bharti airtel - bombay hc

8/10/2019 Bharti Airtel - Bombay HC

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINA !I"I #$RI%DI!&ION

!'N&RA '(!I%' APP'A NO.)* O+ ,01,AND

!'N&RA '(!I%' APP'A NO.119 O+ ,01,

-/s.harti Airtel td.

'arlier 2o32 as harti &ele4"e2tures td. a co56a27 dul7 registered u2der the !o56a2ies Act819: havi2g its o;;ice at "ega !e2tre8

D uildi2g8 %ha2arshet Road8 Pu2e < =110=). ...A66ella2t

4Versus4

&he !o55issio2er o; !e2tral '>cise8

Pu2e III8 havi2g its o;;ice at I!' ?ouse8 =1A8 %assoo2 Road8

O66osite @adia !ollege8 Pu2e4=11 001 ..Res6o2de2t

...........

-r.".%ridhara28 %e2ior Advocate 3ith -r.Praash %hah 3ith Ashish P.Abrahi5

i/b. PD% Associates8 ;or the A66ella2t.

-r.Bevic %etal3ad8 Addl. %olicitor Ge2eral 3ith -r.Pradee6 #etl7 i/b.-r.#..-ishra -r.N.".Bala2tri8 ;or Res6o2de2t.

...........

CORAM: S.C. DHARMADHIKARI & G. S. KULKARNI, JJ.

Reserved o :! "#$%Ar'(, ")*+roo-ed o :! "/$%A-0-s$, ")*+

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JUDGMENTC ER G.S.KULKARNI, J.

1. oth these a66eals u2der %ectio2 * G o; the !e2tral '>cise

Act 19== arise out o; the co55o2 orders dated :.1.,01, o; the !usto5s8 '>cise

%ervice &a> A66ellate &ribu2al &ribu2al8 @est o2al e2ch at -u5bai ;or

brevit7 Ethe &ribu2alF i2 A66eal 2os.%&/=9/,00) a2d %&/1=/,009. &he

A66ella2t has raised the ;ollo3i2g substa2tial uestio2s o; la3C4

H1. @hether i2 the ;acts a2d circu5sta2ces o; the case8

the A66ellate &ribu2al 3as correct a2d usti;ied i2 holdi2g

that the A66ella2t 3as 2ot e2titled to credit o; dut7 6aid o2

to3er 6arts8 gree2 shelter8 6ri2ters a2d o;;ice chairs J

,. @hether i2 the ;acts a2d circu5sta2ces o; the case8


that the A66ella2t 3as 2ot e2titled to credit o; dut7 6aid o2

to3er 6arts8 gree2 shelter o2 the grou2d that to3er/gree2

shelter is Hi55ovable 6ro6ert7K a2d he2ce8 do 2ot uali;7

as Hca6ital goodsK or Hi26utsK as de;i2ed u2der the !e2vat

!redit Rules8,00= J

*. @hether i2 the ;acts a2d circu5sta2ces o; the case8


that to3er 3ould 2ot uali;7 as H6artK or Hco56o2e2tK or

Haccessor7K o; the ca6ital goods i.e. a2te22a JK

&he a66eal is ad5itted o2 the above substa2tial uestio2s o; la3. 7 co2se2t o;

the ear2ed !ou2sel ;or the 6arties a2d at their reuest 3e have tae2 u6 these

a66eals ;or ;i2al heari2g.

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co2;iscated u2der the 6rovisio2s o; Rule 11 o; the !redit RulesM a2d v

i2terest should 2ot be recovered ;ro5 the A66ella2t ;ro5 the date o2 3hich the

!e2vat credit has bee2 3ro2gl7 tae2 till the date o; recover7 o; the said credit8

u2der 6rovisio2s o; Rule 1= o; the !redit Rules read 3ith %ectio2 ) o; the Act.

=. &o the sho3 cause 2otice 3as e2closed A22e>ure HAK8 i2 3hich it

3as stated that the !e2tral '>cise O;;icers had develo6ed a2 i2tellige2ce to the

e;;ect that the a66ella2t has 3ro2gl7 tae2 a2d utilised !e2vat !redit o2 certai2

goods 3hich do 2ot uali;7 as ca6ital goods 3ithi2 the 5ea2i2g o; !redit Rules.

It 3as stated that a;ter veri;icatio2 o; docu5e2ts a2d records relati2g to !e2vat

credit o2 accou2t o; ca6ital goods ;or the 6eriod October8 ,00= to %e6te5ber8

,008 it 3as observed that the credit availed b7 the a66ella2t 3as 2ot i2

accorda2ce 3ith the 6rovisio2s o; !redit Rules a2d sa5e 3as i2 co2trave2tio2 o;

the Rules. &he releva2t Rule bei2g Rule ,aA o; the !redit Rules 3hich

de;i2ed H!a6ital goodsK. It 3as stated that 3hile availi2g !e2vat credit i2

res6ect o; a27 goods as H!a6ital goodsK the reuire5e2t o; Rule ,aA o; the

!redit Rules sti6ulates satis;actio2 o; ;ollo3i2g t3o co2ditio2sC4

Ha &he goods should ;all u2der 6articular !%? or

descri6tio2 s6eci;ied ;or the 6ur6oseM

b &hat i2 case o; the service 6rovider8 the goods should

be used ;or 6rovidi2g out6ut service.K

It 3as stated that the !e2vat !redit availed b7 the a66ella2t duri2g the 6eriod

October8,00= to %e6te5ber8,00 i2 res6ect o; the ;ollo3i2g ite5s 3as i2

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co2trave2tio2 o; Rule ,aA o; the !redit RulesC4

Hi &o3er a2d Parts o; to3er8

ii Pre;abricated buildi2g8

iii Pri2ter8

iv O;;ice chairs.K

It 3as stated that ;ro5 the !e2vat !redit retur2s ;iled b7 the a66ella2t ;or the

said 6eriod it 3as ;ou2d that the a66ella2t had ;ailed to give a27 Echa6ter

headi2gF u2der !e2tral '>cise &ari;; 2or the use o; said goods i2 6rovidi2g

out6ut service. %ubseue2tl78 i2;or5atio2 about use o; the goods a2d !ha6ter

headi2g u2der the !e2tral '>cise tari;; 3as called ;or ;ro5 the a66ella2t. &he

sa5e 3as8 therea;ter8 ;ur2ished b7 the a66ella2t vide its letter dated .*.,00:. It

3as8 alleged that the a66ella2t had su66ressed 5aterial ;acts a2d 2o3i2gl78

3ill;ull7 a2d 3ro2gl7 had tae2 a2d utiliLed !e2vat credit o2 the said ite5s. It

3as alleged that the !e2vat credit a5ou2ti2g to Rs.,80=8*98100/4 3as tae2 a2d

utiliLed o2 accou2t o; the goods 3hich are 2ot ca6ital goods 3ithi2 the 5ea2i2g

o; Rule ,aA o; the !redit Rules a2d he2ce8 the said a5ou2t 3as liable to be

recovered ;ro5 the a66ella2t u2der Rule 1= o; the !redit Rules read 3ith %ectio2

)* o; the !e2tral '>cise Act. It 3as also alleged that o2 accou2t o; these acts a2d

o5issio2s the a66ella2t had re2dered itsel; liable ;or 6e2alt7 u2der Rule 11

a2d , o; the !redit Rules a2d the subect goods 3ere also liable ;or

co2;iscatio2 u2der rule 11 o; the !redit Rules. It 3as alleged that the

a66ella2t 3as also liable to 6a7 i2terest at sti6ulated rates ;ro5 the date o; 3ro2g

avail5e2t o; the !redit till the date o; 6a75e2t o; service ta> i2 ter5s o; Rule )

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o; the Act.

. &he a66ella2t b7 its re6l7 to the sho3 cause 2otice dated 1.9.,00:

de2ied the allegatio2s a2d the sta2d o; the reve2ue. &he a66ella2t stated that the

to3ers a2d 6arts o; to3er are ca6ital goods a2d that credit is ad5issible o2

to3ers a2d 6arts o; to3ers also as i26uts. As regards the 6re;abricated buildi2gs

P+ the a66ella2t stated that the7 are eligible ;or ca6ital goods credit a2d i2

a27 case 3ere eligible ;or i26ut credit. %i5ilar sta2d 3as tae2 i2 res6ect o;

6ri2ters. &he a66ella2t 6laced relia2ce o2 the !redit Rules i2troduced b7 the

!e2tral Gover25e2t 3ith e;;ect ;ro5 10.9.,00= a2d 5ore 6articularl7 Rule *1

3hich de;i2es the ter5 H!e2vat !reditK8 Rule ,aA 3hich de;i2es H!a6ital

goodsK a2d Rule , 3hich de;i2es Hi26utK. It 3as the a66ella2ts case that Rule

*1 o; the !redit Rules allo3s the service 6rovider to tae credit o; the e>cise

duties 6aid o2 a27 Hi26utsK a2d Hca6ital goodsK. &hat the de;i2itio2 o; the ter5

Hca6ital goodsK a2d Hi26utK 3as clear to i2clude the said goods ;or availi2g

credit o; the dut7 6aid. &he a66ella2t stated that ;or the goods to 5ea2 Hca6ital

goodsK u2der the !redit Rules8 the esse2tials 3ere that the7 5ust be goodsM the

goods 5ust belo2g to a27 categor7 as s6eci;ied u2der Rule ,aAi to vii o;

the !redit Rules a2d that goods 5ust be used 6rovidi2g out6ut service. It 3as

stated that the a66ella2t 3as a service 6rovider a2d i2 so ;ar as service 6rovider is

co2cer2ed8 clause ii o; sub4rule o; Rule , o; the !redit Rules is a66licable.

