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M/s. Bharti Airtel Ltd. Vs. The Commissioner of Central Excise - Court Judgment

LegalCrystal Citation
CourtMumbai High Court
Decided On
Case NumberCentral Excise Appeal Nos. 73 of 2012 & 119 of 2012
Judge
AppellantM/s. Bharti Airtel Ltd.
RespondentThe Commissioner of Central Excise
Excerpt:
central excise act 1944 - section 35 g, 73,  -  finance act,1994 - section 65, 73 - cenvat credit rules,2004 - rule 2, 2(a)(a), 2(k), 3, 3(1), 4, 6(1), 11 ac, 14, 15,   appellant is engaged in providing cellular telephone services - appellant, availed cenvat credit on excise duty paid on towers parts and shelters purchased by them and alleged to be used for providing output service - credit so availed was utilised for payment of service tax on output service - show cause notice issued by the revenue that the appellant had wrongly taken and utilised cenvat credit in contravention of the rules - appellant stated that the towers and parts of tower are capital goods and that credit is admissible on towers and parts of towers also as inputs - prefabricated buildings (pfb) are.....g.s. kulkarni, j. both these appeals under section 35 g of the central excise act 1944 arise out of the common orders dated 6.1.2012 of the customs, excise and service tax appellate tribunal (tribunal), west zonal bench at mumbai ( for brevity ‘the tribunal) in appeal nos.st/49/2007 and st/145/2009. the appellnt has raised the following substantial questions of law:- “1. whether in the facts and circumstances of the case, the appellate tribunal was correct and justified in holding that the appellant was not entitled to credit of duty paid on tower parts, green shelter, printers and office chairs ? 2. whether in the facts and circumstances of the case, the appellate tribunal was correct and justified in holding that the appellant was not entitled to credit of duty paid on tower.....
Judgment:

G.S. Kulkarni, J.

Both these appeals under Section 35 G of the Central Excise Act 1944 arise out of the common orders dated 6.1.2012 of the Customs, Excise and Service Tax Appellate Tribunal (Tribunal), West Zonal Bench at Mumbai ( for brevity ‘the Tribunal) in Appeal nos.ST/49/2007 and ST/145/2009. The Appellnt has raised the following substantial questions of law:-

“1. Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that the Appellant was not entitled to credit of duty paid on tower parts, green shelter, printers and office chairs ?

2. Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that the Appellant was not entitled to credit of duty paid on tower parts, green shelter on the ground that tower/green shelter is “immovable property” and hence, do not qualify as “capital goods” or “inputs” as defined under the Cenvat Credit Rules,2004 ?

3. Whether in the facts and circumstances of the case, the Appellate Tribunal was correct and justified in holding that tower would not qualify as “part” or “component” or “accessory” of the capital goods i.e. antenna ?”

The appeal is admitted on the above substantial questions of law. By consent of the Learned Counsel for the parties and at their request we have taken up these appeals for final hearing.

The relevant facts are :-

2. The appellant is engaged in providing cellular telephone services and is paying applicable service tax on the cellular telephone services. The appellant, inter alia, availed Cenvat credit on excise duty paid on towers parts and shelters/ prefabricated buildings purchased by them and alleged to be used for providing output service. The credit so availed was utilised for payment of service tax on output service viz. Cellular Mobile Service being provided by the appellant.

3. The genesis of the issue is a show cause notice dated 25.4.2006 issued by the revenue to the appellant, inter alia, recording that the appellant had wrongly taken and utilised Cenvat credit in contravention of the provisions of Rule 2(a)(A) of Cenvat Credit Rules,2004 (hereinafter referred to as “Credit Rules”). The appellant was called upon to show cause as to why (i) the Cenvat credit amounting to Rs.2,04,39,093/- taken and utilized wrongly should not be recovered from them under the provisions of Rule 14 of the Credit Rules, read with Section 73 of the Act; (ii) penalty should not be imposed under provisions of Rule 15(1) of the Credit Rules on account of Cenvat Credit wrongly taken and utilized; (iii) penalty should not be also imposed on under provisions of Rule 15(2) of the Credit Rules read with Section 11 AC of Central Excise Act,1944 for Cenvat credit wrongly taken and utilized on account of suppression of the facts; (iv) all such goods (as detailed in annexure–B to this notice) should not be confiscated under the provisions of Rule 15(1) of the Credit Rules; and (v) interest should not be recovered from the Appellant from the date on which the Cenvat credit has been wrongly taken till the date of recovery of the said credit, under provisions of Rule 14 of the Credit Rules read with Section 75 of the Act.

4. To the show cause notice was enclosed Annexure “A”, in which it was stated that the Central Excise Officers had developed an intelligence to the effect that the appellant has wrongly taken and utilised Cenvat Credit on certain goods which do not qualify as capital goods within the meaning of Credit Rules. It was stated that after verification of documents and records relating to Cenvat credit on account of capital goods for the period October, 2004 to September, 2005, it was observed that the credit availed by the appellant was not in accordance with the provisions of Credit Rules and same was in contravention of the Rules. The relevant Rule being Rule 2(a)(A) of the Credit Rules which defined “Capital goods”. It was stated that while availing Cenvat credit in respect of any goods as “Capital goods” the requirement of Rule 2(a)(A) of the Credit Rules stipulates satisfaction of following two conditions:-

“(a) The goods should fall under particular CSH or description specified for the purpose;

(b) That in case of the service provider, the goods should be used for providing output service.”

It was stated that the Cenvat Credit availed by the appellant during the period October,2004 to September,2005 in respect of the following items was in contravention of Rule 2(a)(A) of the Credit Rules:-

“(i) Tower and Parts of tower,

(ii) Prefabricated building,

(iii) Printer,

(iv) Office chairs.”

It was stated that from the Cenvat Credit returns filed by the appellant for the said period it was found that the appellant had failed to give any ‘chapter heading under Central Excise Tariff nor the use of said goods in providing output service. Subsequently, information about use of the goods and Chapter heading under the Central Excise tariff was called for from the appellant. The same was, thereafter, furnished by the appellant vide its letter dated 8.3.2006. It was, alleged that the appellant had suppressed material facts and knowingly, willfully and wrongly had taken and utilized Cenvat credit on the said items. It was alleged that the Cenvat credit amounting to Rs.2,04,39,100/- was taken and utilized on account of the goods which are not capital goods within the meaning of Rule 2(a)(A) of the Credit Rules and hence, the said amount was liable to be recovered from the appellant under Rule 14 of the Credit Rules read with Section 73 of the Central Excise Act. It was also alleged that on account of these acts and omissions the appellant had rendered itself liable for penalty under Rule 15(1) and (2) of the Credit Rules and the subject goods were also liable for confiscation under rule 15(1) of the Credit Rules. It was alleged that the appellant was also liable to pay interest at stipulated rates from the date of wrong availment of the Credit till the date of payment of service tax in terms of Rule 75 of the Act.

5. The appellant by its reply to the show cause notice dated 15.9.2006 denied the allegations and the stand of the revenue. The appellant stated that the towers and parts of tower are capital goods and that credit is admissible on towers and parts of towers also as inputs. As regards the prefabricated buildings (PFB) the appellant stated that they are eligible for capital goods credit and in any case were eligible for input credit. Similar stand was taken in respect of printers. The appellant placed reliance on the Credit Rules introduced by the Central Government with effect from 10.9.2004 and more particularly Rule 3(1) which defines the term “Cenvat Credit”, Rule 2(a)(A) which defines “Capital goods” and Rule 2(k) which defines “input”. It was the appellant's case that Rule 3(1) of the Credit Rules allows the service provider to take credit of the excise duties paid on any “inputs” and “capital goods”. That the definition of the term “capital goods” and “input” was clear to include the said goods for availing credit of the duty paid. The appellant stated that for the goods to mean “capital goods” under the Credit Rules, the essentials were that they must be goods; the goods must belong to any category as specified under Rule 2(a)(A)(i) to (vii) of the Credit Rules and that goods must be used providing output service. It was stated that the appellant was a service provider and in so far as service provider is concerned, clause (ii) of sub-rule (k) of Rule 2 of the Credit Rules is applicable. It was stated that under the said clause all goods except LDO, HSD and motor spirit are inputs provided they are used for providing output service. The appellant also placed reliance on Rule 4 of the Credit Rules to contend that the credit in respect of “inputs” can be availed of immediately on receipt of the goods in the premises of the service provider. It was stated that credit of “inputs” can be taken in time and in any manner and non availment of whole or part of input credit immediately on receipt of inputs in the factory will not vitiate the right of the manufacturer or output service provider to take un-availed credit later. Further case of the Appellant was that the tower is part of the ‘Base Transceiver Station (BTS), which is an integrated system. It was stated that the BTS was classifiable under heading 85.25 of Central Excise Tariff Act which comprises of the tower also as one of its parts, without which the output service cannot be provided. It was, therefore, submitted that the towers are part of the eligible capital goods viz. BTS and are used for providing output services, as also the towers were eligible for capital goods credit. The appellant placed reliance on whole architecture of BTS in a GSM network in support of this submission. That the appellant had imported number of BTS for installation at various sites and that the BTS equipments are classified under heading No.85.25 of the Central Excise Tariff Act (CETA) when they were imported. Depending on the site condition, additional peripheral equipments such as battery back up, rectifier, UPS were also purchased by the appellant. All these equipments are brought to the site and they were housed/installed in a prefabricated room or a building. Subsequently, installation of various equipments at the site is undertaken in accordance with the Radio Frequency Design Plan. It was Appellants case that in accordance with the site lay out, report of the structural consultant, the material is ordered from various vendors. All the material is supplied by the vendors on payment of applicable duty when clearing from their factories. Thereafter, erection of the tower for supporting antennas is undertaken. That the tower comprises of poles for mounting of GSM and Microwave antenna. The poles are given necessary angular supports to ensure their stable positioning. Antenna mounts comprising of angles are fixed on these poles and the antenna mounted on them. It was stated that a prefabricated housing/shelter is also purchased for housing electrical equipments viz. isolation Transformers, batteries and stabilizers, rectifiers etc. and telecom equipments like BTS and Microwave/ Radio Hops etc and serves as a junction box. That the telecom installation vendor installs the BTS telecom equipments, lays cable (including feeder cables) from Antenna to BTS. The electrical vendor installs the electrical equipments and does the required wiring inside and outside the room. A separate power supply connection is taken from the concerned State Electricity Board as also the Diesel Generating (DG) set is used as a back-up source for power supply in case of mains failure. The BTS and Microwave link is then commissioned and the site is integrated with the main network. It was therefore submitted that since the BTS as a whole is considered as a single integrated system classifiable under 85.25 of Central Excise Tariff Act and are eligible capital goods, towers and parts thereof which form part of the integrated system of BTS are part of specified capital goods eligible for capital goods credit. It was further stated that in any case credit is admissible on towers and parts of towers as inputs as falling within the ambit of Rule 2(k) of the Credit Rules which defines “input”. It was stated that as per the definition of term “input” irrespective of classification of the said goods under the Central Excise Tariff Act, they will qualify as “inputs” and will be eligible for input credit if they are used for providing output service. In regard to the prefabricated building, the appellant contended that they are eligible for capital goods credit as they were part of the integrated BTS and in any case they were eligible to input credit. As also, the same contention was raised in respect of office chairs and printers. As regards the penalty as proposed to be levied under rule 15(1) and (2) of the Credit Rules, the appellant submitted that the penalty provision is not attracted in view of classification of their goods as capital goods and in any case as “inputs”. The appellant denied that they had availed credit wrongly by practicing fraud or by making willful mis-statement, collusion or suppression of facts. It was stated that there was no willful suppression. It was, therefore, submitted that the show cause notice as issued against the appellant be dropped.

