Commissioner Of CGST And Cx North Commissionerate vs. Bharat Sanchar Nigam Limited
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The Commissioner of CGST and CX North Commissionerate (appellant) filed an appeal against an order passed by the Customs, Excise and Service Tax Appellate Tribunal (Tribunal). The appeal concerns Bharat Sanchar Nigam Limited (BSNL) (respondent) and relates to CENVAT credit availed during the years 2005-06, 2006-07, and 2007-08. A show-cause notice was issued on November 23, 2009, proposing to recover credit availed on "Towers and parts of accessories of towers" on the grounds that these were not capital goods and the parts/accessories were not 'input' as towers are civil structures. A second ground alleged that BSNL, acting as an Input Service Distributor, had transferred credit without proper registration and used invalid documents, and that the credit was not admissible as BSNL did not provide taxable service or manufacture dutiable final products. The Commissioner dropped the demand, and the Tribunal affirmed this decision, leading to the present appeal by the revenue.
Held
The High Court held that the appeal filed by the revenue did not raise any substantial question of law, rendering it entirely factual. The Court affirmed the Tribunal's findings, which in turn concurred with the Commissioner's decision to drop the demand. Regarding the first issue, the Tribunal found that the adjudicating authority had correctly considered towers and their parts/accessories as excisable goods on which excise duty was paid, and that BSNL, as a provider of output services, was eligible for credit on such goods and input services. The Tribunal also held that it was not necessary for the towers to be installed within BSNL's premises for them to render output services. Concerning the second issue, the Tribunal examined the facts and agreed with the Commissioner's view that BSNL had satisfied the conditions for availing credit, and that CENVAT credit should not be denied solely on account of procedural lapses. The Tribunal also found that BSNL had provided taxable services and paid service tax, refuting the department's allegations. Consequently, the appeal was dismissed.
Key Issues
1. Whether towers and parts/accessories of towers, on which excise duty was paid, qualify as capital goods and inputs, respectively, for the purpose of CENVAT credit, considering towers are civil structures attached to the earth and not excisable goods. This issue turns on the interpretation of Rule 2(A) and the definition of 'input' under the CENVAT Credit Rules. 2. Whether BSNL, acting as an Input Service Distributor (ISD) for its Eastern Telecom Region and Eastern Telecom Project, was eligible to distribute CENVAT credit to its branches, given allegations of lack of ISD registration under Rule 7A, use of non-prescribed documents under Rule 9, and the credit not being attributable to output services provided by BSNL. Petitioner's Arguments (Revenue): The revenue contended that towers are not capital goods and their parts/accessories are not inputs. They also argued that BSNL failed to comply with ISD registration requirements, used improper documents, and that the credit was not admissible as BSNL did not provide taxable services or manufacture dutiable final products, thus violating Rule 7 of the CENVAT Credit Rules. Respondent's Arguments (BSNL): The judgment does not explicitly record arguments made by BSNL before the High Court. However, it notes that BSNL vehemently opposed the delay in filing the appeal. The Tribunal's findings, which the High Court affirmed, indicate that BSNL satisfied the conditions for availing credit and that procedural lapses, if any, should not lead to denial of credit.