It 3as stated that u2der the said clause all goods e>ce6t DO8 ?%D a2d 5otor

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s6irit are i26uts 6rovided the7 are used ;or 6rovidi2g out6ut service. &he

a66ella2t also 6laced relia2ce o2 Rule = o; the !redit Rules to co2te2d that the

credit i2 res6ect o; Hi26utsK ca2 be availed o; i55ediatel7 o2 recei6t o; the

goods i2 the 6re5ises o; the service 6rovider. It 3as stated that credit o; Hi26utsK

ca2 be tae2 i2 ti5e a2d i2 a27 5a22er a2d 2o2 avail5e2t o; 3hole or 6art o;

i26ut credit i55ediatel7 o2 recei6t o; i26uts i2 the ;actor7 3ill 2ot vitiate the

right o; the 5a2u;acturer or out6ut service 6rovider to tae u24availed credit

later. +urther case o; the A66ella2t 3as that the to3er is 6art o; the Ease

&ra2sceiver %tatio2 &%F8 3hich is a2 i2tegrated s7ste5. It 3as stated that the

&% 3as classi;iable u2der headi2g ., o; !e2tral '>cise &ari;; Act 3hich

co56rises o; the to3er also as o2e o; its 6arts8 3ithout 3hich the out6ut service

ca22ot be 6rovided. It 3as8 there;ore8 sub5itted that the to3ers are 6art o; the

eligible ca6ital goods viL. &% a2d are used ;or 6rovidi2g out6ut services8 as also

the to3ers 3ere eligible ;or ca6ital goods credit. &he a66ella2t 6laced relia2ce o2

3hole architecture o; &% i2 a G%- 2et3or i2 su66ort o; this sub5issio2. &hat

the a66ella2t had i56orted 2u5ber o; &% ;or i2stallatio2 at various sites a2d

that the &% eui65e2ts are classi;ied u2der headi2g No.., o; the !e2tral

'>cise &ari;; Act !'&A 3he2 the7 3ere i56orted. De6e2di2g o2 the site

co2ditio28 additio2al 6eri6heral eui65e2ts such as batter7 bac u68 recti;ier8

$P% 3ere also 6urchased b7 the a66ella2t. All these eui65e2ts are brought to

the site a2d the7 3ere housed/i2stalled i2 a 6re;abricated roo5 or a buildi2g.

%ubseue2tl78 i2stallatio2 o; various eui65e2ts at the site is u2dertae2 i2

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accorda2ce 3ith the Radio +reue2c7 Desig2 Pla2. It 3as A66ella2tFs case that

i2 accorda2ce 3ith the site la7 out8 re6ort o; the structural co2sulta2t8 the

5aterial is ordered ;ro5 various ve2dors. All the 5aterial is su66lied b7 the

ve2dors o2 6a75e2t o; a66licable dut7 3he2 cleari2g ;ro5 their ;actories.

&herea;ter8 erectio2 o; the to3er ;or su66orti2g a2te22as is u2dertae2. &hat the

to3er co56rises o; 6oles ;or 5ou2ti2g o; G%- a2d -icro3ave a2te22a. &he

6oles are give2 2ecessar7 a2gular su66orts to e2sure their stable 6ositio2i2g.

A2te22a 5ou2ts co56risi2g o; a2gles are ;i>ed o2 these 6oles a2d the a2te22a

5ou2ted o2 the5. It 3as stated that a 6re;abricated housi2g/shelter is also

6urchased ;or housi2g electrical eui65e2ts viL. isolatio2 &ra2s;or5ers8 batteries

a2d stabiliLers8 recti;iers etc. a2d teleco5 eui65e2ts lie &% a2d -icro3ave/

Radio ?o6s etc a2d serves as a u2ctio2 bo>. &hat the teleco5 i2stallatio2 ve2dor

i2stalls the &% teleco5 eui65e2ts8 la7s cable i2cludi2g ;eeder cables ;ro5

A2te22a to &%. &he electrical ve2dor i2stalls the electrical eui65e2ts a2d

does the reuired 3iri2g i2side a2d outside the roo5. A se6arate 6o3er su66l7

co22ectio2 is tae2 ;ro5 the co2cer2ed %tate 'lectricit7 oard as also the Diesel

Ge2erati2g DG set is used as a bac4u6 source ;or 6o3er su66l7 i2 case o;

5ai2s ;ailure. &he &% a2d -icro3ave li2 is the2 co55issio2ed a2d the site is

i2tegrated 3ith the 5ai2 2et3or. It 3as there;ore sub5itted that si2ce the &%

as a 3hole is co2sidered as a si2gle i2tegrated s7ste5 classi;iable u2der ., o;

!e2tral '>cise &ari;; Act a2d are eligible ca6ital goods8 to3ers a2d 6arts thereo;

3hich ;or5 6art o; the i2tegrated s7ste5 o; &% are 6art o; s6eci;ied ca6ital

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goods eligible ;or ca6ital goods credit. It 3as ;urther stated that i2 a27 case

credit is ad5issible o2 to3ers a2d 6arts o; to3ers as i26uts as ;alli2g 3ithi2 the

a5bit o; Rule , o; the !redit Rules 3hich de;i2es Hi26utK. It 3as stated that

as 6er the de;i2itio2 o; ter5 Hi26utK irres6ective o; classi;icatio2 o; the said

goods u2der the !e2tral '>cise &ari;; Act8 the7 3ill uali;7 as Hi26utsK a2d 3ill

be eligible ;or i26ut credit i; the7 are used ;or 6rovidi2g out6ut service. I2

regard to the 6re;abricated buildi2g8 the a66ella2t co2te2ded that the7 are eligible

;or ca6ital goods credit as the7 3ere 6art o; the i2tegrated &% a2d i2 a27 case

the7 3ere eligible to i26ut credit. As also8 the sa5e co2te2tio2 3as raised i2

res6ect o; o;;ice chairs a2d 6ri2ters. As regards the 6e2alt7 as 6ro6osed to be

levied u2der rule 11 a2d , o; the !redit Rules8 the a66ella2t sub5itted that

the 6e2alt7 6rovisio2 is 2ot attracted i2 vie3 o; classi;icatio2 o; their goods as

ca6ital goods a2d i2 a27 case as Hi26utsK. &he a66ella2t de2ied that the7 had

availed credit 3ro2gl7 b7 6ractici2g ;raud or b7 5ai2g 3ill;ul 5is4state5e2t8

collusio2 or su66ressio2 o; ;acts. It 3as stated that there 3as 2o 3ill;ul

su66ressio2. It 3as8 there;ore8 sub5itted that the sho3 cause 2otice as issued

agai2st the a66ella2t be dro66ed.

:. &he !o55issio2er a;ter heari2g the a66ella2t o2 the sho3 cause

2otice 6assed a2 order4 i24origi2al dated 19.1,.,00: tai2g i2to co2sideratio2 the

6rovisio2s o; the !redit Rules8,00= a2d 5ore 6articularl78 the de;i2itio2 o;

ca6ital goods as de;i2ed u2der Rule ,aA a2d the de;i2itio2 o; the ter5

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i26uts as de;i2ed u2der rule , o; the !redit Rules8 held that the a66ella2t has

3ro2gl7 availed o; !e2vat !redit a5ou2t o; Rs.,80=8*9809*/4 u2der 6rovisio2s

o; Rule 1= o; the !redit Rules read 3ith %ectio2 )* o; the +i2a2ce Act8199=. I2

res6ect o; to3ers a2d 6arts thereo;8 6re;abricated buildi2g8 6ri2ters a2d o;;ice

chairs8 the !o55issio2er observed that the a66ella2t had availed be2e;it o;

!e2vat !redit o2 the ase &ra2sreceiver %tatio2 &% clai5i2g to be a si2gle

i2tegrated s7ste5 co2sisti2g o; to3er8 G%- or -icro3ave A2te22as8

Pre;abricated buildi2g8 isolatio2 tra2s;or5ers8 electrical eui65e2ts8 ge2erator

sets8 ;eeder cables etc. It 3as observed that these s7ste5s have bee2 treated as

Hco56osite s7ste5K classi;ied u2der !ha6ter ., o; the &ari;; Act a2d that the

a66ella2ts co2te2tio2 that these s7ste5s should be treated as ca6ital goods a2d

credit be allo3ed8 could 2ot be acce6ted. It 3as observed that each o; these

goods had i2de6e2de2t ;u2ctio2s a2d he2ce8 the7 ca22ot be treated a2d classi;ied

as si2gle u2it. It 3as observed that all ca6ital goods are 2ot eligible ;or credit a2d

o2l7 those relatable to the out6ut services 3ould be eligible ;or credit. It 3as

observed that o2l7 teleco5 eui65e2ts lie &% tra2s5itters 3hich are used i2

6rovidi2g teleco5 services alo2e 3ould be liable to i26ut credit. I2 regard to the

e>te2ded 6eriod8 it 3as observed that the service ta> is based o2 sel; assess5e2t

a2d there;ore8 it is the assessee 3ho deter5i2es the dut7 a2d discharges the sa5e.

It 3as the res6o2sibilit7 o; the a66ella2t to give details o; ite5s o2 3hich i26ut

credit 3as availed i2cludi2g a 3rite4u6 to satis;7 the de6art5e2t that avail5e2t

o; !e2vat credit 3as i2 accorda2ce 3ith the !redit Rules 3hich is a co55o2

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legislatio2 ;or both goods a2d services. It 3as held that b7 2ot 6rovidi2g the

details a2d tai2g credit8 the a66ella2t is guilt7 o; su66ressio2 o; ;acts a2d

he2ce8 it 3as held that the e>te2ded 6eriod 3as i2vocable i2 the a66ella2ts case.