6. The Commissioner after hearing the appellant on the show cause notice passed an order- in-original dated 19.12.2006 taking into consideration the provisions of the Credit Rules,2004 and more particularly, the definition of 'capital goods' as defined under Rule 2(a)(A) and the definition of the term 'inputs' as defined under rule 2(k) of the Credit Rules, held that the appellant has wrongly availed of Cenvat Credit amount of Rs.2,04,39,093/- under provisions of Rule 14 of the Credit Rules read with Section 73 of the Finance Act,1994. In respect of towers and parts thereof, prefabricated building, printers and office chairs, the Commissioner observed that the appellant had availed benefit of Cenvat Credit on the Base Trans-receiver Station (BTS) claiming to be a single integrated system consisting of tower, GSM or Microwave Antennas, Prefabricated building, isolation transformers, electrical equipments, generator sets, feeder cables etc. It was observed that these systems have been treated as “composite system” classified under Chapter 85.25 of the Tariff Act and that the appellant's contention that these systems should be treated as 'capital goods' and credit be allowed, could not be accepted. It was observed that each of these goods had independent functions and hence, they cannot be treated and classified as single unit. It was observed that all capital goods are not eligible for credit and only those relatable to the output services would be eligible for credit. It was observed that only telecom equipments like BTS transmitters which are used in providing telecom services alone would be liable to input credit. In regard to the extended period, it was observed that the service tax is based on self assessment and therefore, it is the assessee who determines the duty and discharges the same. It was the responsibility of the appellant to give details of items on which input credit was availed including a write-up to satisfy the department that availment of Cenvat credit was in accordance with the Credit Rules which is a common legislation for both goods and services. It was held that by not providing the details and taking credit, the appellant is guilty of suppression of facts and hence, it was held that the extended period was invocable in the appellant's case. The Commissioner while confirming the rejection of the Credit availed by the appellant, imposed a penalty of an amount of Rs.2,04,39,093/- for wrongly availing credit under Rule 15(2) read with Section 11 AC of the Central Excise Act,1944. Further, payment of interest under Section 75 of the Central Excise Act at the rates applicable from time to time was also ordered.

7. The appellant being aggrieved by the order in original dated 19.12.2006 filed an appeal before the Tribunal being Appeal no.ST/49/2007. In the appeal, the principal ground of challenge to the order passed by the Commissioner disallowing Cenvat Credit was that the tower and parts thereof, prefabricated building, office chairs and printers were capital goods as falling under the definition of Rule 2(a)(A) of the Credit Rules, as also it was contended that in the alternative in any case the said goods also qualified as inputs under the definition of 'input' under Credit Rules and hence, the credit availed by the appellant was valid. The appellant also challenged the order of the Commissioner pertaining to interest on penalty on the ground that Rule 15(2) of the Credit Rules is applicable to a manufacturer and hence, levying of penalty was not proper. The appellant also field a stay application along-with the appeal.

8. After the order in original dated 19.12.2006 was passed for the period October 2004 to September 2005 three further show cause cum demand notices were issued issued covering the period October 2005 to March 2008 dated 23.4.2007, 8.2.2008 and 23.10.2008 making an aggregate demand of Rs.15,40,63,898/- as also interest and equivalent penalty was demanded.

9. The appellant filed its reply to the demand cum penalty notice and the corrigendum dated 2.3.2009 issued by the Commissioner. The appellant now contended that the towers and the parts thereof are “supporting structure” for antenna which are capital goods and therefore, as antenna is qualified as 'capital goods', the towers and parts thereof would also qualify as 'capital goods'. It was submitted that the towers are nothing but the structures installed in support of GSM and Microwave Antennas. Relying on the definition of “inputs”, the appellant submitted that irrespective of classification of the goods under the Central Excise Tariff Act, the goods will also qualify as “inputs” and will be eligible for Cenvat credit if they are eligible for providing output services, falling under the definition under Rule 2(k) of the Credit Rules. It was contended that the towers and parts thereof are used for providing output service viz. telecommunication service and hence, eligible for input credit. The appellant relied on several decisions to contend the admissibility of the tower and tower parts and the prefabricated buildings to be capital goods and also that in any case the said goods being used for providing output services they would qualify as 'inputs' under the definition of 'inputs' under Rule 2(k) of the Credit Rules and hence, eligible for input credit. It was, therefore, contended that the tower, shelters and antenna, all the three items as used by the appellants in providing telecommunication services are either capital goods within the meaning of Rule 2(a)(A) and in any case the said goods also could be classified as inputs and therefore, entitled for availment of the credit under the Credit Rules,2004.

10. The Commissioner adjudicated the demand cum penalty notices dated 23.4.2007, 8.2.2008 and 23.10.2008 by passing an order in original dated 23.3.2009. By this order, the Commissioner disallowed the Appellant's claim for credit amounting to Rs.13,02,08,928/- under the provisions of Rule 14 of the Credit Rules. However, Cenvat credit on antenna amounting to Rs.2,38,54,970/- was allowed and the demand in that regard was dropped. The demand in respect of other items viz. the tower and parts thereof and the prefabricated building was confirmed. A penalty of Rs.13,02,08,928/- was also imposed under Rule 15(1) of the Credit Rules, 2004. In confirming the demand in respect of tower and parts thereof, it was observed by the Commissioner that tower is fixed to the earth and after its installation becomes immovable and therefore, cannot be goods. It was also observed that even in CKD or SKD condition, the Tower and parts thereof would fall under Chapter heading 7308 of the Central Excise Tariff Act which is not specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules,2004 as capital goods. It was held that tower and parts thereof are not directly utilised for output service as the same has been basically a structural support for certain equipment. It was further observed that it may not be necessary if suitable alternate support is available. Such towers by no stretch of imagination can be considered parts of telecom equipment or as telecom equipment by themselves and it was thus held that tower and parts thereof do not qualify as capital goods. Applying the same reasoning, credit on prefabricated building was also rejected.

11. The appellant filed therefore another appeal before the Tribunal being Appeal No.ST/145/2009 against the order in original dated 23.3.2009 passed by the Commissioner. By this order dated 23.3.2009, the Commissioner had confirmed the demand cum penalty notices issued to the appellant and sought recovery of Rs.13,02,08,928/- for the period October,2005 to March,2008. An equivalent amount of penalty under Rule 15(1) of the Credit Rules read with Section 11-AC of the Finance Act,1994 was also imposed by the said order.

12. As regards the stay application, by an order dated 1.5.2007 passed in Application no.ST/S/587/2007 in Appeal no.ST/49/2007-Mumbai, the Tribunal held that prima facie case was made out on admissibility of credit and waiver of pre-deposit in respect of credit on towers and parts thereof and prefabricated building, the offer of the appellant of a pre-deposit of Rs.10 lakhs in respect of office chairs and printers was accepted. On such pre-deposit the balance amount and penalty was waived and recovery thereof was stayed pending the appeal. In regard to the other appeal being Appeal no.ST/145/2009, the Tribunal by a detailed order dated 7.6.2010, directed a pre-deposit of Rs.5 crores within eight weeks and subject to deposit of the said amount, stayed the balance demand till the disposal of the appeal. The appellant being aggrieved by the said order passed by the Tribunal had filed Central Excise Appeal no.116 of 2010 before this Court. By an order dated 18.11.2010 passed by this Court while admitting the appeal filed by the appellant, directed the Tribunal to dispose of the appeal along-with other pending appeals without any pre-deposit, as expeditiously as possible and preferably within a period of six months.

13. By the impugned judgment and order dated 6.1.2012 passed by the Tribunal, both the aforesaid appeals as filed by the appellant have been rejected. The appellant's plea that the towers and parts thereof and the prefabricated building, printers and office chairs are capital goods under the Credit Rules,2004 as also the alternate plea of the appellant that the said goods are inputs falling under Rule 2(k) of the Credit Rules are also rejected. The Tribunal in dismissing appeals filed by the appellants ordered as under:-

“(a) The subject items are neither 'capital goods' under Rule 2(a) nor 'inputs' under Rule 2(k) of the CENVAT Credit Rules, 2004 and hence, CENVAT credit of the duty paid thereon is not admissible to the appellant for the relevant period;

(b) The CENVAT credit taken on the said items and utilized by the appellant is recoverable subject to limitation;

(c) The limitation issue is remanded to the Commissioner for careful consideration and decision;

(d) The question whether, on the facts and circumstances of this case, the appellant is liable to be penalized under Rule 15 of the CENVAT Credit Rules,2004 and, if so, to what extent is also remanded to the Commissioner for fresh consideration and decision;

(e) The appellant shall be given a reasonable opportunity of being heard on the remanded issues.”

14. We have heard Mr. V. Sridharan, learned Senior Counsel with Mr. Prakash Shah learned Advocate appearing on behalf of the appellant and Mr. Kevic Setalvad, learned A.S.G. with Mr. Pradeep Jetly and Mr. J.B. Mishra, for Respondents.

15. The appellants have brought to our notice the following details of the Cenvat Credit taken on tower, shelter, prefabricated building and other for the period in dispute:-

YearsTowerShelterOthersTotal
2004-05174368801478938Chair – 298,738Printer – 1,224,53720,439,100
2005-0644142943  44142943
2006-071591920315384719 31303922
2007-082658803428174029 54762063
Total104087060450376861523282150648028
 
16. Mr. Sridharan, learned Senior Counsel on behalf of the Appellant has made the following submission in assailing the orders passed by the Tribunal:-

(I) The Tribunal has misinterpreted the application of Cenvat Credit Rules, 2004 in rejecting the appellant's claim to avail credit of the duty paid on the towers and parts thereof, prefabricated shelters and the printers. He submits that the goods in question clearly fall within the ambit of the definition of “capital goods” under Rule 2(a)(A) of the Credit Rules.

