VODAFONE MOBILE SERVICES LIMITED vs. COMMISSIONER OF SERVICE TAX DELHI,

CEAC/12/2016HC DelhiDLHC01240410201631 October 2018Author: CASES PERTAINING TO SPL.DIVISION BENCHES67 pages
AI SummaryPartly Allowed

What were the facts?

These appeals involve Vodafone Mobile Services Limited and Indus Towers Limited (assessees) challenging orders related to CENVAT credit, and the Commissioner of Service Tax (Revenue) appealing some decisions. The assessment years are not explicitly stated but pertain to periods where CENVAT credit was availed. The core issue revolves around the eligibility of CENVAT credit on towers, shelters, and their parts used for providing telecom services. The Revenue issued Show Cause Notices alleging wrongful availment and utilization of CENVAT credit, citing contravention of Rule 2(a)(A) of the CENVAT Credit Rules, 2004. The Revenue contended that these items did not qualify as capital goods. The assessees resisted these demands, leading to the present appeals before the High Court.

What did the High Court hold?

The High Court held that the conclusion of the CESTAT denying CENVAT credit on the premise that towers erected result in immovable property was erroneous and contrary to established judicial precedent, specifically citing Solid and Correct Engineering. The Court reasoned that towers are received in CKD condition and erected at site, and the emergence of an immovable structure at an intermediate stage is of no consequence if the goods are ultimately used for providing output services. The entitlement to CENVAT credit is to be determined at the time of receipt of goods. If the received goods qualify as inputs or capital goods, their subsequent fixation to the earth does not render them non-excisable when received. The Court further noted that the ability to relocate towers and shelters implies they are not immovable property, thus distinguishing the case from Bharti Airtel. Consequently, all questions of law were answered in favour of the assessees. The appeals filed by the assessees were allowed, and the appeals filed by the Revenue were dismissed.

What were the issues?

The High Court had to decide the following questions of law: 1. Whether the CESTAT was correct in concluding that towers, shelters, and accessories used by the assessees for providing telecom services are immovable property, thereby denying CENVAT credit. 2. Whether the assessees are entitled to claim CENVAT credit on towers and shelters as 'accessories' or 'capital goods' under Rule 2(a) or 2(k) of the CENVAT Credit Rules, 2004. 3. Whether the CESTAT erred in applying a nexus test concerning MS Angles and Channels, when the assessees argued that towers, shelters, and accessories were brought to the site for providing services. 4. Whether the assessees were justified, under Rule 4(1) of the Credit Rules, in claiming CENVAT credit of excise duty paid by the manufacturer of towers and shelters after their receipt at the tower sites. 5. Whether the emergence of an immovable structure at an intermediate stage is a criterion for denying CENVAT credit. Assessee's contentions: The assessees argued that credit is admissible even if an immovable property emerges at an intermediate stage, citing judgments like Tata Iron and Steel Company v. CCE, Madras Aluminum Company Ltd. Vs. CCE, Mahalaxmi Glass Works Ltd. v. CEE, and CCE, Vishakhapatnam- II v. Sai Sahmita Storages (P) Limited. They contended that entitlement to CENVAT credit is determined at the time of receipt of goods, and if they qualify as inputs or capital goods, later fixation to earth does not disqualify them. They also argued that the ability to relocate towers and shelters implies they are not immovable property. The assessees relied on the definition of 'input' in Rule 2(g) read with Explanation (2) of the Credit Rules. Revenue's contentions: The Revenue alleged that the assessees had wrongly claimed and utilized CENVAT credit on goods that did not qualify as capital goods under Rule 2(a)(A) of the Credit Rules. They contended that the towers and shelters resulted in immovable property, making them ineligible for credit.

Which sections of the Income-tax Act were involved?

Section 35E,Section 83,Section 73,Section 11AC,Section 75

AI-generated summary — verify with the full judgment below

CEAC 12/2016 and other connected matter * IN THE HIGH COURT OF DELHI AT NEW DELHI

Reserved on: 27.07.2018 Pronounced on: 31.10.2018

+ CEAC 12/2016, C.M. APPL.37207/2016

VODAFONE MOBILE SERVICES LIMITED ……Appellant

versus COMMISSIONER OF SERVICE TAX, DELHI ..... Respondent

+ CEAC 13/2016, C.M. APPL.37208/2016

VODAFONE MOBILE SERVICES LIMITED …… Appellant

versus COMMISSIONER OF SERVICE TAX, DELHI ..... Respondent

+ CEAC 6/2017, C.M. APPL.6902/2017 & 37758/2017

COMMISSIONER OF SERVICE TAX, AHMEDABAD .… Appellant

versus M/S. VODAFONE MOBILE SERVICES LIMITED..... Respondent

+ CEAC 4/2018, C.M. APPL.3649/2018

VODAFONE MOBILE SERVICES LIMITED …… Appellant

versus COMMISSIONER OF SERVICE TAX, DELHI ..... Respondent

+ SERTA 14/2016, C.M. APPL.45647/2016

INDUS TOWERS LIMITED

…… Appellant

versus THE COMMISSIONER OF SERVICE TAX NEW DELHI

..... Respondent + SERTA 15/2016

INDUS TOWERS LIMITED

…… Appellant

versus THE COMMISSIONER OF SERVICE TAX NEW DELHI

..... Respondent

The order continues below.

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