&he !o55issio2er 3hile co2;ir5i2g the reectio2 o; the !redit availed b7 the

a66ella2t8 i56osed a 6e2alt7 o; a2 a5ou2t o; Rs.,80=8*9809*/4 ;or 3ro2gl7

availi2g credit u2der Rule 1, read 3ith %ectio2 11 A! o; the !e2tral '>cise

Act819==. +urther8 6a75e2t o; i2terest u2der %ectio2 ) o; the !e2tral '>cise

Act at the rates a66licable ;ro5 ti5e to ti5e 3as also ordered.

). &he a66ella2t bei2g aggrieved b7 the order i2 origi2al dated

19.1,.,00: ;iled a2 a66eal be;ore the &ribu2al bei2g A66eal 2o.%&/=9/,00). I2

the a66eal8 the 6ri2ci6al grou2d o; challe2ge to the order 6assed b7 the

!o55issio2er disallo3i2g !e2vat !redit 3as that the to3er a2d 6arts thereo;8

6re;abricated buildi2g8 o;;ice chairs a2d 6ri2ters 3ere ca6ital goods as ;alli2g

u2der the de;i2itio2 o; Rule ,aA o; the !redit Rules8 as also it 3as co2te2ded

that i2 the alter2ative i2 a27 case the said goods also uali;ied as i26uts u2der the

de;i2itio2 o; i26ut u2der !redit Rules a2d he2ce8 the credit availed b7 the

a66ella2t 3as valid. &he a66ella2t also challe2ged the order o; the

!o55issio2er 6ertai2i2g to i2terest o2 6e2alt7 o2 the grou2d that Rule 1, o;

the !redit Rules is a66licable to a 5a2u;acturer a2d he2ce8 lev7i2g o; 6e2alt7

3as 2ot 6ro6er. &he a66ella2t also ;ield a sta7 a66licatio2 alo2g3ith the a66eal.

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. A;ter the order i2 origi2al dated 19.1,.,00: 3as 6assed ;or the

6eriod October ,00= to %e6te5ber ,00 three ;urther sho3 cause cu5 de5a2d

2otices 3ere issued issued coveri2g the 6eriod October ,00 to -arch ,00

dated ,*.=.,00)8 .,.,00 a2d ,*.10.,00 5ai2g a2 aggregate de5a2d o;

Rs.18=08:*89/4 as also i2terest a2d euivale2t 6e2alt7 3as de5a2ded.

9. &he a66ella2t ;iled its re6l7 to the de5a2d cu5 6e2alt7 2otice a2d

the corrige2du5 dated ,.*.,009 issued b7 the !o55issio2er. &he a66ella2t 2o3

co2te2ded that the to3ers a2d the 6arts thereo; are Hsu66orti2g structureK ;or

a2te22a 3hich are ca6ital goods a2d there;ore8 as a2te22a is uali;ied as ca6ital

goods8 the to3ers a2d 6arts thereo; 3ould also uali;7 as ca6ital goods. It 3as

sub5itted that the to3ers are 2othi2g but the structures i2stalled i2 su66ort o;

G%- a2d -icro3ave A2te22as. Rel7i2g o2 the de;i2itio2 o; Hi26utsK8 the

a66ella2t sub5itted that irres6ective o; classi;icatio2 o; the goods u2der the

!e2tral '>cise &ari;; Act8 the goods 3ill also uali;7 as Hi26utsK a2d 3ill be

eligible ;or !e2vat credit i; the7 are eligible ;or 6rovidi2g out6ut services8 ;alli2g

u2der the de;i2itio2 u2der Rule , o; the !redit Rules. It 3as co2te2ded that

the to3ers a2d 6arts thereo; are used ;or 6rovidi2g out6ut service viL.

teleco55u2icatio2 service a2d he2ce8 eligible ;or i26ut credit. &he a66ella2t

relied o2 several decisio2s to co2te2d the ad5issibilit7 o; the to3er a2d to3er

6arts a2d the 6re;abricated buildi2gs to be ca6ital goods a2d also that i2 a27 case

the said goods bei2g used ;or 6rovidi2g out6ut services the7 3ould uali;7 as

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i26uts u2der the de;i2itio2 o; i26uts u2der Rule , o; the !redit Rules a2d

he2ce8 eligible ;or i26ut credit. It 3as8 there;ore8 co2te2ded that the to3er8

shelters a2d a2te22a8 all the three ite5s as used b7 the a66ella2ts i2 6rovidi2g

teleco55u2icatio2 services are either ca6ital goods 3ithi2 the 5ea2i2g o; Rule

,aA a2d i2 a27 case the said goods also could be classi;ied as i26uts a2d

there;ore8 e2titled ;or avail5e2t o; the credit u2der the !redit Rules8,00=.

10. &he !o55issio2er adudicated the de5a2d cu5 6e2alt7 2otices

dated ,*.=.,00)8 .,.,00 a2d ,*.10.,00 b7 6assi2g a2 order i2 origi2al dated

,*.*.,009. 7 this order8 the !o55issio2er disallo3ed the A66ella2ts clai5 ;or

credit a5ou2ti2g to Rs.1*80,8089,/4 u2der the 6rovisio2s o; Rule 1= o; the

!redit Rules. ?o3ever8 !e2vat credit o2 a2te22a a5ou2ti2g to Rs.,8*8=89)0/4

3as allo3ed a2d the de5a2d i2 that regard 3as dro66ed. &he de5a2d i2 res6ect

o; other ite5s viL. the to3er a2d 6arts thereo; a2d the 6re;abricated buildi2g 3as

co2;ir5ed. A 6e2alt7 o; Rs.1*80,8089,/4 3as also i56osed u2der Rule 11 o;

the !redit Rules8 ,00=. I2 co2;ir5i2g the de5a2d i2 res6ect o; to3er a2d 6arts

thereo;8 it 3as observed b7 the !o55issio2er that to3er is ;i>ed to the earth a2d

a;ter its i2stallatio2 beco5es i55ovable a2d there;ore8 ca22ot be goods. It 3as

also observed that eve2 i2 !BD or %BD co2ditio28 the &o3er a2d 6arts thereo;

3ould ;all u2der !ha6ter headi2g )*0 o; the !e2tral '>cise &ari;; Act 3hich is

2ot s6eci;ied i2 clause i or clause ii o; Rule ,aA o; the !redit Rules8,00=

as ca6ital goods. It 3as held that to3er a2d 6arts thereo; are 2ot directl7

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utilised ;or out6ut service as the sa5e has bee2 basicall7 a structural su66ort ;or

certai2 eui65e2t. It 3as ;urther observed that it 5a7 2ot be 2ecessar7 i;

suitable alter2ate su66ort is available. %uch to3ers b7 2o stretch o; i5agi2atio2

ca2 be co2sidered 6arts o; teleco5 eui65e2t or as teleco5 eui65e2t b7

the5selves a2d it 3as thus held that to3er a2d 6arts thereo; do 2ot uali;7 as

ca6ital goods. A66l7i2g the sa5e reaso2i2g8 credit o2 6re;abricated buildi2g 3as

also reected.

11. &he a66ella2t ;iled there;ore a2other a66eal be;ore the &ribu2al

bei2g A66eal No.%&/1=/,009 agai2st the order i2 origi2al dated ,*.*.,009

6assed b7 the !o55issio2er. 7 this order dated ,*.*.,0098 the !o55issio2er

had co2;ir5ed the de5a2d cu5 6e2alt7 2otices issued to the a66ella2t a2d

sought recover7 o; Rs.1*80,8089,/4 ;or the 6eriod October8,00 to

-arch8,00. A2 euivale2t a5ou2t o; 6e2alt7 u2der Rule 11 o; the !redit

Rules read 3ith %ectio2 11A! o; the +i2a2ce Act8199= 3as also i56osed b7 the

said order.

1,. As regards the sta7 a66licatio28 b7 a2 order dated 1..,00) 6assed

i2 A66licatio2 2o.%&/%/)/,00) i2 A66eal 2o.%&/=9/,00)4-u5bai8 the

&ribu2al held that 6ri5a ;acie case 3as 5ade out o2 ad5issibilit7 o; credit a2d

3aiver o; 6re4de6osit i2 res6ect o; credit o2 to3ers a2d 6arts thereo; a2d

6re;abricated buildi2g8 the o;;er o; the a66ella2t o; a 6re4de6osit o; Rs.10 lahs

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the releva2t 6eriodM

b &he !'N"A& credit tae2 o2 the said ite5s

a2d utiliLed b7 the a66ella2t is recoverable subect to

li5itatio2M

c &he li5itatio2 issue is re5a2ded to the

!o55issio2er ;or care;ul co2sideratio2 a2d decisio2M

d &he uestio2 3hether8 o2 the ;acts a2d

circu5sta2ces o; this case8 the a66ella2t is liable to be

6e2aliLed u2der Rule 1 o; the !'N"A& !redit Rules8,00=

a2d8 i; so8 to 3hat e>te2t is also re5a2ded to the

!o55issio2er ;or ;resh co2sideratio2 a2d decisio2M

e &he a66ella2t shall be give2 a reaso2able

o66ortu2it7 o; bei2g heard o2 the re5a2ded issues.K

1=. @e have heard -r.".%ridhara28 lear2ed %e2ior !ou2sel 3ith

-r.Praash %hah lear2ed Advocate a66eari2g o2 behal; o; the a66ella2t a2d

-r.Bevic %etalvad8 lear2ed A.%.G. 3ith -r.Pradee6 #etl7 a2d -r.#..-ishra8 ;or

Res6o2de2ts.

1. &he a66ella2ts have brought to our 2otice the ;ollo3i2g details o;

the !e2vat !redit tae2 o2 to3er8 shelter8 6re;abricated buildi2g a2d other ;or the

6eriod i2 dis6ute C4

Years &o3er %helter Others &otal

,00=40 1)=*:0 1=)9* !hair < ,98)*

Pri2ter has bee2 6aid. &hat ca6ital

goods viL. A2te22a a2d &% are ;itted i2to the to3er a2d shelter to 6rovide

teleco55u2icatio2 services a2d there;ore8 the7 uali;7 as i26uts u2der Rule ,.