(II) That alternatively the goods in question fall within the definition of “input” under 2(k) respectively of the Credit Rules. That the tower and shelter were received by the appellants in knocked down condition (CKD) and were used for providing telecom services and hence these goods qualify as “inputs” in terms of Rule 2(k) of the Credit Rules. It is submitted that Rule 2(k)(2) uses the words “all goods” which are “used for providing any “output service”. He, therefore, submits that these goods completely fall within the purview of Rule 2(k) so as to mean inputs.

(III) It is submitted that a combined reading of these definitions read with Rules 3 and 4 of the Credit Rules entitles the appellants to avail the credit of duty paid on purchase of these goods.

(IV) The appellant's case is fully covered under Rule 3(1) of the Credit Rules which provides that manufacturer or producer of the final product or provider of output service shall be allowed to take credit. He lays emphasis on the following wording of Rule 3(1)(i) of the Credit Rules:-

“any input or capital goods received in the factory of manufacturer of final product by the provider of output services”, on or after 10th September,2004.”

(emphasis supplied)

(V) It is submitted that Rule 3(1) of the Credit Rules stipulates the only condition for the purpose of availing credit of duties paid on inputs and capital goods is that the inputs or the capital goods must be received by the provider of output services. It is submitted that the goods in questions have been received by the appellant who has provided output services viz. Telecommunication services.

(VI) The contention of the Revenue that after the use of the towers and parts thereof and PFB they have become “immovable”, is misconceived and credit cannot be denied accepting this contention. In support of this submission, reliance is placed on the following decisions:-

(a) CCE Vs. SLR Steels Ltd., (2012 (280) ELT 176 (Kar));

(b) CCE Vs. ICL Sugars Ltd., (2011(271) ELT 360 (Kar));

(c) CCE Vs. Sai Sahmita Storages Ltd., (2011(23) L.T.R. 341(A.P.));

(d) Bannari Amman Sugars Ltd. Vs. CCE, (2010(250) ELT 326 (Kar);

(e) CCE New Delhi Vs. Hindustan Sanitary-ware and Industries Ltd. (2002(145) ELT (SC));

(f) Orders of the Bombay High Court dated 7.10.2008 in CCE, Mumbai Vs. N.R.C. Ltd.”

(VII) That the towers and shelters are used for providing telecommunication services on which service tax has been paid. That capital goods viz. Antenna and BTS are fitted into the tower and shelter to provide telecommunication services and therefore, they qualify as inputs under Rule 2(k). In support of this proposition, reliance is placed on the following judgments:-

(a) Industrial Machinery Manufacturers Pvt. Ltd Vs. The State of Gujarat, (1965)16 STC 380);

(b) Member, Board of Revenue, West Bengal Vs. M/s.Phelps and Co.(P) Ltd., (1972) 4 Supreme Court Cases 121;

(c) CC, Kolkata Vs. Rupa and Co. Ltd., (2004(170) E.L.T. 129 (S.C.))

(d) Indian Farmers Fertilisers Co-op. Ltd. Vs. C.C.E., Ahmedabad, (1996(86) E.L.T. 177(S.C.)

(e) M/s. J.K. Cotton Spinning and Weaving Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur and Anr., (AIR 1965 SC 1310);

(f) CCE Vs. Jay Engineering Works Ltd., (1989(39) ELT 169 (S.C.)

(g) Indus Towers Ltd. Vs. CTO, Hyderabad, ((2012) 52 VST 447),

(VIII) That it is impossible to conceive that the telecommunication services can be provided without towers and shelters and that necessity or the functional utility test is required to be applied. In support of this submission, reliance is placed on the judgment of Calcutta High Court in the case of “Singh Alloys and Steel Ltd. Vs. ACC” reported in “1993 (66) ELT 273 (Cal).” It is submitted that these goods are used for providing output services on commercial scale and hence, they satisfied the functional utility test. It is submitted that the functional utility of the towers is apparent from the fact that the antennas are installed on the towers. The antennas continuously receive signals and transmit signals with the subscriber's devices to authenticate subscriber's accounts and enable the roaming of the mobile subscriber. In support of this submission, reliance is placed on the functioning of GSM Network as explained in “Wireless Communications and Networks, 2nd Edition, Williams Stallings, Pearson Prentice Hall” and “Mobile Cellular Telecommunications, Analog and Digital Systems, 2nd Edition, William C.Y. Lee, McGraw Hill.”

(IX) Alternatively, it is submitted that in the mobile telecommunication service, towers are the “accessory” of the antenna and therefore, qualify as capital goods falling under Chapter Heading 85. It is submitted that shelter is also an accessory of BTS equipment falling under Chapter heading 85. It is submitted that capital goods viz. Antenna and Base Transceiver Station are fitted into the tower and shelter respectively to provide telecommunication service. In support of this proposition reliance is placed on the definition of 'capital goods' as defined under Rule 2(a) of the Credit Rules to contend that the accessories of goods fall within the ambit of capital goods when they are used for providing output services. As regards the meaning of the word 'accessory', reliance is placed on the following decisions.

(a) M/s. Annapurn Carbon Industries Co. Vs. State of Andhra Pradesh, ((1976)2 SCC 273);

(b) CST, Maharashtra State, Bombay Vs. L.D. Bhave and Sons, (1981(47) STC 318.);

(c) Mehra Brothers Vs. Joint Commercial Officer, Madras, ((1991) 1 SCC 514);

(d) Banco Products (India) Ltd. Vs. Commissioner of C.Ex., Vadodara-I, (2009(235) ELT 636 (Tri-LB));

(e) CCE, Jaipur Vs. M/s. Rajasthan Spinning and Weaving Mills Ltd., (2010(255) ELT 481 (SC))

It is submitted that these are cases in which items were held to be fall within the definition of 'input' and also 'capital goods' and hence, in any case the appellant would be entitled for availing credit of duty paid on the same.

(X) In regard to the prefabricated building, it is submitted that all the aforesaid submissions are equally applicable in respect of prefabricated building/ shelter.

(XI) It is submitted that green shelters are falling under Chapter heading 85.37 and qualify as capital goods under Rule 2(a)(A) of the Credit Rules.

(XII) As regards the printers falling under Chapter Heading 84 and qualify as capital goods in terms of Rule 2(a)(A) of the Credit Rules,2004 it is submitted that the printers are classifiable under Chapter heading 84 of the Central Excise Tariff Act as printers are used for printing bills for subscribers and that the service of telecommunication does not come to an end once the signal is communicated, and activity like printing of bills is absolutely essential part of the telecommunication service. It is, therefore, submitted that the printers are being capital goods under Chapter 84 are used for providing output services and hence, capital goods.

(XIII) As regards the chairs, it is submitted that the amount being small, the credit in that regard is not pressed.

17. On the other hand, learned ASG appearing for the Revenue has supported the impugned orders passed by the Tribunal. Learned ASG has made the following submissions:-

(i) that the towers and parts thereof are fixed to the earth, on installation and become immovable and as such cannot be considered to be goods.

(ii) in CKD/SKD condition the tariff classification of the tower would be under Chapter heading 7308 of the Central Excise Tariff Act. It is submitted that as Chapter 7308 is not specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules, 2004 and the tower is not one of the items specified in clause (ii) of the said Rules that the parts of the tower cannot be claimed for credit as they are not components and spare from accessories.

(iii) even if it is assumed that the Cenvat on these parts of towers would be admissible under clause (iii) of Rule 2(a)(A) even then though under this clause no specific heading has been prescribed for eligibility of the capital goods, there is an explicit condition that the said goods should be component, spare and accessories of the goods specified in clause (i) and (ii) of the said Rule. As the tower is not a capital good, duty paid on its parts is not admissible for availing credit.

(iv) It is then submitted that only those articles which would go into composition of another article can be considered as components or parts of later. It is submitted that GSM and network antenna and such other goods classified specifically under Tariff heading 8517, but not the tower on which antenna is placed and hence tower cannot be considered as a component. That the tower does not enter into the composition of antenna, it is not constituted as part of antenna.

(v) It is then contended that under the definition of input under the Credit Rules, the service provider cannot avail the Cenvat Credit on input goods only the manufacturer can avail such credit. The service provider can avail of input credit and also on capital goods which satisfies the definition under Rule 2(a) of the Credit Rules. Hence, the credit on excise duty paid on tower and prefabricated buildings do not satisfy the definition of capital goods and hence, are certainly not covered as input service. In support of his aforesaid submissions, learned ASG relied on the following judgments.:-

(I)Vandana Global Ltd Versus Comm. Of C. Ex. Raipur, (2010(253) ELT 440(Tri-LB));

(II) Quality Steel Tubes (P) Ltd) versus Collector of C. Ex., ((1995) 2 SCC 372)

(III) Triveni Engineering and Industries Ltd and Anr Versus Comm. Of C. Ex. (2000) and SCC 29

(IV) Mittal Enginnering Works (P) Ltd Vs. Collector of Central Excice (1997) 1 SCC 203

(V) Commissioner of C. Ex. Indore Versus Cethar Vessels Ltd and Ors., ((2009)17 Supreme Court Cases 551)

(VI) Bharti Tele Ventures Ltd vs. State of Maharashtra, ( 2007 Vol 109 (1) Bom L.R. 0585);

(VII) Municipal Corporation of Greater Bombay Vs. Indian Oil Corporation, (1991 Supp (2) SCC 18.);

(VIII) Cellular Operators Association of India and Ors. vs. Municipal Corporation of Delhi etc., (179 (2011) DLT 381);

(IX) Collector of Central Excise Vs. Hutchison Max Telecom P.Ltd.,(2008(224) ELT 191 (Bom.));

(X) Commissioner of C.Ex. Nagpur Vs. Ultratech Cement Ltd. (2010(20) STR 577 (Bom));

(XI) Coca Cola India Pvt. Ltd. Vs. Commissioner of C. Ex. Pune-III, (2009(15) STR 657 (Bom.);

(XII) Saraswati Sugar Mills Vs. Commissioner of C.Ex., Delhi-III, (2011(270)ELT 465 (S.C.))

(XIII) Collector of Central Ecise Vs. Solaris Chemtech Ltd. , (2007(214) ELT 481 (SC));

18. With the assistance of learned Counsel for parties, we had gone through the paper book of the present appeals. We have also perused the written submissions and additional written submissions as filed on behalf of the appellant.