Sections Cited
Section 35G, Rule 2(A), Rule 7A, Rule 9, Rule 7
AI-generated summary — verify with the full judgment below
od 7 IN THE HIGH COURT AT CALCUTTA SPECIAL JURI ICTION (CENTRAL EXCISE) ORIGINAL SIDE
CEXA/32/2024 IA NO: GA/1/2024, GA/2/2024 BEFORE : THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM -A N D- HON'BLE JUSTICE HIRANMAY BHATTACHARYYA DATE : 30th August, 2024. Appearance : Mr. Kaushik Dey, Adv. Ms. Manasi Mukherjee, Adv. …for appellant Mr. R. Chatterjee, Adv. …for respondent
The Court :- We have heard learned Advocates for the parties. Though the learned Advocate appearing for the respondent would vehemently oppose the delay, as we are satisfied with the reasons given in the affidavit filed in support of the petition we exercise discretion in favour of the appellant department and condone the delay in filing the appeal. This appeal filed by the revenue under Section 35G of the Central Excise Act, 1944 (the Act) is directed against the order passed by the Customs, Excise and Service Tax Appellate Tribunal Eastern Zonal Bench, Calcutta (the Tribunal) in Service Tax Appeal No. 265 of 2011 dated 28th June, 2023. The respondent is Bharat Sanchar Nigam Limited (BSNL). Show-cause notice was issued to the respondent on 23rd November, 2009 proposing to recover the credit which they had availed on the ground
2 that the credit was availed on “Towers and parts of accessories of towers” falling under Chapter 73 of the Central Excise Tariff Act, 1985. The show-cause notice proposed to disallow the same on two grounds; namely, that the respondent BSNL purchased the towers and parts and accessories of towers and availed credit on duty of excise paid on them during the year 2006-07 and 2007-08 and that towers were not capital goods as defined under Rule 2(A) of the said Rules and that parts and accessories used in the erection of towers do not satisfy the definition of ‘input’ as the towers are civil structures attached to earth and not ‘excisable goods. The second ground was, the BSNL, Eastern Telecom Region and BSNL Eastern Telecom Project provide IUC service and undertook various project related jobs for all the BSNL branches of Eastern India. They receive inputs, capital goods and input services from various vendors and service providers. They transferred credit to the assessee through the inter office memo called ATD/TED during the period 2005-06 and 2006-07. It was alleged by the department that the credit is not admissible as they had not obtained registration as “Input Service Distributor” as required under Rule 7A of the CENVAT Credit Rules and the documents on the basis of which credit was availed are not documents as prescribed under Rule 9 of the CENVAT Credit Rules. It was also alleged that all the inputs/capital goods and input services received by them could not be said to have been used by the assessee, as in references to the addresses mentioned in the bills where the materials were installed. It was identifiable as used and installed in premises throughout Eastern India other than the premises of the assessee. It was further alleged that during the material period they did not provide any taxable service and/or manufactured any dutiable final product and, accordingly, in terms of the Rule 7 of the CENVAT Credit Rules 2004 credit of service tax attributable to service used in
3 a unit exclusively engaged in manufacture of exempted goods or provider of exempted services cannot be distributed. The show-cause notice was adjudicated by the Commissioner and the demand raised in the show-cause notice was dropped by the Order-in-Original dated 29th March, 2011. Aggrieved by the same the revenue preferred appeal before the Tribunal. The Tribunal carefully noted the submissions made by the revenue and concurred with the view taken by the Commissioner for dropping the proposal in the show-cause notice. The Tribunal after going through the factual position found that adjudicating authority has given a clear finding that towers and parts and accessories of towers were goods on which Central Excise Duty has been paid by considering them as excisable goods. Further a provider of all output service is eligible for availing credit on duty of excise and service tax paid on capital goods, input and input service, towers and parts and accessories of towers. In addition, providing of output service, the other factual findings referred to by the adjudicating authority was re-examined and the learned tribunal affirmed the view taken by the Commissioner and held that the Commissioner had rightly dropped the demand in the show-cause. The second issue with regard to the Eastern Telecom Region and Eastern Telecom Project was taken up for consideration and the tribunal examined the facts and agreed with a view taken by the Commissioner for dropping the proposal in the show-cause notice not stopping with that the tribunal went further to examine the facts and that the assessee had satisfied the so-called contentions for availing the credit and, therefore, held that the CENVAT credit cannot be denied on account of procedural lapse, if any. Furthermore, we agree with the finding of the learned tribunal held that the assessee for rendering their output service, it is not necessary that the towers on which CENVAT credit was
4 availed has to be installed in their premises. Furthermore, on facts the tribunal found that the assessee as directed taxable service and paid service tax and found no substance in the allegation made by the department. Thus, we find the matter being entirely factual and no question of law much less substantial question of law arises for consideration in this appeal. The appeal fails and dismissed. Consequently, the application is dismissed.
(T.S. SIVAGNANAM) CHIEF JUSTICE
(HIRANMAY BHATTACHARYYA, J.)
pkd/GH.
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.