By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Transmission tower, its parts and prefabricated building on which telecommunication equipments are erected are neither capital goods nor inputs for a telecom service provider.
Facts:
The Appellant engaged in providing cellular telecommunication service availed CENVAT Credit of excise duty paid on tower parts, shelters/prefabricated buildings (PFB) purchased by them and treated them as capital goods from October, 2004 onwards till March, 2008. This was objected to by the department.
Before first appellate authority, Appellant contended that tower and parts of tower were the part of “Base Trans-receiver Station” (BTS) which comprises of BTS transmitter, transformers, batteries, stabilisers, antenna, tower etc., which was a integrated system falling under Chapter heading 85.25 of the Central Excise Act and hence was capital goods eligible for credit. The BTS was used for providing the telecommunication service and hence credit availment was correct. It was also contended that tower and its parts were accessories of antenna. An independent argument about the coverage of these items as ‘inputs’ if they ought to be held as not capital goods was also advanced.
First appellate authority upheld the reversal of credit on all items except on BTS transmitter and antenna holding that each of these goods had independent functions hence cannot be treated as integrated system and held that even in SKD/CKD condition, these would be classifiable under 7308 heading and the said heading was not classifiable under capital goods definition. On the argument of inputs, first appellate authority held that since these items became an immovable property and hence could not be regarded as ‘inputs’ and confirmed the reversal along with interest and penalty.
Tribunal rejected appellant’s contention on the reasons advanced by the first appellate authority and confirmed the reversal of credit. On the issue of imposition of penalty and limitation, the Tribunal remanded the case to the first appellate authority.
Appellant challenged the reversal of credit before the High Court.
Held:
The High Court, after observing that tower and its part, PFB were fixed to the earth and after its erection they became an immovable property and therefore, held that these items could not be regarded as goods and hence argument about the coverage as inputs was held to be without force. Further, the High Court observed that in CKD/SKD condition the tower and its part was covered under chapter 7308 and hence the same were also not falling in the definition of capital goods. Further it was held that, an antenna could function without its erection (the tower and its part) and hence the argument that tower is the accessory of antenna was rejected and thus the appeal itself was rejected.