19. To appreciate the issue as to whether the appellant would be entitled for availing Cenvat Credit in respect of excise duty paid on the purchase of tower and parts thereof, prefabricated building and printers a reference to the relevant provisions of the Credit Rules and the Central Excise Tariff Act would become necessary. Rule 2(a)(A) of the Credit Rules defines 'capital goods' as under:-

“2. In these rules, unless the context otherwise requires,-

(a) “capital goods” means :-

(A) the following goods, namely:-

(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, (heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804) of the First Schedule to the Excise Tariff Act;

(ii) Pollution control equipment;

(iii) components, spares and accessories of the goods specified at (i) and (ii);

(iv) moulds and dies, jigs and fixtures;

(v) refractories and refractory materials;

(vi) tubes and pipes and fittings thereof; and

(vii) storage tank,

used-

(1) in the factory of the manufacturer of the final products, but does not

include any equipment or appliance used in an office; or

(2) for providing output service.”

(emphasis supplied)

Rule 2(k) defines “input” as under :-

“2(k) “input” means-

(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along-with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;

(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any out service.

Explanation 1- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.

Explanation 2- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacture;”

Rule 3 provides for credit on excise duty paid in discharging liability towards service tax payable by the manufacturer. Rule 3 of Cenvat Credit Rules provides as under:-

Rule 3. CENVAT credit. --- A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –

(i)(i) the duty of excise specified in the First Schedule to the ExciseTariff Act, leviable under the Excise Act;
(ii)(ii) the duty of excise specified in the Second Schedule to the ExciseTariff Act, leviable under the Excise Act
(iii)(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act,1978 ( 40 of 1978);
(iv)(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957( 58 of 1957);
(v)(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001)
(vi)(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004)
(via)(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);
(vii)(vii) the additional duty leviable under section 3 of Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via)
(viia)(viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act
 Provided that a provider of taxable service shall not be eligible to take creditof such additional duty
(viii)(viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003)
(ix)(ix) the service tax leviable under section 66 of the Finance Act; …….”
 
20. In respect of a service taxable under Section 65 of the Finance Act 1994 for payment of service tax on the output service an assesse can utilize CENVAT Credit of the duty paid on capital goods and inputs provided such ‘capital goods and ‘inputs fall within the respective definitions under Rule 2 of the Credit Rules. A perusal of the definition of ‘capital goods , ‘inputs and reveal the following position :-

(i) Capital goods

Only those goods qualify for Cenvat Credit as capital goods which are covered under Chapter 82, 84, 85, 90, 68.02 and those under heading 6805 of the first schedule to the Central Excise Tariff Act, pollution control equipment or those which are components, spares and accessories of these goods and used in the factory of the manufacturer of the final products or for providing output service, but does not include any equipment or appliance used in an office.

(ii) Inputs

All goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along-with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; and all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any out service. Explanation 2 to the definition of inputs is relevant which includes goods used in the manufacture of capital goods which are further used in the factory of the manufacture;

21. A plain reading of the definition of ‘capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No.6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specified at sub clauses (i) and (ii) which are used either in the factory for manufacture of final products but does not include any equipment or appliance used in the office and those used for providing output service. A combined reading of sub-clause (a)(A) (i) and (iii) and sub-rule (2) indicates that only the category of goods in Rule 2(a)(A) falling under clause (i) and (iii) used for providing output services can qualify as capital goods and none other.

22. Further the definition of ‘input as defined Rule 2(k) includes all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production, and as provided in sub-clause (ii) all goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Explanation (2) of sub-rule (k) is also relevant which provides that input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Similarly a plain reading of the definition of input indicates that in the present context clause (i) of Rule 2 (k) may not be of relevance as same pertains to manufacturing activity and pertains to goods used in relation to manufacture of final product or any other purpose within the factory of production. Sub-clause (ii) has been referred to as relevant by the appellant as the same pertains to goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service.

23. In the context of these definitions the contentions as raised by the appellant are required to be examined. The position of the goods in question vis– a-vis the plain application of the rules is that the tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods. Further in the CKD or SKD condition the tower and parts thereof would fall under the chapter heading 7308 of the Central Excise Tariff Act. Heading 7308 is not specified in clause (i) or clause (ii) of rule 2 (a) (A) of the Credit Rules so as to be capital goods. The goods in question would not be capital goods for the purpose of CENVAT credit as they are neither components, spares and accessories of goods falling under any of the chapters or headings of the Central Excise Tariff Schedule as specified in sub-clause (i) of the definition of capital goods.

24. The alternate contention of the appellant is therefore that tower is an accessory of antenna and that without towers antennas cannot be installed and as such the antennas cannot function and hence the tower should be treated as parts or 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 antenna and should be held as capital goods for availing of credit of duty paid.

25. In the context of the aforesaid rules and the issue as falling for consideration in these appeals we examine the various decisions as relied upon by the Appellants.

(I) That towers and parts thereof and PFB are not immovable properties. :

(a) In the case of “Commissioner of Central Excise, Bangalore-II Vs. SLR Steels Ltd., (2012(280) ELT 176 (Kar.))” In this case the issue was whether credit of duty paid on cement and steel used for manufacture for storage tank which is an immovable property can be availed of. The Commissioner of Excise held that as cement and steel was used for manufacture of storage tank which was an immovable property and non-excisable no credit of duty paid on any inputs used for any non-excisable goods is admissible in view of rule 6 (1) of Cenvat Credit Rules 2003-04. The assesse had preferred an appeal before the tribunal. The tribunal held that cement and steel used by the assesse for the purpose of construction of iron/coke storage tank, gas storage tanks are capital goods for the purpose of constructing iron/coke and that these inputs being used for pollution control equipments hence the assesse was entitled for Cenvat credit. The Court considered the storage tank as capital goods as the storage tanks were used as pollution control equipments and as pollution control equipments were directly falling under rule 2 (a) (A) (ii) of the credit rules. The Court came to a conclusion that once storage tank and pollution control equipments constitute capital goods the duty paid on any raw material purchased for construction of those goods could be utilised as a Cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property. However, the facts in the present case are quite different. The towers are not capital goods under the definition of capital goods as defined in rule 2 (a) of the credit rules being immovable and are non-excisable. This judgment is therefore of no assistance to the appellants.

(b) In the decision of the Karnataka High Court in the case of “CCE Vs. ICL Sugars Ltd., (2011(271) ELT 360 (Kar))” the issue was in regard to the input used in the manufacturing of storage tank which was an immovable property are admissible for MODVAT credit. The Assesse was a sugar factory and had claimed CENVAT credit on the raw materials used for construction of storage tanks. The assessing authority had granted credit in respect of water storage tank on the ground that water is an essential raw material of sugar after conversion into steam. The water storage tank is a component of main machinery viz. boiler and the excise duty paid on the inputs in the construction of water storage tanks were held eligible for availing Modvat credit. However, Modvat credit was disallowed, in respect of syrup and molasses storage tank–MS staging of tank and shell plates/ bottom plates/roof plates used for constructing non-excisable final molasses storage tank and shell of final molasses storage tank. This was on the ground that molasses tank is constructed on the floor with a concrete foundation and the shell of the final molasses storage tank will be placed over the concrete to hold about 2500 tons, and that since the final molasses storage tank is erected to the earth, it becomes non-excisable. It was, therefore, held by Assessing Officer that any component used in the nonexcisable molasses final storage tanks are ineligible for Modvat credit. The Commissioner had set aside the order disallowing credit to the Assesse and further the same was upheld by the Tribunal. In the background of this fact, the Division Bench of Karnataka High Court has observed as under:-

“The storage tank has been held to be a component to the main machinery namely, boiler and the benefit is extended to the inputs used in the construction of the storage tank though it is also embedded to the land. On the same reasoning the assessing authority ought to have extended the benefit to the syrup and molasses storage tank also, as they are bye-products in the course of manufacturing activity which are also excisable at the time of selling the same to the assessee. It appears even when the storage tanks if specifically mentioned in the definition of capital goods by liberally incorporating these provisions the benefit was extended to the assessee. However, the controversy remains. In order to set right this controversy by a Notification, specifically storage tank is introduced within the definition of capital goods. The said insertion is clarificatory in nature. Under these circumstances even though the said insertion was in the year 2001 we are concerned with the period anterior to the said insertion.

5. Having regard to the aforesaid facts and also the fact that the assessing authority has himself extended the benefit to storage tank storing water as a component to main machinery namely , boiler he ought to have extended the benefit to the storage tank which are also a part of the factory premises in which the bye-products are stored and thereafter sold as finished product….”

This decision is clearly not applicable in the facts of the appellants case as the issues in question cannot be held to be components of the antenna.

(c) In the case of “Commissioner of Central Excise Vs. Sai Sahmita Storages (P) Ltd., (2011(23) S.T.R. 341(A.P.))” decided by the Division Bench of Andhra Pradesh High Court the assessee was registered under Section 69 of the Finance Act, 1994 for providing storage and warehouse services. The Assessee was filing service tax returns classifying the services under storage and warehousing service. While scrutinizing the sale tax returns for the period from April, 2005 to September, 2005 the assessing officer came to a conclusion that the assessee had taken credit on Central Excise duty paid on cement, iron bars, expansion bellows and pipes, and hence, a show cause notice was issued proposing to adjudicate and determine short paid service tax and penalty thereon. The Assessing authority passed an order in original confirming the show cause notice and demanding service tax and interest thereon. The Assessee had preferred an appeal before the Commissioner of Central Excise which came to be dismissed. Before the High Court, it was contended by the Revenue that the cement used for making foundation and TMT bars used for reinforcement, cannot be treated as capital goods as defined in Rule 2(a) of the Rules and that the assessee had wrongly claimed credit when the items were outside the definition of input under Rule 2(k).That the assessee had suppressed this fact and filed returns adjusting the credit to which the assessee was not entitled to. In the context of the definition of ‘storage and warehousing' as falling under Section 65(102) of the Finance Act, the Court considered the definition of 'input' and 'input service' under the Credit Rules and in that context it was observed in paragraph (7) that the definition of 'input' and 'input services' would show that, unless excluded, all goods used in relation to manufacture of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for Cenvat Credit. The Court considered the decision of the Supreme Court in the case of “Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III, ((2009)9 SCC 193)”, wherein the definition of 'input' as defined in Rule 2(g) of Cenvat Credit Rules, 2002 was considered and it was observed by the Supreme Court that the crucial requirement of the Rule is that all goods “used in or in relation to the manufacture” of final products qualify as “input”. It was observed that this presupposes that “element of manufacture” must be present. In noting the following observations of the Supreme Court, the Division Bench of the Andhra Pradesh High Court held that as the assessee used cement and TMT bar for providing storage facility without which storage and warehousing services could not have been provided the assessee was permitted to avail the credit on cement and TMT bar. Paragraph 8 of the Judgment reads as under:-

“8. Yet again considering the inclusive part of the definition of “input”, it was held as follows:-

“All these considerations become relevant only when they are read with the expression “used in or in relation to the manufacture of final product” in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is “used in or in relation to the manufacture of final product”. It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression “used in or in relation to the manufacture” have many shades and would cover various situations based on the purpose for which the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas used in the manufacture of sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Head Transfer oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being “used in or in relation to the manufacture” stands complied with. In our view, one has to therefore read the definition in its entirety.”

