The Mumbai bench of Customs, Excise and Service Tax Appellate Tribunal(CESTAT) in the case of Idea Cellular Ltd has held that the construction service in connection with immovable property is not to be denied as credit under Cenvat Credit Rules (CCR), 2004.
A division bench of the Tribunal hearing the appeal of M/s Idea Cellular Ltd, challenging the order of Commissioner of Service Tax, Mumbai-IV in a dispute arising from availing of credit of ₹70,42,49,379 between April 2005 and September 2011 corresponding to service tax levied on ‘input service’ procured for rendering of ‘telecommunication service’, and more particularly required for commissioning and erection of ‘base transceiver station (BTS)’, under CENVAT Credit Rules, 2004.
It was common ground that the impugned ‘input service’ was required for the erection and commissioning of the said ‘structure’ at the site of the appellant herein and that the decision in Bharti Airtel Ltd went against assessees on the ineligibility of ‘inputs’ deployed for such erection and commissioning. The adjudicating authority had found itself required to decide on the correctness of the claim of the assessee that the impugned goods were not procured for ‘immoveable property’ and, even if so, the second limb of the inclusive part of the definitions of ‘input’ offered coverage as did that of ‘capital goods’ for the ‘structures’ supporting or housing the equipment which, undeniably, were deployed for rendering ‘output service’ that would be dysfunctional except when mounted on towers which happened to be fixed to the ground for stability; on all counts, assessees were held to be ineligible.
The referral bench was inclined to apply the same yardstick for both because ‘input services’ had, admittedly, been procured for the erection and commissioning of ‘towers’, on which equipment was mounted, or of ‘prefab shelters’, in which equipment was placed, and thereby, for the same ‘immoveable property’ which, for availing credit of duty on ‘inputs’, was held as ineligible.
The controversy induced thereby is that impost levied on rendering of ‘taxable service’ deployed in connection with any process that did not yield ‘excisable goods’ is not eligible to be claimed as a credit under CENVAT Credit Rules, 2004 in the absence of nexus that ‘structure’ has with ‘output service’ which is the essence of entitlement.
In effect, the proposition is that ‘taxable service’ has merged into ‘structures’ that, one way or another, are outside the ambit of central excise law as held in Bharti Airtel Ltd and, hence, ineligible. That the brooding presence of a central excise dispute, of yore and over exigibility of ‘on-site, fabrication of goods’ to duties chargeable on manufacture, continues to haunt the altered paradigm of indirect tax is, according to the appellant, testimony to the unwarranted influence of legacy.
The appellant contended that the tower is an accessory of the antenna and that without towers antennas cannot be installed and as such the antennas cannot function hence the tower should be treated as parts and components of the antenna. It is urged that antennas fall under Chapter 85 of the Schedule to the Central Excise Tariff Act and hence being capital goods used for providing cellular service falling under Rule 2(a)(A)(iii) as part of capital goods falling under Rule 2(a)(A)(i) towers become accessories of the antenna and should be held as capital goods for availing of credit of duty paid.
Conventionally, a bench of the Tribunal confronted with conflicting views in precedent decisions may have cause to request the constitution of a Larger Bench to resolve such impediment to the disposal of dispute.
In the other proceedings, founded on the propositions adopted by the adjudicating authority in the aforesaid order, the assessee canvassed entitlement to the credit of duty discharged on procurement of ‘tower parts’ and ‘prefab shelters’ by the requirement of deploying in installation of ‘capital goods’, viz., ‘antenna’, and, as an alternative, the claim of being ‘inputs’ similar to the earlier disposal
Though the decision cited on behalf of respondent is about eligibility of ‘inputs’ used by ‘provider of service’ and those on behalf of appellant are all about eligibility of ‘input service’ used for ‘manufacture of final product’, as in Coca Cola India Pvt Ltd, Ultratech Cement Ltd, Wipro Ltd, Bellsonica Auto Components Ltd and Reliance Industries Ltd, there is a wealth of relevant jurisprudence to assist in responding to the reference before us.
It, therefore, emerges that ‘input’ and ‘input services’ stand in their respective, and mutually exclusive, contexts for CENVAT Credit Rules, 2004. The wide latitude of ‘input service’, even in the post-2011 situation, permits credit of ‘input service’ subject to evaluation of deployment in each case. The subsequent restriction manifests even more extensive intent to cover ‘construction services’ too in the pre-amendment era. The chain of ‘input’, owing to tangibility, is tested in its contribution to the taxable service while the chain of ‘input service’, owing to its inability to be absorbed on utilization for production or rendering of service, is tested by use in the hands of the recipient who provides taxable service.
A division bench comprising Justice Dilip Gupta, President, Mr C J Mathew, Member (Technical) And Mr Ajay Sharma, Member (Judicial) held that ‘The decision in Bharti Airtel is limited to ‘input’ as a source of credit consequent on the finding of ineligibility for claim as ‘capital goods’ and, therefore, not relevant in dispute over entitlement of ‘input service’ as credit. There is no break in the CENVAT chain insofar as ‘input service’ is concerned. The decisions of the coordinate benches survive as precedent to the extent appropriate to the facts of the present dispute.’
Shri S.S. Gupta Chartered Accountant with Shri Mehul Jivani, Chartered Accountant and Shri Manoj Chauhan, Chartered Accountant appeared for the appellant. Shri Suvir Mishra, Authorised Representative appeared for the respondent.
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