I2 su66ort o; this 6ro6ositio28 relia2ce is 6laced o2 the ;ollo3i2g udg5e2tsC4

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a I2dustrial -achi2er7 -a2u;acturers Pvt.td "s. &he %tate o;

Guarat8 19:1: %&! *0M

b -e5ber8 oard o; Reve2ue8 @est e2gal "s. -/s.Phel6s

!o.P td.8 19), = %u6re5e !ourt !ases 1,1M

c !!8 Bolata "s. Ru6a a2d !o.td.8 (2004(170 !.".#. 12$

(S.%.

d I2dia2 +ar5ers +ertilisers !o4o6.td. "s. !.!.'.8

Ah5edabad8 199:: '..&. 1))%.!.

e -/s.#.B.!otto2 %6i22i2g @eavi2g -ills !o.td. "s. %ales

&a> O;;icer8 Ba26ur a2d A2r.8 AIR 19: %! 1*10M

; !!' "s. #a7 '2gi2eeri2g @ors td.8 199*9 '& 1:9

%.!.

g I2dus &o3ers td. "s. !&O8 ?7derabad8 ,01, , "%&

==)8

"III &hat it is i56ossible to co2ceive that the teleco55u2icatio2

services ca2 be 6rovided 3ithout to3ers a2d shelters a2d that 2ecessit7 or the

;u2ctio2al utilit7 test is reuired to be a66lied. I2 su66ort o; this sub5issio28

relia2ce is 6laced o2 the udg5e2t o; !alcutta ?igh !ourt i2 the case o; 1S'0%

A((o2s & S$ee( L$d. 3s. ACC4 reor$ed ' 1*##5 6//7 ELT "85 6C9(7.4 It is

sub5itted that these goods are used ;or 6rovidi2g out6ut services o2 co55ercial

scale a2d he2ce8 the7 satis;ied the ;u2ctio2al utilit7 test. It is sub5itted that the

;u2ctio2al utilit7 o; the to3ers is a66are2t ;ro5 the ;act that the a2te22as are

i2stalled o2 the to3ers. &he a2te22as co2ti2uousl7 receive sig2als a2d tra2s5it

sig2als 3ith the subscribers devices to authe2ticate subscribers accou2ts a2d

e2able the roa5i2g o; the 5obile subscriber. I2 su66ort o; this sub5issio28

relia2ce is 6laced o2 the ;u2ctio2i2g o; G%- Net3or as e>6lai2ed i2 H@ireless

!o55u2icatio2s a2d Net3ors8 ,2d'ditio28 @illia5s %talli2gs8 Pearso2 Pre2tice

?allK a2d H-obile !ellular &eleco55u2icatio2s8 A2alog a2d Digital %7ste5s8

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,2d'ditio28 @illia5 !.Y. ee8 -cGra3 ?ill.K

I( Alter2ativel78 it is sub5itted that i2 the 5obile teleco55u2icatio2

service8 to3ers are the Haccessor7K o; the a2te22a a2d there;ore8 uali;7 as

ca6ital goods ;alli2g u2der !ha6ter ?eadi2g . It is sub5itted that shelter is

also a2 accessor7 o; &% eui65e2t ;alli2g u2der !ha6ter headi2g . It is

sub5itted that ca6ital goods viL. A2te22a a2d ase &ra2sceiver %tatio2 are ;itted

i2to the to3er a2d shelter res6ectivel7 to 6rovide teleco55u2icatio2 service. I2

su66ort o; this 6ro6ositio2 relia2ce is 6laced o2 the de;i2itio2 o; ca6ital goods

as de;i2ed u2der Rule ,a o; the !redit Rules to co2te2d that the accessories o;

goods ;all 3ithi2 the a5bit o; ca6ital goods 3he2 the7 are used ;or 6rovidi2g

out6ut services. As regards the 5ea2i2g o; the 3ord accessor78 relia2ce is

6laced o2 the ;ollo3i2g decisio2s.

a -/s.A22a6ur2 !arbo2 I2dustries !o. "s. %tate o; A2dhra

Pradesh8 ((1$7&2 S%% 27'M

b !%&8 -aharashtra %tate8 o5ba7 "s. .D.have %o2s8

(1$1(47 S#% '1.M

c -ehra rothers "s. #oi2t !o55ercial O;;icer8 -adras8

((1$$1 1 S%% )14M

d a2co Products I2dia td. "s. !o55issio2er o;

!.'>.8 "adodara4I8 (200$(2') !"# &'& (#ri*"+M

e !!'8 #ai6ur "s. -/s.Raastha2 %6i22i2g a2d @eavi2g

-ills td.8 2010(2)) !"# 41 (S%

It is sub5itted that these are cases i2 3hich ite5s 3ere held to be

;all 3ithi2 the de;i2itio2 o; i26ut a2d also ca6ital goods a2d

he2ce8 i2 a27 case the a66ella2t 3ould be e2titled ;or availi2g

credit o; dut7 6aid o2 the sa5e.

( I2 regard to the 6re;abricated buildi2g8 it is sub5itted that all thea;oresaid sub5issio2s are euall7 a66licable i2 res6ect o; 6re;abricated buildi2g/

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shelter.

(I It is sub5itted that gree2 shelters are ;alli2g u2der !ha6ter headi2g

.*) a2d uali;7 as ca6ital goods u2der Rule ,aA o; the !redit Rules.

(II As regards the 6ri2ters ;alli2g u2der !ha6ter ?eadi2g = a2d

uali;7 as ca6ital goods i2 ter5s o; Rule ,aA o; the !redit Rules8,00= it is

sub5itted that the 6ri2ters are classi;iable u2der !ha6ter headi2g = o; the

!e2tral '>cise &ari;; Act as 6ri2ters are used ;or 6ri2ti2g bills ;or subscribers a2d

that the service o; teleco55u2icatio2 does 2ot co5e to a2 e2d o2ce the sig2al is

co55u2icated8 a2d activit7 lie 6ri2ti2g o; bills is absolutel7 esse2tial 6art o; the

teleco55u2icatio2 service. It is8 there;ore8 sub5itted that the 6ri2ters are bei2g

ca6ital goods u2der !ha6ter = are used ;or 6rovidi2g out6ut services a2d he2ce8

ca6ital goods.

(III As regards the chairs8 it is sub5itted that the a5ou2t bei2g s5all8

the credit i2 that regard is 2ot 6ressed.

1). O2 the other ha2d8 lear2ed A%G a66eari2g ;or the Reve2ue has

su66orted the i56ug2ed orders 6assed b7 the &ribu2al. ear2ed A%G has 5ade

the ;ollo3i2g sub5issio2sC4

i that the to3ers a2d 6arts thereo; are ;i>ed to the earth8 o2 i2stallatio2

a2d beco5e i55ovable a2d as such ca22ot be co2sidered to be goods.

ii i2 !BD/%BD co2ditio2 the tari;; classi;icatio2 o; the to3er 3ould be

u2der !ha6ter headi2g )*0 o; the !e2tral '>cise &ari;; Act. It is sub5itted that

as !ha6ter )*0 is 2ot s6eci;ied i2 clause i or clause ii o; Rule ,aA o; the

!redit Rules8 ,00= a2d the to3er is 2ot o2e o; the ite5s s6eci;ied i2 clause ii o;

the said Rules that the 6arts o; the to3er ca22ot be clai5ed ;or credit as the7 are

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2ot co56o2e2ts a2d s6are ;ro5 accessories.

iii eve2 i; it is assu5ed that the !e2vat o2 these 6arts o; to3ers 3ould

be ad5issible u2der clause iii o; Rule ,aA eve2 the2 though u2der this

clause 2o s6eci;ic headi2g has bee2 6rescribed ;or eligibilit7 o; the ca6ital goods8

there is a2 e>6licit co2ditio2 that the said goods should be co56o2e2t8 s6are a2d

accessories o; the goods s6eci;ied i2 clause i a2d ii o; the said Rule. As the

to3er is 2ot a ca6ital good8 dut7 6aid o2 its 6arts is 2ot ad5issible ;or availi2g

credit.

iv It is the2 sub5itted that o2l7 those articles 3hich 3ould go i2to

co56ositio2 o; a2other article ca2 be co2sidered as co56o2e2ts or 6arts o; later.

It is sub5itted that G%- a2d 2et3or a2te22a a2d such other goods classi;ied

s6eci;icall7 u2der &ari;; headi2g 1)8 but 2ot the to3er o2 3hich a2te22a is

6laced a2d he2ce to3er ca22ot be co2sidered as a co56o2e2t. &hat the to3er

does 2ot e2ter i2to the co56ositio2 o; a2te22a8 it is 2ot co2stituted as 6art o;

a2te22a.

v It is the2 co2te2ded that u2der the de;i2itio2 o; i26ut u2der the

!redit Rules8 the service 6rovider ca22ot avail the !e2vat !redit o2 i26ut goods

o2l7 the 5a2u;acturer ca2 avail such credit. &he service 6rovider ca2 avail o;

i26ut credit a2d also o2 ca6ital goods 3hich satis;ies the de;i2itio2 u2der Rule

,a o; the !redit Rules. ?e2ce8 the credit o2 e>cise dut7 6aid o2 to3er a2d

6re;abricated buildi2gs do 2ot satis;7 the de;i2itio2 o; ca6ital goods a2d he2ce8

are certai2l7 2ot covered as i26ut service. I2 su66ort o; his a;oresaid

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sub5issio2s8 lear2ed A%G relied o2 the ;ollo3i2g udg5e2ts.C4

I"a2da2a Global td "ersus !o55. O; !. '>. Rai6ur8

,010,* '& ==0&ri4M

II ualit7 %teel &ubes P td versus !ollector o; !.'>.8

199 , %!! *),

III &rive2i '2gi2eeri2g I2dustries td A2r "ersus

!o55. O; !. '>. ,000 %!! ,9

I" -ittal '2gi22eri2g @ors P td "s. !ollector o;

!e2tral '>cice 199) 1 %!! ,0*

" !o55issio2er o; !.'>.I2dore "ersus !ethar "essels

td Ors.8 ,0091) %u6re5e !ourt !ases 1

"I harti &ele "e2tures td vs. %tate o; -aharashtra8

,00) "ol 109 1 o5 .R. 0M

"II -u2ici6al !or6oratio2 o; Greater o5ba7 "s. I2dia2

Oil !or6oratio28 1991 %u66 , %!! 1.M

"III !ellular O6erators Associatio2 o; I2dia Ors. vs.