The reliance on this judgment may not be helpful to the appellants inasmuch as the definition of storage and warehousing as contained in Section 65(102) of the Finance Act itself stand on a different footing. In that context the Division Bench of Andhra Pradesh High Court has held that use of cement and TMT bars by the assessee for providing storage facility has become integral part of storage and warehousing and without the use of cement and TMT bars, storage and housing could not have been provided. However, in the present case the facts are distinct. The towers are admittedly immovable structures and non marketable and non excisable. We therefore, of the clear opinion that this judgment of the Division Bench of Andhra Pradesh High Court is inapplicable in the facts of the present case.

(d) The case of “Bannari Amman Sugars Ltd. Vs. Commissioner of Central Excise, Mysore, (2010(250) E.L.T. 326 (Kar.))” as decided by the Division Bench of Karnataka High Court concerned with credit of inputs used in manufacturing of storage tank by the assessee. The period in question was 12.5.2001 to 3.1.2002. By notification no.6/2001 storage tank was inserted in the definition of ‘capital goods' which was held to be applicable. The Tribunal in identical circumstances had also held credit admissible. In this context allowing in the assessee's appeal, the Division Bench has taken into consideration the provisions of Rule 57AA of the Central Excise Rules, in allowing the credit to the assessee. It was observed as under:-

“9. The definition of the capital goods itself being explicit and clear we are of the opinion that the Tribunal was in error in ignoring the definition 'capital goods' as enumerated in Rule 57Aa. In view of the above, we are of the opinion that the substantial question which had been formulated by this Court have to be answered in favour of the appellant-assessee and against the Revenue in so far as question nos.1 and 2 are concerned. In so far as question no.3 is concerned the Tribunal having itself come to the conclusion that the storage tanks are not movable property, it could not have held that the assessee would not be entitled to the benefit of Modvat credit.”

As storage tank by a notification was declared as a capital goods the inputs used in the manufacture of storage tank were held to be admissible. In the present case the output service is telecommunication service, this analogy therefore is inapplicable.

(e) The decision of the Supreme Court in the case of “C.C.E. New Delhi vs. Hindustan Sanitary-ware and Industries, (2002(145) E.L.T. 3 (S.C.))”, was a case of captive consumption. The assessee was a manufacturer of sanitary-wares and used plaster of paris as inputs for the final product of sanitary-ware. This involved making of moulds from plaster of paris which in turn used as inputs for manufacture of sanitary-ware. The assessee had claimed the benefit of exemption under a Notification no.217 of 1986. The revenue declined to grant benefit of exemption. The Tribunal had set aside the orders passed by the Excise Authority and held that exemption would apply to the assessee. The Supreme Court after taking into consideration the contents of the Notification no.82/87 which showed that the description of inputs given in column (2) under Chapter 25, would be ‘plaster of paris' and the final product given in column (3) under Chapter 69 would be 'ceramic goods' held as under:-

“9. The proviso postulates a situation where the final product itself is exempted in which case alone the exemption of plaster of paris under Notification No.217/86 cannot be availed. It is nobody's case that the sanitary-ware falling under Chapter 69 has been exempted by the Central Government. What is exempted is plastic moulds but they are only inputs and not final product in this case. This fact is further clarified by the Central Government in Notification No.221/96, as amended by Notification No.89/89. Item 6 thereof clearly mentions that plaster of paris moulds are input for ceramic products.

10. From the above discussion, it follows that plaster of paris which is used as inputs in relation to the manufacture of sanitary-ware (final product), is exempt under Notification No.217/86, dated April 2, 1986, as amended.”

This decision therefore cannot be applied to the case in hand.

(f) In so far as the decision of the Division Bench of this court in the case of “The Commissioner of Central Excise Vs. M/s. N.R.C. Ltd.” dated 7.10.2008 in Central Excise Application no.11 of 2002 the issue was ‘whether the Modvat Credit is admissible on components of Diesel Generating Power Plant (DGPP) installed in the factory when the Diesel Generating Power Plants are exempted from payment of duty. The Division Bench of this Court had passed the following order in rejecting the application as filed by the Revenue:-

“2. It is not in dispute that the Diesel Generating Power Plants on which Modvat credit is availed, have been used in the manufacture of final product and on which excise duty has been paid. The decision of the Tribunal is in accordance with the judgment of the Apex Court in the case of Escorts Ltd. Vs. Commissioner of Central Excise, Delhi, reported in 2004(171) ELT 145 (SC). Since the question raised in this application is covered by the decision of the Apex Court, we dismiss the application. Rule is discharge with no order as to costs.”

Perusal of the aforesaid judgment clearly shows that it would not be applicable to the facts of the present case. Firstly for the reason that tower and parts thereof and prefabricated buildings are not capital goods within the meaning of Rule 2(a)(A) of the Credit Rules.

(II) On the proposition that the towers and shelters are used for providing telecommunication services as the antenna and BTS are fitted into the tower and shelter respectively and therefore, tower and parts thereof and shelter qualify as inputs under Rule 2(k) of the Credit Rules. In support of this proposition, the appellants place reliance on the following decisions:-

(a) The decision of the Gujarat High Court in the case of “Industrial Machinery Manufacturers Pvt. Ltd. Vs. The State of Gujarat, ((1965) 16 STC 380)” concerned the item, ‘humidifires used by cotton textile mills in order to maintain certain humidity for the purpose of increasing the strength of yarn, avoiding breakages of yarn and improving the quality of yarn, are essential to the modern textile industry. It was held that humidifires are machinery used in the manufacture of cloth and fall within Entry 15 of Schedule C to the Bombay Sales Tax Act,1959. The appellants on the basis of this decision intend to canvass that similar to the position of humidifires as held by the Division Bench of Gujarat High Court, to be used in manufacturing of the goods, the towers and parts thereof and PFB are also to be construed to be used in providing output services and hence, credit ought to be granted. This decision, however, would not be applicable to the towers and PFB in view of the fact that they are not directly used for the output services namely telecommunication services and further as they are non excisable and hence, not falling within the definition of 'input' as defined under Rule 2(k) of the Credit Rules.

(b) The decision of the Supreme Court in the case of “Member, Board of Revenue, West Bengal Vs. M/s. Phelps and Co.(P) Ltd., (1972) 4 Supreme Court Cases 121” concerned the issue in regard to the gloves used by workmen engaged in hot jobs and handling corrosive substances to qualify as goods used in the course of manufacture of the goods for sale. The issue which fell for consideration was under the Bengal Finance (Sales Tax) Act,1941. The Supreme Court considered as to what should be meant by the wording “for use by him in the manufacture of goods for sale” as appearing in Section 5(2) of Bengal Finance (Sales Tax) Act,1941, making a reference to the earlier decision rendered in the case of “M/s. J.K. Cotton Spinning and Weaving Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur and Anr., (AIR 1965 SC 1310)” wherein it was held that the expression “in the manufacture of goods” would normally encompass the entire process carried on by the dealer of converting raw materials into finished goods and that where any particular process is so integrally connected with the ultimate production of goods, that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression “in the manufacture of goods.”. It was held that the Assessee company had sold goods in question to certain manufactures who are manufacturing iron steel materials and that the gloves were to be used by workmen who were engaged in hot jobs or in handling corrosive substances in the course of manufacture. It was therefore, held that it cannot be denied that the gloves had to be used in the course of manufacture.

As this decision concerned the manufacturing of excisable goods which is different from the present context of a excisable service namely telecommunication service, the same is of no avail to the appellant.

(c) The decision of the Supreme Court in the case of “Commissioner of Customs, Kolkata Vs. Rupa and Co. Ltd, (2004(170) E.L.T. 129 (S.C.)” the facts were that under Notification no.29/97-Cus. dated 1.4.1997 exemption from custom duty was granted to capital goods, components and spares thereof etc. imported under the Export Promotion Capital Goods Scheme (EPCG Scheme). Under the EPCG Scheme the capital goods imported were exempted from payment of customs duty and so much of the additional duty as was in excess of the amount calculated at the rate of 10% of the value of the goods. Under the proviso, if the capital goods were imported for manufacture of items mentioned therein then they were exempted from payment of whole of the additional duty. Thus, in the facts of the case, if the capital goods were imported for the manufacture of textile garments then under the notification the importer would be exempted from payment of customs duty and additional duty. The assessee had imported machines for processing of fabric/yarn, fabric inspection machines, machines for knitting and dying fabrics and other such machines. The assessee was denied benefit of 100% exemption on the ground that the machines imported by them were not required for the purposes of manufacture of textile garments. In this context, the Supreme Court in paragraphs 8 and 9 has observed as under:-

“8. Further, in our view, this Notification is very clear. The 100% exemption is given to capital goods required for manufacture of, amongst others, “textile garments”. The term “capital goods” has been defined in the Notification. The term “capital goods” means goods which are used in the manufacture of that product and also goods which would be required for manufacture or production of other goods including packaging machinery and equipments. The term also includes instruments for testing, research and development. The term includes machines for pollution control, refrigeration, power generating sets etc. Thus, the example, if after manufacturing of textile garments the same have to be packed, the machinery required for packing would be capital goods required for manufacture of textile garments. Similarly, refrigeration machinery for refrigerating the plant would also fall within the term capital goods required for manufacture of textile garments. If such sort of equipments and machinery get covered by the term “capital goods” we fail to understand as to how machinery required for knitting, dyeing, compacting are not covered.

9. For the purposes of manufacture of garments it cannot be said that only stitching and knitting machines are required. Apart from stitching and cutting the manufacturer may himself manufacture the yarn or fabric. The quality of the yarn or fabric would have to be tested. Machines would be required for that. Similarly, machines for dyeing and/or drying the fabric or yarn, machines for inspecting the defects etc. would be required. The term “capital goods” required for manufacture of textile garments would thus include all machines required for the ultimate manufacture of the garments. The Notification has its own safeguards. The import can only be under a license issued under the EPCG scheme. The license would contain a condition that garments must be exported by the importer. The Notification also contains a condition that the capital goods (which are imported) are installed in the importers' factory or premises and a certificate to that effect has to be produced within 6 months of the date of the import.”

