M/s Bharti Airtel Ltd. vs The Commissioner of Central Excise, Pune

(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 – Thus, tower and the PFBs are not immovable property but are “goods”/ “capital goods” within the meaning of Rule 2(a) (A)(iii) and since these are used for providing output service, these can be considered to be “inputs” within the meaning of Rule 2(k) – CENVAT credit can be availed in respect of these goods for payment of service tax – Any item so long it qualifies as a “good” and is “used” for providing output service, would come within the purview of “input” under Rule 2(k) and excise duty paid on such items can be claimed as CENVAT credit which may in turn be used for payment of service tax for the output service provided by the MSPs – Judgment of the Delhi High Court in Vodafone Mobile Services Limited v. CST, Delhi 2019 [(27) G.S.T.L. 481 (Del.)] upheld, while that of the Bombay High Court in Bharti Airtel case is set aside. [Paras 11.9.9, 11.9.18, 11.11.12, 11.12.1,11.13, 11.14] Words and Phrases – “accessory” – Meaning – Whether mobile towers, prefabricated buildings (PFBs) are accessories of antenna and Base Transceiver System (BTS):

Held: Any such item which adds to the beauty, convenience or effectiveness of some other items can be said to be accessory of that other thing and it may or may not be essential for functioning of main machinery – The tower is a structure fixed to the earth or building on which microwave antenna is fastened to provide the necessary height and stability to the antenna by making it steady and wobble free – The function of antenna as part of the BTS is to receive and transmit radio signal and is used for providing mobile telecom service to the subscribers – Without tower, antenna cannot effectively function for the purpose it is used – Thus, tower is an accessory of antenna – Further, PFBs also enhance the efficacy and functioning of mobile antenna as well as BTS – PFBs are also accessories to the antenna and BTS which are “capital goods” falling under Chapter 85 of the Schedule to the Central Excise Tariff – The restricted meaning of accessory given by the CESTAT and not differed from by the Bombay High Court is not wholly correct in as much as the meaning of accessory can have different ascribed meanings. [Paras 11.1.5, 11.1.6, 11.11.10] Circulars/Notices – Circular contrary to the statute must be withdrawn – Revenue relied upon a circular issued by the Central Board of Excise and Customs, Department of Revenue, Ministry of Finance specifying that angles, channels, beam of steel and prefabricated shelter etc. are used by cellular phone service providers for erecting towers and making housing/storage units and are used in making of products and cannot be called excisable goods, being attached to the earth and are not chargeable to excise duty – Circular further stated that these inputs are not used for providing taxable service and the credit of excise duty paid on such items is not available to the telecom service providers – Enforceability of Circular: Held: Revenue/Department may issue any such circular based on their understanding of the matter and the Revenue authorities/officers are bound to follow it yet, in view of the findings arrived at in the present proceedings, the said circular would be of no avail – Circular not enforceable to the extent it is contrary to the findings in these proceedings and to be withdrawn. [Para 11.9.20] Words and Phrases – “use”; “goods”/“capital goods”; “inputs” – CENVAT Credit Rules, 2004 – Rule 2(k) – Sales of Goods Act, 1930 – s.2(7) – Transfer of Property Act, 1882 – s.3 – General Clauses Act, 1897 – ss.3(36), 3(26) – “movable property”; “immovable property” – Nature of the property – Criteria for determination – Tests of permanency, intendment, functionality and marketability – Principles summarised.