Vodafone Entitled To Claim CENVAT Credit On Tower And Prefabricated Buildings: CESTAT

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Vodafone is entitled to claim CENVAT credit on tower/tower material and pre-fabricated buildings/shelters.

The two-member bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that Vodafone was entitled to take CENVAT credit since the items in dispute were "capital goods".

The appellant, Vodafone Mobile Services Limited, has challenged the order passed by the Commissioner adjudicating the 12 show cause notices by confirming the denial of CENVAT credit on inputs, input services, and capital goods used by the appellant for the provision of telecommunication services.

The demand for CENVAT credit has been confirmed along with interest under rule 14 of the CENVAT Credit Rules, 2004 read with section 75 of the Finance Act, 19943 and penalties under rule 15 of the 2004 Rules read with sections 76 and 78 of the Finance Act.

The appellant is a provider of telecommunication services to customers and business support services to fellow telecommunication service providers. The appellant claims to have discharged service tax liability on such services. As a provider of output services, the appellant availed CENVAT credit on inputs, input services, and capital goods.

The issue raised was regarding the eligibility of the appellant to claim CENVAT credit on a tower, tower material, shelter, and input services for the period from October 2004 to March 2012 and April 2014 to March 2015.

The order has confirmed the denial of CENVAT credit primarily on the ground that the subject goods, being attached to the earth, are immovable in nature and thus not used for providing output services. The Commissioner has relied on Board Circular dated 26.02.2008 and has held that goods and services are received at cell sites and not at the registered premises and, thus, CENVAT credit is not admissible.

The appellant submitted that towers are not immovable structures and can be moved around from one place to another as per the needs of the appellant since the mode of their installation is completely different from that of the construction of a civil structure. The only activity of a civil construction nature, if at all, is the laying of the foundation for the tower. The main legs, which are also called L-angled metal pieces, are fixed to the foundation stubs/anchor bolts and joined with bracing members to form the structure. The tower was formed by connecting all the L-angled metal pieces, which are tightened with nuts and bolts. These nuts and bolts can be unfastened, and the dismantled tower can be transported to and reassembled at another location. The attachment of a tower with the help of nuts and bolts to a foundation to provide stability and functionality does not qualify as "attached to the earth".

The department contended that as the capital goods were not received at the registered premises, the Commissioner was justified in denying credit on capital goods. The eligibility of CENVAT credit on input services for providing output services, namely, support structures, which is an immovable property attached to the earth, has been rightly denied as it is neither a service nor a good and so input credit of service tax cannot be taken.

The expression "movable property" has been defined in section 3(36) of the General Clauses Act, 1897 to mean property of every description, except immovable property. Standing timber, growing crops, or grass would not be considered "movable property."Section 3(26)of the General Clauses Act, 1897, provides that "immovable property" shall include land, benefits to arise out of the land, and things attached to the earth, or permanently fastened to anything attached to the earth. The term "attached to the earth" has not been defined in the General Clauses Act, of 1897.

The CESTAT observed that the entire tower and shelter are fabricated in the factories of the respective manufacturers, and these are supplied in CKD condition. They are merely fastened to the civil foundation to make it wobble-free and ensure stability. They can be unbolted and reassembled without any damage in a new location.

The tribunal set aside the order passed by the commissioner.

Case Title: M/s Vodafone Mobile Services Limited Versus Commissioner of Central Excise

Citation: Service Tax Appeal No. 50961 Of 2017

Date: 23.09.2022

Counsel For Petitioner: Advocate B.L. Narasimhan

Counsel For Respondent: Special Counsel Ajay Jain

Click Here To Read Order