We are afraid that this judgment is of any assistance to the appellant. The observations of the Supreme Court in paragraph 8 clearly indicates that the term 'capital goods' was defined in the Notification so as to include goods which are used in the manufacture of that product and also goods which would be required for manufacture or production of other goods including packaging machinery and equipments. In view of the wide definition of the term 'capital goods' as interpreted, the Supreme Court has come to the conclusion that the Assessee was entitled for the benefit of the exemption notification. However, in the present case, the term 'capital goods' as defined in Rule 2(a)(A) does not include tower and parts thereof or the PFB so that the said goods qualify as 'capital goods' and become entitle to credit of the duty paid thereon.

(d) In the decision of the Supreme Court in the case of “Indian Farmers Fertilisers Co-op. Ltd. Vs. C.C.E., Ahmedabad, (1996(86) E.L.T. 177(S.C.))” the issue was ‘whether the ammonia used in the off-site plants is also ammonia which is used elsewhere in the manufacture of fertilisers'. An exemption Notification no.187/61- C.E. was issued under the provisions of Rule 8 of the Central Excise Rules whereby the Central Government exempted raw naphtha falling under item no.6 of the First Schedule to the Central Excises and Salt Act,1944, from the payment of excise duty in excess of Rs.4.36 per kilolitre at 15 degrees centigrade. The exemption Notification applied “in respect of such raw naphtha as is used in the manufacture of Ammonia provided such Ammonia is used elsewhere in the manufacture of fertilisers” and the procedure set out in Chapter -X of the said Rules was followed. The appellant-assessee was in the manufacture of urea which was a fertilizer and utilised for the purpose raw naphtha. The raw naphtha was obtained at the concessional rate of duty and was used for producing ammonia which in turn was used partly, directly in the urea plant and partly, directly, in the production of urea by being employed in off- ite plants viz. the water treatment plant, steam generation plant, inert gas generation plant and effluent treatment plant, all of which were part of the integral process of the manufacture of urea. Show cause notices were issued to the appellant–assessee for the period from 1.4.1974 to 31.12.1982 demanding excise duty at full rate on the raw naphtha used for making ammonia which has been used in water treatment plant, steam generation plant, inert gas generation plant and effluent treatment plant on the ground that such raw naphtha was not used in the manufacture of fertilisers- urea. The demand was confirmed. In appeal by the appellants, the Collector of Central Excise and Customs upheld the contention of the appellants insofar as the ammonia was used in the water treatment plant, steam generation plant and inert gas generation plant. However, as regards the effluent treatment plant was concerned, the Collector took a view that the effluents were waste produced after the fertilisers had been manufactured and that treatment of effluent cannot be directly linked to the process of manufacture of fertilizer and the effluent treatment plant could not be said to be integral part of the process of manufacture of fertilizers. The demand on the appellant-assessee insofar as it related to the effluent treatment plant was, therefore upheld. There were cross appeals filed before the Tribunal by the assessee and by the revenue. The Tribunal reversed the decision of the Collector insofar as it held that off-site plants other than effluent treatment plant were part of the process of manufacture of fertilizers. It held that Ammonia was used for the maintenance of the plant and equipment meant for testing and commissioning the plant and could not be said to be utilised in manufacture. It was held that the purpose of water treatment being essential for the protection of the boiler and other process equipment from corrosion, formation of scales, etc. the ammonia used for the said purpose could not be said to be used in the manufacture of fertilizers. As regards the findings of the Collector, in so far as the effluent treatment plant was concerned, the same were upheld. In this context, referring to its earlier decisions in the case of “M/s. J.K. Cotton Spinning and Weaving Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur and Anr., (1965(1) SCR 900” and “Collector of Central Excise, Calcutta-II vs. Eastend Paper Industries Ltd., (1989(4) SCC 244) held that the treatment of effluents from a plant is an essential and integral part of the process of manufacture in the plant and that the apparatus used for such treatment of effluents in a plant manufacturing a particular end product is part and parcel of the manufacturing process of that end product. It was held that the ammonia used in the treatment of effluents from the urea plant of the assessee was therefore, required to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia would be entitled for exemption. This conclusion was reached on the basis of the observations that the exemption Notification did not require that the ammonia should be used directly in the manufacture of fertilisers and that it requires only that the ammonia should be used in the manufacture of fertilisers. It was observed that exemption notification must be so construed as to give due weight to the liberal language it uses.

From perusal of the facts and the observations of the Supreme Court in this decision as relied upon by the appellants, it is clear that the Supreme Court had construed the provisions of the notification by which exemption was granted. As the notification did not bar use of Ammonia from any indirect use in the factor of the assessee, the Supreme Court held that the water treatment plant, steam generation plant and inert gas generation plants are part and parcel of composite process and that Ammonia used in these ancillary plants is also used in manufacture of fertiliser.

(e) In the decision of the Supreme Court in the case of “J.K. Cotton Spg. and Wvg. Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur, (1997(91) E.L.T. 34 (S.C.))” the issue arose under the Central Sales Tax Act,1956 in respect of the business of the assessee dealing in manufacture of cotton textiles, tiles and other commodities for sale. The assessee was dealing in the goods which were ordinarily purchased in the course of inter-State trade for which it had sought registration as dealer under Section 7(1) of the Central Sales Tax Act, 1956 in respect of the items viz. coal. In the registration certificate the Sales Tax Officer cancelled the specification and issued a show cause notice as to why registration should not be amended so as to exclude certain items. The assessee in reply to the show cause notice contended that all the articles specified in the certificate were required in the manufacture and processing of goods for sale. By an order passed by the Sales Tax Officer, certain items under the certificate of registration were deleted. Against this action on the part of the Sales Tax Officer, the Assessee had approached the Allahabad High Court. The High Court held that drawing instruments, photographic materials, colours, chemicals, electricals, machinery and building materials such as cement, lime are not comprehended in the expression “in the manufacture or processing of goods for sale” under Section 8(3)(b) read with Rule 13 and dismissed the petition filed by the assessee. The assessee had approached the Supreme Court. It is in this context in construing the provisions of Section 8(3)(b) and Rule 13, it was observed that by Rule 13 the Central Government has prescribed the goods referred to in Section 8(3)(b), such goods must be intended for use in the manufacture or processing of goods for sale or in mining or generation or distribution of power, and the intended use of the goods must be as specified in Rule 18. It was observed that under Rule 13 read with Section 8(3)(b) mere intention to use the goods in the manufacture or processing of goods for sale, will not be a sufficient ground for specification. The intention must be to use the goods as raw materials, as processing materials, as machinery, as plant, as equipment, as tools, as stores, as spare parts, as accessories, as fuel or as lubricants. It is in this context, it was held that the expression “in the manufacture of goods” should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods and where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process would fall within the expression “in the manufacture of goods”.

The aforesaid observations of the Supreme Court were clearly in the context of Section 8(3)(b) of the Central Sales Tax Act and Rule 13 as relevant in the said decision. However, the context in the present case as falling under the definition of 'input' as defined under Rule 2(k) would not permit the interpretation as it became possible under the Central Sales Tax Act as in this decision of the Supreme Court, as the towers and PFB cannot be considered to be an integral part of the output services viz. telecommunication services, inasmuch as the telecommunication services become viable on account of antenna, the towers and PFB are immovable in nature fixed to the earth and cannot be regarded as essential inputs inasmuch as an antenna can be installed irrespective of tower or one tower can install number of antennas for different service providers and hence, the same cannot be regarded as integral part of the output services as being provided by the appellants.

(f) The appellants then placed reliance on the decision of Andhra Pradesh High Court in the case of “Indus Towers Ltd. Vs. CTO, Hyderabad, (2012) 52 VST 447)”, on the basis of which of which the Appellant contend that the towers and the PFB being employed in erection and maintenance of cell phone towers are integral to telecommunication network and hence qualify as inputs under the Credit Rules. The issue in the case of Indus Towers arises in the context of adjudication of a sales tax dispute under the Central Sales Tax Act more particularly in regard to the construction of Section 8(1)(3)(b) and (d) and (4) of the Central Sales Tax Act,1956, in regard to purchase of goods by the dealer from the outside State comprising of goods specified in the certificate of registration under the Central Sales Tax Act granted to it against the issue of “C” form and were goods employed for erection and maintenance of cell phone towers which were contended to be integral to communication network. The Division Bench of Andhra Pradesh High Court referred to an earlier Division Bench's judgment in the case of “State of Andhra Pradesh Vs. Bharat Sanchar Nigam Ltd., (2012)49 VST 98 (AP))” and observed that telecommunication towers are held to be immovable property. Learned Counsel for the Appellant has relied on the following observation in the judgment:-

“31. Telecommunication towers are held by a Division Bench of this Court in BSNL (2012)49 VST 98 (AP) to be immovable property. We are not informed at the Bar that the judgment in BSNL (2012) 49 VST 98 (AP) has either been stayed or appealed against or the ratio of the said decision stands eclipsed. This judgment has also analysed that the service providers (passive infrastructure service providers) provide other assets like shelter, air-conditioning equipment, diesel generator, electrical wiring, power plant, etc., for their network operations and concluded that sharing of infrastructure is incidental and only as a means of rendition of telecommunication service; that the effective control and possession of such equipment continues with the passive service provider; is not parted to the other service providers who are merely permitted use of this equipment; and levying tax on the proceeds received by the passive infrastructure provider from sharing of their infrastructure with other service providers, treating it as a sale under Explanation IV to sub-section (28) of Section 2 of the APVAT Act,2005, is without jurisdiction and illegal.

39. In the facts and circumstances of this lis (adverted to supra), in view of the ratio deducible from the judgments of the Supreme Court in Rajasthan Electricity Board (1997) 104 STC 89(SC); (1997)10 SCC 330 and in J.K. Cotton Spinning and Weaving Mills Co. Ltd. (1965)16 STC 563 (SC), we are of the considered view that the purchase of goods by the petitioners from outside the State, comprising goods specified in the certificates of registration under the CST Act granted to them, against issue of C forms and where the goods have been employed in erection and maintenance of cell phone towers which are integral to telecommunication network, fall within the ambit of section 8(1) read with section 8(3)(b) of the CST Act and are entitled to be taxed accordingly. The fact that the goods purchased by the petitioners were neither sold nor used in the manufacture of goods for re-sale does not constitute violation of the C forms. Consequently, levy of penalty, on the factual parameters apparent on the record of these cases is unsustainable.”