-u2ici6al !or6oratio2 o; Delhi etc.8 1)9 ,011 D& *1M

I( !ollector o; !e2tral '>cise "s. ?utchiso2 -a>

&eleco5 P.td.8,00,,= '& 191 o5.M

( !o55issio2er o; !.'>. Nag6ur "s. $ltratech !e5e2t

td. ,010,0 %&R )) o5M

(I !oca !ola I2dia Pvt. td. "s. !o55issio2er o;

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!.'>.Pu2e4III8 ,0091 %&R :) o5.M

(II %aras3ati %ugar -ills "s. !o55issio2er o; !.'>.8

Delhi4III8 ,011,)0'& =: %.!.

(III !ollector o; !e2tral 'cise "s. %olaris !he5tech td. 8

,00),1= '& =1 %!M

1. @ith the assista2ce o; lear2ed !ou2sel ;or 6arties8 3e had go2e

through the 6a6er boo o; the 6rese2t a66eals. @e have also 6erused the 3ritte2

sub5issio2s a2d additio2al 3ritte2 sub5issio2s as ;iled o2 behal; o; the

a66ella2t.

19. &o a66reciate the issue as to 3hether the a66ella2t 3ould be

e2titled ;or availi2g !e2vat !redit i2 res6ect o; e>cise dut7 6aid o2 the 6urchase

o; to3er a2d 6arts thereo;8 6re;abricated buildi2g a2d 6ri2ters a re;ere2ce to the

releva2t 6rovisio2s o; the !redit Rules a2d the !e2tral '>cise &ari;; Act 3ould

beco5e 2ecessar7. Rule ,aA o; the !redit Rules de;i2es 9'$9( 0oods as

u2derC4

H,. I2 these rules8 u2less the co2te>t other3ise reuires84

a Hca6ital goodsK 5ea2s C4

A the ;ollo3i2g goods8 2a5el7C4

(i) all goods falling under Chapter 82, Chapter 84, Chapter 85,

Chapter 90, (heading 6805, grinding wheels and the like, and parts

thereof falling under heading 6804) of the First !hedule to the

"#!ise $ariff %!t&

ii Pollutio2 co2trol eui65e2tM

(iii) !o'ponents, spares and a!!essories of the goods spe!ified

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at (i) and (ii)&

iv 5oulds a2d dies8 igs a2d ;i>turesM

v re;ractories a2d re;ractor7 5aterialsM

vi tubes a2d 6i6es a2d ;itti2gs thereo;M a2d

vii storage ta28

used

() in the fa!tor* of the 'anufa!turer of the final produ!ts, +ut does not

in!lude an* euip'ent or applian!e used in an offi!e& or

(2) for pro-iding output ser-i!e./

e56hasis su66lied

Rule , de;i2es1'-$4 as u2derC4

1"6;7 1'-$4 ce6t light diesel oil8 high s6eed diesel oil a2d 5otor s6irit8

co55o2l7 2o32 as 6etrol8 used i2 or i2 relatio2 to the 5a2u;acture o; ;i2al

6roducts 3hether directl7 or i2directl7 a2d 3hether co2tai2ed i2 the ;i2al

6roduct or 2ot a2d i2cludes lubricati2g oils8 greases8 cutti2g oils8 coola2ts8

accessories o; the ;i2al 6roducts cleared alo2g3ith the ;i2al 6roduct8 goods

used as 6ai2t8 or as 6aci2g 5aterial8 or as ;uel8 or ;or ge2eratio2 o;

electricit7 or stea5 used i2 or i2 relatio2 to 5a2u;acture o; ;i2al 6roducts or

;or a27 other 6ur6ose8 3ithi2 the ;actor7 o; 6roductio2M

ii all goods8 e>ce6t light diesel oil8 high s6eed diesel oil8 5otor s6irit8

co55o2l7 2o32 as 6etrol a2d 5otor vehicles8 used ;or 6rovidi2g a27 out

service.

E=(99$'o *4 &he light diesel oil8 high s6eed diesel oil or 5otor s6irit8

co55o2l7 2o32 as 6etrol8 shall 2ot be treated as a2 i26ut ;or a27 6ur6ose

3hatsoever.

E=(99$'o "4 I26ut i2clude goods used i2 the 5a2u;acture o; ca6ital goods

3hich are ;urther used i2 the ;actor7 o; the 5a2u;actureMK

Rule * 6rovides ;or credit o2 e>cise dut7 6aid i2 dischargi2g

liabilit7 to3ards service ta> 6a7able b7 the 5a2u;acturer. Rule * o; !e2vat

!redit Rules 6rovides as u2derC4

R-(e 5.CEN3AT red'$. 4446*7 A 9$-rer or rod-er o> >'9( rod-$s or 9 rov'der o>

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$9=9?(e serv'e s%9(( ?e 9((o@ed $o $9;e red'$ 6%ere'9>$er re>erred $o 9s$%e CEN3AT red'$7 o>

i i the dut7 o; e>cise s6eci;ied i2 the +irst %chedule to the '>cise

&ari;; Act8 leviable u2der the '>cise ActMii ii the dut7 o; e>cise s6eci;ied i2 the %eco2d %chedule to the '>cise

&ari;; Act8 leviable u2der the '>cise ActMiii iii the additio2al dut7 o; e>cise leviable u2der sectio2 * o; the

Additio2al Duties o; '>cise &e>tile a2d &e>tile Articles Act819) =0 o; 19)M

iv iv the additio2al dut7 o; e>cise leviable u2der sectio2 * o; theAdditio2al Duties o; '>cise Goods o; %6ecial I56orta2ce Act8 19)

o; 19)Mv v the Natio2al !ala5it7 !o2ti2ge2t dut7 leviable u2der sectio2

1*: o; the +i2a2ce Act8 ,001 1= o; ,001Mvi vi the 'ducatio2 !ess o2 e>cisable goods leviable u2der sectio2 91

read 3ith sectio2 9* o; the +i2a2ce No., Act8 ,00= ,* o; ,00=Mvia via the %eco2dar7 a2d ?igher 'ducatio2 !ess o2 e>cisable goods

leviable u2der sectio2 1*: read 3ith sectio2 1* o; the +i2a2ce Act8,00) ,, o; ,00)M

vii vii the additio2al dut7 leviable u2der sectio2 * o; the !usto5s&ari;; Act8 euivale2t to the dut7 o; e>cise s6eci;ied u2der clauses i8

ii8 iii8 iv8 v vi a2d viaMviia viia the additio2al dut7 leviable u2der sub4sectio2 o; sectio2 *

o; the !usto5s &ari;; Act8Provided that a 6rovider o; ta>able service shall 2ot be eligible to tae credit

o; such additio2al dut7Mviii viii the additio2al dut7 o; e>cise leviable u2der sectio2 1) o; the

+i2a2ce Act8 ,00* *, o; ,00*Mi> 6'=7 $%e serv'e $9= (ev'9?(e -der se$'o // o> $%e F'9e A$

QQ.K

,0. I2 res6ect o; a service ta>able u2der %ectio2 : o; the +i2a2ce Act

199= ;or 6a75e2t o; service ta> o2 the out6ut service a2 assesse ca2 utiliLe

!'N"A& !redit o; the dut7 6aid o2 ca6ital goods a2d i26uts 6rovided such

Eca6ital goodsF a2d Ei26utsF ;all 3ithi2 the res6ective de;i2itio2s u2der Rule , o;

the !redit Rules. A 6erusal o; the de;i2itio2 o; Eca6ital goodsF 8 Ei26utsF a2d

reveal the ;ollo3i2g 6ositio2 C4

i !a6ital goods

O2l7 those goods uali;7 ;or !e2vat !redit as ca6ital goods 3hich are

covered u2der !ha6ter ,8 =8 8 908 :.0, a2d those u2der headi2g :0

o; the ;irst schedule to the !e2tral '>cise &ari;; Act8 6ollutio2 co2trol

eui65e2t or those 3hich are co56o2e2ts8 s6ares a2d accessories o; these

goods a2d -sed i2 the ;actor7 o; the 5a2u;acturer o; the ;i2al 6roducts or

>or rov'd'0 o-$-$ serv'e8 but does 2ot i2clude a27 eui65e2t or

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a66lia2ce used i2 a2 o;;ice.

ii I26uts

A(( 0oods,e>ce6t light diesel oil8 high s6eed diesel oil a2d 5otor s6irit8

co55o2l7 2o32 as 6etrol8 -sed ' or ' re(9$'o $o $%e 9$-re o>

>'9( rod-$s @%e$%er d're$(2 or 'd're$(2 9d @%e$%er o$9'ed '

