2024-VIL-49-SC-CE
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CENTRAL EXCISE Supreme Court Cases

Central Excise - CENVAT Credit, Capital Goods, Inputs, Movable Property, Immovable Property – Eligibility of the mobile service providers (MSPs) to claim CENVAT credit on excise duties paid on mobile tower, its parts thereof and prefabricated buildings (PFBs) in terms of the Rule 3 of the CENVAT Credit Rules, 2004 and whether the credit so claimed can be used to pay service tax for the output services rendered by the MSPs - The Bombay High Court and the Delhi High Court have given conflicting views on this issue - While the Bombay High Court has ruled against the MSPs, favouring the Revenue, the Delhi High Court has held to the contrary extending the benefit of CENVAT credit to the MSPs - The decisions of both the High Courts have been challenged by the respective aggrieved parties - Whether the mobile towers and PFBs are "capital goods" within the meaning of Rule 2(a)(A) of the CENVAT Rules, 2004, so as to enable the MSPs to claim CENVAT credit on the excise duty paid on these items - HELD – if the newly set up Base Transceiver System (BTS) or Base Station Controller (BSC) is relocated to another site it may entail certain damages. However, the damage is qua the BTS/BSC or cables connecting the various components, but not the tower itself or PFB with which the case pertains to. If the tower or the PFB can be dismantled and relocated in another site without causing any damage to either the tower or PFB, the mobility or the marketability of these items is retained. Thus, as far as the Tower and PFBs are concerned, these exhibit the character of a movable property - the tower, though appears to be fastened to the earth, cannot be said to be permanently fastened to the earth or a building for the beneficial enjoyment of the land or the building. The tower possesses the characteristics of mobility as the same can be dismantled and relocated to another place or site - merely because certain articles are attached to the earth, it does not ipso facto render Tower and PFBs immovable properties. If such attachment to earth is not intended to be permanent but for providing support to the goods concerned and make their functioning more effective, and if such items can still be dismantled without any damage or without bringing any change in the nature of the goods and can be moved to market and sold, such goods cannot be considered immovable – The mobile towers and PFBs are movable properties and hence, “goods” - Applying the tests of permanency, intendment, functionality, and marketability, these items are "goods" and can be considered as "capital goods" under Rule 2(a)(A)(iii) of the CENVAT Rules, 2004, as they are accessories of the "capital goods" like antenna and BTS, which fall under Chapter 85 of the Central Excise Tariff Act. Therefore, the MSPs are entitled to claim CENVAT credit on the excise duty paid on these items - the decision of the Delhi High Court is upheld and the decision of the Bombay High Court is set aside, thereby allowing CENVAT credit to assessee on the excise duty paid on mobile towers and PFBs – the appeals are allowed - Cenvat Credit on towers and shelters (PFBs) as Capital goods – HELD - Towers and shelters (PFBs) support the BTS/antenna for effective transmission of mobile signals and thus enhance their efficiency and since these articles are components/accessories of BTS/antenna which are “capital goods” falling under Chapter 85 within sub-clause (i) of Rule 2(a)(A) of CENVAT Rules, these items consequently are covered by the definition of “capital goods” within the meaning of sub-clause (iii) read with sub-clause (i) of Rule 2(a)(A) of CENVAT Rules. Further, since these are used for providing output service, i.e., mobile telecommunication service, and since these are “capital goods” received in the premises of the provider of output service as contemplated under Rule 3(1)(i), the assessees would be entitled to CENVAT credit on the excise duties paid on these goods - Whether the mobile towers and PFBs can be considered as "inputs" under Rule 2(k) of the CENVAT Rules, 2004, and the MSPs can claim CENVAT credit on the excise duty paid on these items - HELD – The mobile towers and PFBs, being "goods" used for providing the output service of mobile telecommunication, can be considered as "inputs" under Rule 2(k) of the CENVAT Rules, 2004 - the definition of "input" under Rule 2(k) is wide enough to cover all goods used for providing any output service, except those specifically excluded. Since the mobile towers and PFBs are used for providing mobile telecommunication services, the MSPs can claim CENVAT credit on the excise duty paid on these items
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