(emphasis supplied)

We are afraid that the observations in the aforesaid judgment would be of no assistance to the appellant. The issue which fell for consideration in this case was under the Central Sales Tax Act in the context of registration certificate issued to the petitioner (Indus Towers Ltd) under the Central Sales Tax vis a vis the nature of business of the petitioners therein. The controversy was whether the goods purchased by the petitioners (Indus Towers Ltd/ dealers) are registered under the Central Sales Tax Act which were used for building operating and maintaining passive telecom infrastructure and erection of telecom towers and maintenance and whether the same, would fall within the ambit of Section 8(1) read with 8(3)(b) of the Central Sales Tax Act and thus taxable only at concessional rate of sale tax provided under Section 8(1) of the Act. In regard to the utilization of said goods for the purpose of telecom towers/services and in the context of registration certificate held by the dealer under the Central Sales Tax Act, the Division Bench observed that the goods as purchased by the dealer which were employed in the erection and maintenance of the cell phone towers were integral to the telecommunication network and hence, the goods fell within the ambit of section 8(1) read with section 8(3)(b) of the Central Sales Tax Act and were entitled to be taxed at the concessional rate of tax under the said provision. The Division Bench in this case was examining three aspects, firstly the goods as procured by the dealer in the context of the registration obtained by the dealer under the Central sales Tax Act by procuring 'C' form under the Central Sales Tax Act and the benefit of the 'C' forms whether would be entitled in the context of the provisions of Section 8(1) and 8(3)(b) of the Act. The Division Bench was dealing in a case arising under the Central Sales Tax Act and was examining the benefits which would be available to the dealer of reduction in duties on a “C” form being availed by the dealer. It is in this context that the Division Bench had come to the conclusion that the cell phone towers are integral to telecommunication network. Secondly, the expression “telecommunication network” was being considered in the context of Section 8(1) read with section 8(3)(b) of the Central Sales Tax Act. It was also observed that in the case of “State of Andhra Pradesh Vs. Bharat Sanchar Nigam Ltd.” (supra) ruling of the Division Bench of Andhra Pradesh High Court, it was held that telecommunication tower is immovable property and that it being a immovable property must have direct relevance to the issue as arising for adjudication in the said case. In the present case the issue is one which falls under the Credit Rules and as to whether towers and parts thereof fall within the scope and ambit of the specific definition of Capital goods and the definition of inputs under the Credit Rules,2004. Any issue falling for interpretation under the provisions of Section 8(1) and Section 8(3)(b) and 8(1) of the Central Sales Tax Act cannot ipso facto be made applicable in the context of the Credit Rules as arising in the present appeals and more particularly, when the definition as falling under the Cenvat Credit Rules are distinct and are noticeably different.

(g) The decision of the Supreme Court in “Collector of C.E. Vs. Jay Engineering Works Ltd., (1989(39) E.L.T. 169(S.C.)” concerned the nameplate affixed on a fan which was held as an as an input and an essential ingredient failing which the fan does not become marketable and covered by a notification entitling the manufacturer for set off duty on the nameplates. This decision however is ex-facie not applicable in the present context.

(h) The reliance of the appellant on the judgment of the Division Bench of this Court in the case of “Deepak Fertilizers and Petrochemicals Corpn. Ltd. Vs. C.C.E., Belapur, (2013(288) E.L.T. 316(Tri.-Mumbai))” would also be of no assistance to the appellant. The appellant relied on the following observations in paragraph (5) of the judgment.

“The Tribunal has placed an interpretation which runs contrary to the plain and literal meaning of the words used in Rule 2(1). Moreover, as we have noted earlier, where as Rule 3(1) allows a manufacturer of final products to take credit of excise duty and Service Tax among others paid on any input or capital goods received in the factory of manufacturer of the final product, insofar as any input service is concerned, the only stipulation is that it should be received by the manufacturer of the final product. This must be read with the broad and comprehensive meaning of the expression “input service” in Rule 2(1). The input services in the present case were used by the appellant whether directly or indirectly, in or in relation to the manufacture of final products. The appellant, it is undisputed, manufactures dutiable final products and the storage and use of ammonia is an intrinsic part of that process.”

However, the observations are required to be read in the context of the facts of the said case. The appellant the said case was engaged in manufacturing of excisable goods which fell under Chapters 28, 29 and 31 of the Central Excise Tariff Act,1985. The appellant had installed storage tanks for storing ammonia at its premises situated at JNPT and had claimed that it is eligible for Cenvat Credit of service tax paid on input services used for the ammonia storage tanks installed at JNPT so that input/ raw material stored therein was intended for manufacture of the final product at the factory of the appellant at Taloja. The Cenvat Credit in respect of the services of consulting engineers, technical inspection and certification, construction, erection, commissioning and installation services for the installation of the ammonia storage tanks was claimed. The facts of this case can no manner apply to towers and parts thereof, prefabricated building/shelter which are immovable property and not excisable goods and hence, reliance on this judgment is misconceived.

26. The appellants in support of their alternate contention that the ‘towers are the accessories of antenna and therefore, qualify as ‘capital goods' falling under Chapter Heading 85 and that PFB is also an accessory of BTS equipment falling under Chapter 85 on the basis of definition of 'capital goods' as defined under rule 2(a)(A) of the Credit Rules, relied on the following decisions:-

(a) In the case of “M/s. Annapurna Carbon Industries Co. Vs. State of Andhra Pradesh, (1976) 2 Supreme Court Cases 273)” the issue which fell for consideration of the Supreme Court was in respect of A.P. General Sales Tax Act, 1957, in regard to the interpretation of Entry 4 of Schedule I concerning cinematographic equipment etc. and parts and accessories required for use therewith. The question was whether ‘arc carbons commonly known as “cinema arc carbons” were “parts and accessories” required for use with cinematographic equipment. It was held that the term “accessories” is used in the Schedule to describe goods which may have been manufactured for use as an aid or addition, but “accessories” are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kind of instrument. Considering that main use of the arc carbons under consideration was duly proved to be that of production of powerful light used in projectors in cinemas, and that they can also be used for searchlights, signaling, stage lighting, or where powerful lighting for photography or other purpose may be required could be detracted from the classification to which the carbon arcs belong. It was, therefore, held that 'cinema arc carbons' can, therefore, be brought under Entry no.4 of Schedule I of A.P. General Sales Tax Act,1957, which reads as under:-

“Cinematographic equipment, including cameras, projectors, and sound recording and reproducing equipment, lenses, films and parts and accessories required for use therewith.”

In reaching the aforesaid conclusion in paragraph (6) of the decision, the Supreme Court has specifically observed that the meaning to this entry can only be satisfactorily determined in the light of the language of the entry itself considered in the context in which it occurs. This decision however cannot assist the appellants as the aforesaid entry made to A.P. General Sales Tax Act itself included accessories of cinematographic equipment. In the present case tower cannot be held to be an accessory of antenna.

(b) In the decision of the Division Bench of this Court in the case of “Commissioner of Sales Tax, Maharashtra State, Bombay Vs. L.D. Bhave and Sons, (1981(47) STC 318)”, the issue was as regards the stand specially designed for keeping gas stoves and whether they were 'accessories' for gas stoves. This issue arose in the context of Entry 7A of Schedule E to the Bombay Sales Tax Act,1959 and the rate of sales tax as would be applicable to the items. It is in this context the Division Bench has considered the judgment of the Supreme Court in the case of M/s. Annapurna Carbon Industries Co. Vs. State of Andhra Pradesh” (supra), and has observed as under:-

“Thus, an accessory is considered as something that is an extra or additional item, an adjunct to the main item. It may add to the performance of the main items but it can also be for more convenient use of the main item. It fact, there can be various types of accessories and whether an item constitutes an accessory or not will depend upon how the item is considered in common parlance more than in terms of its dictionary meaning. For example, the leather case in which a transistor radio is kept is an accessory though it does not add to the performance of the transistor radio. At the highest, it protects the transistor radio and makes for its easy carriage.

7. In the case of Annapurna Carbon Industries Co. v. State of Andhra Pradesh the Supreme Court was required to consider whether are carbons known as “cinema arc carbons” were accessories required for use along with cinematographic equipment or projectors. In deciding this question, the Supreme Court cited with approval the meaning of the term “accessory” given in Webster's Third New International Dictionary and observed”

“'Accessories' are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kine of instrument.”

The entry in question in that case specifically referred to accessories which were required for use along-with the main item. In the present case, the entry in question does not have any such limitation. In any case, in order to decide whether an item is an accessory or not, it has to be considered along with the main item. In the present case, the stands on which gas stoves are kept are designed specially for the purpose. They help in facilitating the cleaning of the gas stoves and they are sold by the respondents who deal in gas stoves. The argument of Mr. Joshi that they should not be considered as accessories because they do not improve the performance of the gas stoves cannot be accepted. They are clearly additional items required for use along with the gas stoves and are sold as such. Both according to the dictionary meaning of the term and its use in common parlance, they should be considered as accessories of gas stoves. These stands, therefore, are covered by entry 7A in Schedule E to the Bombay Sales Tax Act,1959.”

(c) In the decision in the case of “Mehra Brothers Vs. Joint Commercial Officer, Madras, (1991)1 Supreme Court Cases 514)”, the issue arose under the Sales Tax Act as to whether car seat covers and upholstery are accessories to be taxable under Entry 3 of Schedule I read with Section 3(3) of Tamil Nadu General Sales Tax Act,1959. It was held that the car seat covers and upholstery are accessories as an addition, an adjunct, an accompaniment for comfortable use of the motor vehicles or for adding elegance to the seat.

(d) The decision in the case of “Banco Products (India) Ltd. Vs. Commissioner of C. Ex., Vadodara-I, (2009(235) ELT 636 (Tri-LB))” of the Larger Bench of the Central Excise and Service Tax Appellate Tribunal concerns the issue as to whether the plastic crates would either to be capital goods or inputs so as to qualify for input credit. These plastic crates were used for internal transportation of the raw material/semi-finished and finished goods from stores to processing machine and from one machine to other machine and to finished goods storage. They were mainly used for storage and supply of different components of radiators, in the production of which the appellant is engaged. The issue which is considered was 'whether the plastic crates can be considered as accessories as falling under clause (iii) of the goods specified in Clause (I) of the definition of capital goods as defined under 2(b) of Cenvat Credit Rules,2002. The observations in paragraphs 14 and 19 are relevant they read as under:-

“14. Reference to all the above decisions was necessary to understand the scope of the term “accessory”. If the plastic crates are held to be an accessory to the main machine, appearing against Sr. no.(i) of the definition of the capital goods, as contained in Rule 2(b) of the Cenvat Credit Rules,2002, they would earn the status of the eligible capital goods for the purposes of Modvat. The appreciation of the various judgments on expression “accessory” as discussed above, leads us to observe that an accessory may or may not be required for essential working of the main unit, but is an object which is used for the convenience and effectiveness of that unit. It may also not be necessary that such accessory must be designed to be used in a particular machine. The same may be of a kind, which is capable of being used as a common object, with number of machines. The only criteria for an object to be held as an accessory, an emerging from the above extracted portion of various judgments is that that a particular item should be capable of being used with a machine and should advance the effectiveness of working of that machine. The plastic crates in question are used for transportation of the raw material to the processing machine and all the finished goods from the machine to the storage area. It can be argued that instead of using such plastic crates as material handling device, the various components or the inputs can be carried manually also. However, the question is as to whether such transportation of the inputs or semi-finished goods in the factory would be convenient way of dealing, and whether the same would not hamper the continuous working of the machine on account of delays in the delivery of the raw material etc. It may be possible in theory to do so, but is neither practical nor possible to do in the actual manner. The delivery of the raw material in time for increasing the effective working of the same and then removal of the finished goods from the vicinity of the machine contributes may be in a subordinate degree to attain a general result or effect. Same adds to definition of effectiveness of the machinery, and when viewed and judged in the light of interpretation of the term “accessory” by various Courts, the plastic crates are required to be held as accessory only. If that be so, the same would fall under Sr.no.3(i) of Rule 2(b) of Cenvat Credit Rules,2002.