$%e >'9( rod-$ or o$ a2d i2cludes lubricati2g oils8 greases8 cutti2g

oils8 coola2ts8 accessories o; the ;i2al 6roducts cleared alo2g3ith the ;i2al

6roduct8 goods used as 6ai2t8 or as 6aci2g 5aterial8 or as ;uel8 or ;or

ge2eratio2 o; electricit7 or stea5 used i2 or ' re(9$'o $o 9$-re o>

>'9( rod-$s or >or 92 o$%er -rose, @'$%' $%e >9$or2 o>

rod-$'o 9d 9(( 0oods,e>ce6t light diesel oil8 high s6eed diesel oil8

5otor s6irit8 co55o2l7 2o32 as 6etrol a2d 5otor vehicles8 -sed >or

rov'd'0 92 o-$ serv'e. E=(99$'o " to the de;i2itio2 o; i26uts is

releva2t 3hich i2cludes 0oods -sed ' $%e 9$-re o> 9'$9( 0oods

@%'% 9re >-r$%er -sed ' $%e >9$or2 o> $%e 9$-re

,1. A 6lai2 readi2g o; the de;i2itio2 o; Eca6ital goods as de;i2ed u2der

Rule ,aA o; the !redit Rules sho3 that all goods ;alli2g u2der !ha6ter ,8

!ha6ter =8 !ha6ter 8 !ha6ter 908 headi2g No.:08 gri2di2g 3heels a2d the

lie8 a2d 6arts thereo; ;alli2g u2der headi2g :0= o; the +irst %chedule to the

!e2tral '>cise &ari;; ActM 6ollutio2 co2trol eui65e2tsM co56o2e2ts8 s6ares a2d

accessories o; the goods s6eci;ied at sub clauses i a2d ii 3hich are used either

i2 the ;actor7 ;or 5a2u;acture o; ;i2al 6roducts but does 2ot i2clude a27

eui65e2t or a66lia2ce used i2 the o;;ice a2d those used ;or 6rovidi2g out6ut

service. A co5bi2ed readi2g o; sub4clause aA i a2d iii a2d sub4rule ,

i2dicates that o2l7 the categor7 o; goods i2 Rule ,aA ;alli2g u2der clause i

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6etrol a2d 5otor vehicles8 used ;or 6rovidi2g a27 out6ut service.

,*. I2 the co2te>t o; these de;i2itio2s the co2te2tio2s as raised b7 the

a66ella2t are reuired to be e>a5i2ed. &he 6ositio2 o; the goods i2 uestio2 vised to the earth a2d a;ter their erectio2 beco5e i55ovable

a2d there;ore ca22ot be goods. +urther i2 the !BD or %BD co2ditio2 the to3er

a2d 6arts thereo; 3ould ;all u2der the cha6ter headi2g )*0 o; the !e2tral '>cise

&ari;; Act. ?eadi2g )*0 is 2ot s6eci;ied i2 clause i or clause ii o; rule , a

A o; the !redit Rules so as to be ca6ital goods. &he goods i2 uestio2 3ould

2ot be ca6ital goods ;or the 6ur6ose o; !'N"A& credit as the7 are 2either

co56o2e2ts8 s6ares a2d accessories o; goods ;alli2g u2der a27 o; the cha6ters or

headi2gs o; the !e2tral '>cise &ari;; %chedule as s6eci;ied i2 sub4clause i o;

the de;i2itio2 o; ca6ital goods.

,=. &he alter2ate co2te2tio2 o; the a66ella2t is there;ore that to3er is

a2 accessor7 o; a2te22a a2d that 3ithout to3ers a2te22as ca22ot be i2stalled a2d

as such the a2te22as ca22ot ;u2ctio2 a2d he2ce the to3er should be treated as

6arts or co56o2e2ts o; the a2te22a. It is urged that a2te22as ;all u2der cha6ter

o; the schedule to the !e2tral '>cise &ari;; Act a2d he2ce bei2g ca6ital goods

used ;or 6rovidi2g cellular service ;alli2g u2der rule ,aAiii as 6art o; ca6ital

goods ;alli2g u2der rule ,aAi to3ers beco5e accessories o; a2te22a a2d

should be held as ca6ital goods ;or availi2g o; credit o; dut7 6aid.

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,. I2 the co2te>t o; the a;oresaid rules a2d the issue as ;alli2g ;or

co2sideratio2 i2 these a66eals 3e e>a5i2e the various decisio2s as relied u6o2

b7 the A66ella2ts.

I &hat to3ers a2d 6arts thereo; a2d P+ are 2ot i55ovable

6ro6erties.:

a I2 the case o; 1Cocise held that as ce5e2t a2d steel 3as used ;or 5a2u;acture o; storage ta2

3hich 3as a2 i55ovable 6ro6ert7 a2d 2o24e>cisable 2o credit o; dut7 6aid o2

a27 i26uts used ;or a27 2o24e>cisable goods is ad5issible i2 vie3 o; rule : 1 o;

!e2vat !redit Rules ,00*40=. &he assesse had 6re;erred a2 a66eal be;ore the

tribu2al. &he tribu2al held that ce5e2t a2d steel used b7 the assesse ;or the

6ur6ose o; co2structio2 o; iro2/coe storage ta28 gas storage ta2s are ca6ital

goods ;or the 6ur6ose o; co2structi2g iro2/coe a2d that these i26uts bei2g used

;or 6ollutio2 co2trol eui65e2ts he2ce the assesse 3as e2titled ;or !e2vat credit.

&he !ourt co2sidered the storage ta2 as ca6ital goods as the storage ta2s 3ere

used as 6ollutio2 co2trol eui65e2ts a2d as 6ollutio2 co2trol eui65e2ts 3ere

directl7 ;alli2g u2der rule , a A ii o; the credit rules. &he !ourt ca5e to a

co2clusio2 that o2ce storage ta2 a2d 6ollutio2 co2trol eui65e2ts co2stitute

ca6ital goods the dut7 6aid o2 a27 ra3 5aterial 6urchased ;or co2structio2 o;

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those goods could be utilised as a !e2vat credit b7 the assessee 2ot3ithsta2di2g

the ;act that the storage ta2 is a2 i55ovable 6ro6ert7. ?o3ever8 the ;acts i2

the 6rese2t case are uite di;;ere2t. &he to3ers are 2ot ca6ital goods u2der the

de;i2itio2 o; ca6ital goods as de;i2ed i2 rule , a o; the credit rules bei2g

i55ovable a2d are 2o24e>cisable. &his udg5e2t is there;ore o; 2o assista2ce to

the a66ella2ts.

b I2 the decisio2 o; the Bar2ataa ?igh !ourt i2 the case o; HCC"

Vs. C1 ugars 1td., (20(2) "1$ 360 (ar)) the issue 3as i2 regard to the

i26ut used i2 the 5a2u;acturi2g o; storage ta2 3hich 3as a2 i55ovable

6ro6ert7 are ad5issible ;or -OD"A& credit. &he Assesse 3as a sugar ;actor7

a2d had clai5ed !'N"A& credit o2 the ra3 5aterials used ;or co2structio2 o;

storage ta2s. &he assessi2g authorit7 had gra2ted credit i2 res6ect o; 3ater

storage ta2 o2 the grou2d that 3ater is a2 esse2tial ra3 5aterial o; sugar a;ter

co2versio2 i2to stea5. &he 3ater storage ta2 is a co56o2e2t o; 5ai2

5achi2er7 viL. boiler a2d the e>cise dut7 6aid o2 the i26uts i2 the co2structio2 o;

3ater storage ta2s 3ere held eligible ;or availi2g -odvat credit. ?o3ever8

-odvat credit 3as disallo3ed8 i2 res6ect o; s7ru6 a2d 5olasses storage ta2 cisable ;i2al 5olasses storage ta2 a2d shell o; ;i2al 5olasses

storage ta2. &his 3as o2 the grou2d that 5olasses ta2 is co2structed o2 the

;loor 3ith a co2crete ;ou2datio2 a2d the shell o; the ;i2al 5olasses storage ta2

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3ill be 6laced over the co2crete to hold about ,00 to2s8 a2d that si2ce the ;i2al

5olasses storage ta2 is erected to the earth8 it beco5es 2o24e>cisable. It 3as8

there;ore8 held b7 Assessi2g O;;icer that a27 co56o2e2t used i2 the 2o24

e>cisable 5olasses ;i2al storage ta2s are i2eligible ;or -odvat credit. &he

!o55issio2er had set aside the order disallo3i2g credit to the Assesse a2d

;urther the sa5e 3as u6held b7 the &ribu2al. I2 the bacgrou2d o; this ;act8 the

Divisio2 e2ch o; Bar2ataa ?igh !ourt has observed as u2derC4

#he storage tan- has been held to be a component to themain machinery namely, boiler and the benefit is etended to

the inputs used in the construction of the storage tan- thoughit is also embedded to the land. /n the same reasoning the

assessing authority ought to have etended the benefit to thesyrup and molasses storage tan- also, as they are bye*

products in the course of manufacturing activity hich arealso ecisable at the time of selling the same to the assessee.

t appears even hen the storage tan-s if specifically

mentioned in the definition of capital goods by liberallyincorporating these provisions the benefit as etended to

the assessee. oever, the controversy remains. n order toset right this controversy by a 3otification, specifically

storage tan- is introduced ithin the definition of capitalgoods. #he said insertion is clarificatory in nature. nder

these circumstances even though the said insertion as in theyear 2001 e are concerned ith the period anterior to the

said insertion.

). aving regard to the aforesaid facts and also the fact that

the assessing authority has himself etended the benefit tostorage tan- storing ater as a component to main

machinery namely , boiler he ought to have etended thebenefit to the storage tan- hich are also a part of the

factory premises in hich the bye*products are stored andthereafter sold as finished product5.

