with Telecom Operators.
The appeal has been filed by M/s. ATC Telecom Infrastructure Private for setting aside the order passed by the Commissioner adjudicating the four show cause notices. The Commissioner denied CENVAT credit availed on inputs and capital goods and utilized by the appellant for payment of service tax. The Commissioner also ordered for recovery of interest and imposed penalty.
The appellant is engaged in setting up of passive infrastructure and provision of such passive infrastructure to various telecom companies. For this purpose, the appellant entered into Passive Infrastructure Sharing Agreement with various telecom operators for setting up towers, shelter etc.
During investigation, it was observed that the appellant had availed ineligible CENVAT credit. Accordingly, the following four show cause notices were issued to the appellant, seeking to deny CENVAT credit availed and utilized by the appellant in respect of inputs and capital goods used in providing output services.
B.L. Narasimhan, Counsel for the Appellant argued that the towers are not immovable structures and can be moved around from one place to another as per the needs of the appellant, since the mode of their installation is completely different from that of construction of a civil structure. The attachment of tower with the help of nuts and bolts to a foundation to provide stability and functionality does not qualify as attached to the earth.
Rajeev Kapoor, Authorized Representative for the department, however, supported the impugned order and submitted that it does not call for any interference in the appeal.
The permanency test was examined at length by the Supreme Court in Commissioner of Central Excise, Ahmedabad v. Solid & Correct Engineering Works.
In this case the Supreme Court drew a distinction between machines which by their very nature are intended to be fixed permanently to the structures embedded in the earth and those machines which are fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because foundation was necessary to provide a wobble free operation to the machine.
The Coram comprising Justice Dilip Gupta, President and Hemambika R Priya, Technical Member noted that the appellant was also entitled to take CENVAT credit since the items in dispute are capital goods and in view of the factual position and the decisions referred, the towers and shelters would not be immovable property.
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