19. Further, in the case of M/s. Hindustan Seals Ltd. Vs. CCE Kolkata-II 2006(196) E.L.T. 302 (Tri-Kolkata), the claim of the assessee for availing Modvat credit of duty paid on the plastic crates was under Rule 57A and 57B as 'inputs'. The claim for admissibility of the credit as capital goods was not one of the issue before the Bench. As such, it can be recorded that M/s. PKPN Spinning Mills' case and followed subsequently in M/s. Sugavaneswara Spinning Mills' case, was by way of concession and M/s. Hindustal Seals judgment having not considered the availability of credit as capital goods, there is no decision holding against the admissibility of the plastic crates as accessory. In any case, having elaborately discussed as to what is the meaning and scope of the term “accessory”, as interpreted by Hon'ble Supreme Court in various decisions and by Tribunal, it has to be held that the plastic crates are eligible capital goods for the purposes of Modvat credit. We answer accordingly.”

The insistence on behalf of the appellants that the analogy as applied by the Larger Bench be applied in the facts of the present case is not acceptable. The argument of the appellants is that the antenna is being classified as capital goods and being held eligible for availing credit of duty paid, tower and PFB become its accessories. To reach to this conclusion on the lines on which the larger Bench of the Tribunal in this decision has held, it would be required to be held that it is impossible for cellular antenna to function in the absence of a tower or a prefabricated building. It is not a case of the appellants that the antenna becomes non functional in the absence of tower and prefabricated building. On the basis of technical material it is clear that an antenna can function irrespective of tower and the prefabricated building and hence, it would be an absurdity to hold that tower is an accessory of antenna.

Perusal of the observations in the decisions in the case of “L.D. Bhave” (supra), “Mehra Brothers” (supra) and “Banco Products (India) Ltd.” (supra) clearly go to show that the same cannot be applied in the facts of the present case inasmuch s tower, PFB and printer cannot be held to be “input” as defined under Rule 2(k) of the Credit Rules.

(e) In the decision of the Supreme Court in the case of “Commr. Of C. Ex., Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd., (2010(255) E.L.T. 481 (S.C.)”, the issue was whether the assessee was right in availing Modvat Credit in respect of steel plates and M.S. Channels used in fabrication of chimney for the diesel generating set, by treating these items as capital goods in terms of Rule 57-Q of the Central Excise Rules,1944. In the context of Rule 57-Q the Supreme Court in paragraphs 2, 10, 12 and 13 has observed as under:-

“9. The language of Rule 57Q is clear and unambiguous. It applies to the final products described in column (3) of the Table under the Rule as also to other goods, referred to as “capital goods”, described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final product. The parties are ad idem that diesel generating set falls under Chapter 85 under Heading No.85.02, as described at Serial no.3 of the afore–extracted Table. Similarly there is no dispute that chimney attached with the generating set is covered by the items described in Serial No.5 thereof. However, the controversy centres around the question whether the steel plates and M.S. Channels used in the fabrication of chimney would fall within the purview of Serial no.5 of the Table below rule 57-Q.

10. Having examined the question in the light of the language employed in Rule 57-Q and the case law on the point, we are of the opinion that the appeal is devoid of any merit.

12. Inter alia observing that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition of “capital goods” in the said Rule, which is not there in Rule 57-Q, as applicable in the instant case, yet the “user test” evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of “capital goods” would depend upon the user it is put to.

13. Applying the “user test” on the facts in hand, we have no hesitation in holding that the steel plates and M.S. channels, used in the fabrication of chimney would fall within the ambit of “capital goods” as contemplated in Rule 57-Q, it is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be treated as an accessory in terms of Serial no.5 of the goods described in column (20 of the Table below Rule 57-Q."

From the observations of the Supreme Court in the aforesaid paragraphs, it is clear that it was an undisputed position and that the parties were ad idem that diesel generating set was falling under Chapter 85 under Heading No.85.02 as described at Serial no.3 in the table below Rule 57-Q and it is in this context the Supreme Court held that the Assessee was entitled for modvat credit in respect of steel plates and M.S. Channels used in the fabrication of chimney by those items as capital goods in terms of Rule 57-Q of the Rules.

27. The reliance of the appellants on the decision of the learned Single Judge of the Calcutta High Court in the case of “Singh Alloys and Steel Ltd. Vs. Assistant Collector of Central Excise, (1993(66) E.L.T. 594 (Cal.))” to contend that it is impossible to conceive that telecommunication service can be provided without towers and shelters and functional utility test is required to be applied, is also misplaced. The issue in this judgment concerns the construction of Rule 57A of Central Excise Rules,1944 in respect of credit of duty paid on excisable goods used as inputs on the manufactured item. The question was whether dolopatch mix, magnesite peas and ramming mass were input of steel ingots. In the context of Explanation to Rule 57A, Kolkata High Court in paragraphs 6 and 7 has observed as under:-

“6. The object of the legislature appears to the to be to exclude from the genus of inputs, the species mentioned in the excluded categories because otherwise a manufacturer would be entitled to claim modvat in respect of such inputs repeatedly as these would not be inputs which would be consumed in the process of manufacture. This is clear from a scrutiny of the excluded inputs.

7. It is not disputed that Ramming mass and dolopatch mix have been classified as miscellaneous chemical products under Chapter 38 Heading 3816.00 of the Schedule to the Central Excise Tariff Act, 1985. Magnesite peas have been classified under Heading No.28.20 of the Schedule to the Tariff Act which deal with Manganese Oxides. Heading no.28.20 is under Chapter 28 which deals with inorganic chemicals, organic or inorganic compounds of precious metals, or rare earth metals, of radioactive elements or of isotopes. These three items are used when ingots are manufactured. It is the admitted case that these items are first charged into the furnace as fettling materials. The items dissolve and seal the crevices in the refractory walls of the furnace to prevent leaking of the liquid metal from the furnace and to reduce the erosion of the refractory lining of the furnace. The items lose their identity and are consumed in the process. Some part of the items remains in the liquid metal which forms the ingot and the balance forms part of the residue or slug.”

It is on the basis of the aforesaid observations, the Court in paragraph 23 concluded as under:-

“23. The respondents then argued that steel ingots could be manufactured even without the items. That may be so, but that is immaterial. The definition of inputs is not dependent upon what ought to be used but what is in fact used. There is no dispute that the petitioner No. 1 had in fact, used and uses the items in the manufacturing of ingots. The Supreme Court has also held that manufacture would include a process which was commercially expedient in the production of goods [See : Collector of Central Excise v. Eastend Paper Industries - ; Collector of Central Exise, Jaipur v. Rajasthan State Chemical Works : AIR 1991 SCC 2222] . That the process in question is commercially expedient has not been doubted.”

The contention of the appellants that the test in this judgment is the test of ‘functional utility as to determine whether the inputs are used in the manufacture of the goods. It is contended that when an item is required for providing output services of the service provider on commercial scale, it satisfies the functional utility test, and therefore, it ought to be held that the towers and shelters are inputs used for providing output services as also on the basis of functional utility test. We are afraid that this contention on behalf of the appellants cannot be accepted for the reason that the tower and parts thereof and PFB cannot be regarded as inputs as defined under Rule 2(k) of the Credit Rules and that they are not integral part of the output services viz. telecommunication services as provided by the appellants. To consider the towers and parts thereof and PFB as inputs would clearly go contrary to the clear reading of Rule 2(k) read with definition of 'excisable goods' as defined in Section 2(d) of the Central Excise Act,1944.

28. The next decision as relied upon by the Ld Counsel for the Appellant is in the case of “M/s. Mahalaxmi Cotton Ginning Pressing and Oil Industries, Kolhapur Vs. The State of Maharashtra and Ors.” (Writ Petition no.33 of 2012), to contend that the provisions of the credit rules are required to be read harmoniously and such reading of the relevant rules would entitle the appellants for the credit of the duty paid. This was a case falling under the Maharashtra Value Added Tax Act 2002. The challenge in this case was to the constitutional validity of Section 48(5) of the Maharashtra Value Added Tax Act,2002 in the context of an order of assessment. The petitioner sought a writ of mandamus against the State Government to recover from the vendor tax paid on goods on which a set off was claimed. The proposition which the Appellant would canvass in relying on this decision is that the Credit Rules are required to be harmoniously construed so as to permit the benefit of the credit of the excise duty to the appellants in discharge of their service tax liability. Reliance is placed on paragraph 15 and 16 of the judgment wherein the Division Bench of this Court speaking through Dr. Justice D.Y. Chandrachud (as His Lordship then was) observed thus:-

“15. The White Paper on a State level Value Add Tax published under the aegis of the Empowered Committee of State Finance Ministers on 17 January 2005 took note of the fact that in the existing structure of indirect taxation, the tax regime resulted in a cascading tax burden where inputs are first taxed and after a commodity is produced with an input tax the output is taxed again. VAT was considered as a preferred alternative to rationalize the overall tax burden so as to obviate the cascading effects of indirect taxation. Moreover, VAT was to replace existing systems of inspection by a system of built in self assessment by dealers and auditing, which would make the system simple and transparent. Improved tax compliance and the augmentation of revenue were important policy objectives of the system of value added taxation.

16. As an economic concept, translated into State legislation VAT sub-serves two important fiscal goals. First a system of taxation based on VAT obviates a cascading effect of tax burdens. This is achieved inter alia by the grant of a set off for input taxation and in respect of taxes paid on previous purchases. Second the VAT regime is also and no less important, an instrument in promoting compliance and for broad basing the tax base. Both aspects of the regime have to be harmonized. This aspect merits importance because while interpreting the provisions of legislation, it is necessary to bring about a harmony that would preserve the balance between the need on the one hand of ensuring against a cascading tax burden and on the other hand of promoting regulatory compliance. The first element is preserved by a multi point levy and collection of tax which allows a set off of t


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