&his decisio2 is clearl7 2ot a66licable i2 the ;acts o; the a66ella2tFs case as the

issues i2 uestio2 ca22ot be held to be co56o2e2ts o; the a2te22a.

c I2 the case o; 1Co''issioner of Central "#!ise Vs. ai ah'ita

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torages () 1td., (20(23) .$.. 34(%..))4 decided b7 the Divisio2 e2ch

o; A2dhra Pradesh ?igh !ourt the assessee 3as registered u2der %ectio2 :9 o;

the +i2a2ce Act8 199= ;or 6rovidi2g storage a2d 3arehouse services. &he

Assessee 3as ;ili2g service ta> retur2s classi;7i2g the services u2der storage a2d

3arehousi2g service. @hile scruti2iLi2g the sale ta> retur2s ;or the 6eriod ;ro5

A6ril8 ,00 to %e6te5ber8 ,00 the assessi2g o;;icer ca5e to a co2clusio2 that

the assessee had tae2 credit o2 !e2tral '>cise dut7 6aid o2 ce5e2t8 iro2 bars8

e>6a2sio2 bello3s a2d 6i6es8 a2d he2ce8 a sho3 cause 2otice 3as issued

6ro6osi2g to adudicate a2d deter5i2e short 6aid service ta> a2d 6e2alt7 thereo2.

&he Assessi2g authorit7 6assed a2 order i2 origi2al co2;ir5i2g the sho3 cause

2otice a2d de5a2di2g service ta> a2d i2terest thereo2. &he Assessee had

6re;erred a2 a66eal be;ore the !o55issio2er o; !e2tral '>cise 3hich ca5e to be

dis5issed. e;ore the ?igh !ourt8 it 3as co2te2ded b7 the Reve2ue that the

ce5e2t used ;or 5ai2g ;ou2datio2 a2d &-& bars used ;or rei2;orce5e2t8 ca22ot

be treated as ca6ital goods as de;i2ed i2 Rule ,a o; the Rules a2d that the

assessee had 3ro2gl7 clai5ed credit 3he2 the ite5s 3ere outside the de;i2itio2

o; i26ut u2der Rule ,.&hat the assessee had su66ressed this ;act a2d ;iled

retur2s adusti2g the credit to 3hich the assessee 3as 2ot e2titled to. I2 the

co2te>t o; the de;i2itio2 o; Estorage a2d 3arehousi2g as ;alli2g u2der %ectio2

:10, o; the +i2a2ce Act8 the !ourt co2sidered the de;i2itio2 o; i26ut a2d

i26ut service u2der the !redit Rules a2d i2 that co2te>t it 3as observed i2

6aragra6h ) that the de;i2itio2 o; i26ut a2d i26ut services 3ould sho3 that8

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u2less e>cluded8 all goods used i2 relatio2 to 5a2u;acture o; ;i2al 6roduct or ;or

a27 other 6ur6ose used b7 a 6rovider o; ta>able service ;or 6rovidi2g a2 out6ut

service are eligible ;or !e2vat !redit. &he !ourt co2sidered the decisio2 o; the

%u6re5e !ourt i2 the case o; H-aruti %uLui td. "s. !o55issio2er o; !e2tral

'>cise8 Delhi4III8 ,0099 %!! 19*K8 3herei2 the de;i2itio2 o; i26ut as

de;i2ed i2 Rule ,g o; !e2vat !redit Rules8 ,00, 3as co2sidered a2d it 3as

observed b7 the %u6re5e !ourt that the crucial reuire5e2t o; the Rule is that all

goods Hused i2 or i2 relatio2 to the 5a2u;actureK o; ;i2al 6roducts uali;7 as

Hi26utK. It 3as observed that this 6resu66oses that Hele5e2t o; 5a2u;actureK

5ust be 6rese2t. I2 2oti2g the ;ollo3i2g observatio2s o; the %u6re5e !ourt8 the

Divisio2 e2ch o; the A2dhra Pradesh ?igh !ourt held that as the assessee used

ce5e2t a2d &-& bar ;or 6rovidi2g storage ;acilit7 3ithout 3hich storage a2d

3arehousi2g services could 2ot have bee2 6rovided the assessee 3as 6er5itted to

avail the credit o2 ce5e2t a2d &-& bar. Paragra6h o; the #udg5e2t reads as

u2derC4

. 6et again considering the inclusive part of the

definition of input, it as held as follos *

8ll these considerations become relevant only hen

they are read ith the epression used in or in relation to

the manufacture of final product in the

substantive9specific part of the definition. n each case it

has to be established that inputs mentioned in the inclusive

part is used in or in relation to the manufacture of final

product. t is the functional utility of the said item hich

ould constitute the relevant consideration. nless and

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until the said input is used in or in relation to the

manufacture of final product ithin the factory of

production, the said item ould not become an eligible

input. #he said epression used in or in relation to the

manufacture have many shades and ould cover various

situations based on the purpose for hich the input is used.

oever, the specified input ould become eligible for

credit only hen used in or in relation to the manufacture

of final product. ydrogen gas used in the manufacture of

sodium cyanide is an eligible input, since it has a

significant role to play in the manufacturing process and

since the final product cannot emerge ithout the use of

gas. Similarly, ead #ransfer oil used as a heating medium

in the manufacture of "8+ is an eligible input since it has a

persuasive role in the manufacturing process and ithout

its use it is impossible to manufacture the final product.#herefore, none of the categories in the inclusive part of the

definition ould constitute relevant consideration per se.

#hey become relevant only hen the above crucial

re:uirement of being used in or in relation to the

manufacture stands complied ith. n our vie, one has

to therefore read the definition in its entirety.

&he relia2ce o2 this udg5e2t 5a7 2ot be hel6;ul to the a66ella2ts

i2as5uch as the de;i2itio2 o; storage a2d 3arehousi2g as co2tai2ed i2 %ectio2

:10, o; the +i2a2ce Act itsel; sta2d o2 a di;;ere2t ;ooti2g. I2 that co2te>t the

Divisio2 e2ch o; A2dhra Pradesh ?igh !ourt has held that use o; ce5e2t a2d

&-& bars b7 the assessee ;or 6rovidi2g storage ;acilit7 has beco5e i2tegral 6art

o; storage a2d 3arehousi2g a2d 3ithout the use o; ce5e2t a2d &-& bars8 storage

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a2d housi2g could 2ot have bee2 6rovided. ?o3ever8 i2 the 6rese2t case the

;acts are disti2ct. &he to3ers are ad5ittedl7 i55ovable structures a2d 2o2

5aretable a2d 2o2 e>cisable. @e there;ore8 o; the clear o6i2io2 that this

udg5e2t o; the Divisio2 e2ch o; A2dhra Pradesh ?igh !ourt is i2a66licable i2

the ;acts o; the 6rese2t case.

d &he case o; H7annari %''an ugars 1td. Vs. Co''issioner of

Central "#!ise, *sore, (200(250) ".1.$. 326 (ar.)) as decided b7 the

Divisio2 e2ch o; Bar2ataa ?igh !ourt co2cer2ed 3ith credit o; i26uts used i2

5a2u;acturi2g o; storage ta2 b7 the assessee. &he 6eriod i2 uestio2 3as

1,..,001 to *.1.,00,. 7 2oti;icatio2 2o.:/,001 storage ta2 3as i2serted i2

the de;i2itio2 o; Eca6ital goods 3hich 3as held to be a66licable. &he &ribu2al i2

ide2tical circu5sta2ces had also held credit ad5issible. I2 this co2te>t allo3i2g

i2 the assessees a66eal8 the Divisio2 e2ch has tae2 i2to co2sideratio2 the

6rovisio2s o; Rule )AA o; the !e2tral '>cise Rules8 i2 allo3i2g the credit to

the assessee. It 3as observed as u2derC4

$. #he definition of the capital goods itself being

eplicit and clear e are of the opinion that the

#ribunal as in error in ignoring the definition

;capital goods; as enumerated in


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:uestion nos.1 and 2 are concerned. n so far as

:uestion no.' is concerned the #ribunal having itself

come to the conclusion that the storage tan-s are not

movable property, it could not have held that the

assessee ould not be entitled to the benefit of

=odvat credit.

As storage ta2 b7 a 2oti;icatio2 3as declared as a ca6ital goods the i26uts used i2 the

5a2u;acture o; storage ta2 3ere held to be ad5issible. I2 the 6rese2t case the out6ut

service is teleco55u2icatio2 service8 this a2alog7 there;ore is i2a66licable.

e &he decisio2 o; the %u6re5e !ourt i2 the case o; 1C.C.". ew :elhi -s.

;industan anitar*ware < ndustries, (2002(45) ".1.$. 3 (.C.))/, 3as a case

o; ca6tive co2su56tio2. &he assessee 3as a 5a2u;acturer o; sa2itar73ares a2d

used 6laster o; 6aris as i26uts ;or the ;i2al 6roduct o; sa2itar73are. &his i2volved

5ai2g o; 5oulds ;ro5 6laster o; 6aris 3hich i2 tur2 used as i26uts ;or

5a2u;acture o; sa2itar73are. &he assessee had clai5ed the be2e;it o; e>e56tio2

u2der a Noti;icatio2 2o.,1) o; 19:. &he reve2ue decli2ed to gra2t be2e;it o;

e>e56tio2. &he &ribu2al had set aside the orders 6assed b7 the '>cise Authorit7

a2d held that e>e56tio2 3ould a66l7 to the assessee. &he %u6re5e !ourt a;ter

tai2g i2to co2sideratio2 the co2te2ts o; the Noti;icatio2 2o.,/) 3hich sho3ed

that the descri6tio2 o; i26uts give2 i2 colu52 , u2der !ha6ter ,8 3ould be

E6laster o; 6aris a2d the ;i2al 6roduct give2 i2 colu52 * u2der !ha6ter :9

3ould be cera5ic goods held as u2derC4

$. #he proviso postulates a situation here the finalproduct itself is eempted in hich case alone the

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eemption of plaster of paris under 3otification 3o.2179&

cannot be availed. t is nobody;s case that the

sanitaryare falling under %hapter &$ has been eempted

by the %entral >overnment. ?hat is eempted is plastic

moulds but they are only inputs and not final product in this

case. #his fact is further clarified by the %entral

>overnment in 3otification 3o.2219$&, as amended by

3otification 3o.$9$. tem & thereof clearly mentions that

plaster of paris moulds are input for ceramic products.

10. @rom the above discussion, it follos that plaster of

paris hich is used as inputs in relation to the manufacture

of sanitaryare (final product, is eempt under

3otification 3o.2179&, dated 8pril 2, 1$&, as amended.

&his decisio2 there;ore ca22ot be a66lied to the case i2 ha2d.

; I2 so ;ar as the decisio2 o; the Divisio2 e2ch o; this court i2 the

case o; =$he Co''issioner of Central "#!ise Vs. >s...C.1td./ dated

).10.,00 i2 !e2tral '>cise A66licatio2 2o.11 o; ,00, the issue 3as E3hether

the -odvat !redit is ad5issible o2 co56o2e2ts o; Diesel Ge2erati2g Po3er

Pla2t DGPP i2stalled i2 the ;actor7 3he2 the Diesel Ge2erati2g Po3er Pla2ts

are e>e56ted ;ro5 6a75e2t o; dut7. &he Divisio2 e2ch o; this !ourt had

6assed the ;ollo3i2g order i2 reecti2g the a66licatio2 as ;iled b7 the Reve2ueC4

2. t is not in dispute that the Aiesel >enerating Boer Blants

on hich =odvat credit is availed, have been used in the

manufacture of final product and on hich ecise duty has been

paid. #he decision of the #ribunal is in accordance ith the

Cudgment of the 8pe %ourt in the case of !scorts "td. Ds.

%ommissioner of %entral !cise, Aelhi, reported in 2004(171

!"# 14) (S%. Since the :uestion raised in this application is

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covered by the decision of the 8pe %ourt, e dismiss the

application. tile 5ills i2 order to

5ai2tai2 certai2 hu5idit7 ;or the 6ur6ose o; i2creasi2g the stre2gth o; 7ar28

avoidi2g breaages o; 7ar2 a2d i56rovi2g the ualit7 o; 7ar28 are esse2tial to the

5oder2 te>tile i2dustr7. It 3as held that hu5idi;ires are 5achi2er7 used i2 the

5a2u;acture o; cloth a2d ;all 3ithi2 '2tr7 1 o; %chedule ! to the o5ba7 %ales

&a> Act8199. &he a66ella2ts o2 the basis o; this decisio2 i2te2d to ca2vass that

si5ilar to the 6ositio2 o; hu5idi;ires as held b7 the Divisio2 e2ch o; Guarat

?igh !ourt8 to be used i2 5a2u;acturi2g o; the goods8 the to3ers a2d 6arts

thereo; a2d P+ are also to be co2strued to be used i2 6rovidi2g out6ut services

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a2d he2ce8 credit ought to be gra2ted. &his decisio28 ho3ever8 3ould 2ot be

a66licable to the to3ers a2d P+ i2 vie3 o; the ;act that the7 are 2ot directl7

used ;or the out6ut services 2a5el7 teleco55u2icatio2 services a2d ;urther as

the7 are 2o2 e>cisable a2d he2ce8 2ot ;alli2g 3ithi2 the de;i2itio2 o; i26ut as

de;i2ed u2der Rule , o; the !redit Rules.

b &he decisio2 o; the %u6re5e !ourt i2 the case o; 1e'+er, 7oard

of e-enue, Aest 7engal Vs. >s.helps < Co.() 1td., (92) 4 upre'e

Court Cases 2/co2cer2ed the issue i2 regard to the gloves used b7 3or5e2

e2gaged i2 hot obs a2d ha2dli2g corrosive substa2ces to uali;7 as goods used

i2 the course o; 5a2u;acture o; the goods ;or sale. &he issue 3hich ;ell ;or

co2sideratio2 3as u2der the e2gal +i2a2ce %ales &a> Act819=1. &he %u6re5e

!ourt co2sidered as to 3hat should be 5ea2t b7 the 3ordi2g H;or use b7 hi5 i2

the 5a2u;acture o; goods ;or saleK as a66eari2g i2 %ectio2 , o; e2gal

+i2a2ce %ales &a> Act819=18 5ai2g a re;ere2ce to the earlier decisio2 re2dered

i2 the case o; H=9s.E.F.%otton Spinning G ?eaving =ills %o."td. Ds. Sales #a

/fficer, Fanpur and 8nr., (8< 1$&) S% 1'10K 3herei2 it 3as held that the

e>6ressio2 Hi2 the 5a2u;acture o; goodsK 3ould 2or5all7 e2co56ass the e2tire

6rocess carried o2 b7 the dealer o; co2verti2g ra3 5aterials i2to ;i2ished goods

a2d that 3here a27 6articular 6rocess is so i2tegrall7 co22ected 3ith the ulti5ate

6roductio2 o; goods8 that but ;or that 6rocess8 5a2u;acture or 6rocessi2g o;

goods 3ould be co55erciall7 i2e>6edie2t8 goods reuired i2 that 6rocess 3ould

;all 3ithi2 the e>6ressio2 Hi2 the 5a2u;acture o; goods.K. It 3as held that the

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Assessee co56a27 had sold goods i2 uestio2 to certai2 5a2u;actures 3ho are

5a2u;acturi2g iro2 steel 5aterials a2d that the gloves 3ere to be used b7

3or5e2 3ho 3ere e2gaged i2 hot obs or i2 ha2dli2g corrosive substa2ces i2

the course o; 5a2u;acture. It 3as there;ore8 held that it ca22ot be de2ied that the

gloves had to be used i2 the course o; 5a2u;acture.

As this decisio2 co2cer2ed the 5a2u;acturi2g o; e>cisable goods 3hich is

di;;ere2t ;ro5 the 6rese2t co2te>t o; a e>cisable service 2a5el7

teleco55u2icatio2 service8 the sa5e is o; 2o avail to the a66ella2t.

c &he decisio2 o; the %u6re5e !ourt i2 the case o; =Co''issioner

of Custo's, olkata Vs. upa and Co.1td, (2004(0) ".1.$. 29 (.C.)4 the

;acts 3ere that u2der Noti;icatio2 2o.,9/9)4!us. dated 1.=.199) e>e56tio2 ;ro5

custo5 dut7 3as gra2ted to ca6ital goods8 co56o2e2ts a2d s6ares thereo; etc.

i56orted u2der the '>6ort Pro5otio2 !a6ital Goods %che5e 'P!G %che5e.

$2der the 'P!G %che5e the ca6ital goods i56orted 3ere e>e56ted ;ro5

6a75e2t o; custo5s dut7 a2d so 5uch o; the additio2al dut7 as 3as i2 e>cess o;

the a5ou2t calculated at the rate o; 10 o; the value o; the goods. $2der the

6roviso8 i; the ca6ital goods 3ere i56orted ;or 5a2u;acture o; ite5s 5e2tio2ed

therei2 the2 the7 3ere e>e56ted ;ro5 6a75e2t o; 3hole o; the additio2al dut7.

&hus8 i2 the ;acts o; the case8 i; the ca6ital goods 3ere i56orted ;or the

5a2u;acture o; te>tile gar5e2ts the2 u2der the 2oti;icatio2 the i56orter 3ould

be e>e56ted ;ro5 6a75e2t o; custo5s dut7 a2d additio2al dut7. &he assessee

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had i56orted 5achi2es ;or 6rocessi2g o; ;abric/7ar28 ;abric i2s6ectio2 5achi2es8

5achi2es ;or 2itti2g a2d d7i2g ;abrics a2d other such 5achi2es. &he assessee

3as de2ied be2e;it o; 100 e>e56tio2 o2 the grou2d that the 5achi2es i56orted

b7 the5 3ere 2ot reuired ;or the 6ur6oses o; 5a2u;acture o; te>tile gar5e2ts.

I2 this co2te>t8 the %u6re5e !ourt i2 6aragra6hs a2d 9 has observed as u2derC4

. @urther, in our vie, this 3otification is very clear.

#he 100H eemption is given to capital goods re:uired

for manufacture of, amongst others, tetile garments.

#he term capital goods has been defined in the

3otification. #he term capital goods means goods

hich are used in the manufacture of that product and

also goods hich ould be re:uired for manufacture or

production of other goods including pac-aging

machinery and e:uipments. #he term also includes

instruments for testing, research and development. #he

term includes machines for pollution control,

refrigeration, poer generating sets etc. #hus, the

eample, if after manufacturing of tetile garments the

same have to be pac-ed, the machinery re:uired for

pac-ing ould be capital goods re:uired for

manufacture of tetile garments. Similarly, refrigeration

machinery for refrigerating the plant ould also fall

ithin the term capital goods re:uired for manufacture

of tetile garments. f such sort of e:uipments and

machinery get covered by the term capital goods e

fail to understand as to ho machinery re:uired for

-nitting, dyeing, compacting are not covered.

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$. @or the purposes of manufacture of garments it

cannot be said that only stitching and -nitting machines

are re:uired. 8part from stitching and cutting the

manufacturer may himself manufacture the yarn or

fabric. #he :uality of the yarn or fabric ould have to

be tested. =achines ould be re:uired for that.

Similarly, machines for dyeing and9or drying the fabric

or yarn, machines for inspecting the defects etc. ould

be re:uired. #he term capital goods re:uired for

manufacture of tetile garments ould thus include all

machines re:uired for the ultimate manufacture of the

garments. #he 3otification has its on safeguards. #he

import can only be under a license issued under the

!B%> scheme. #he license ould contain a condition

that garments must be eported by the importer. #he

3otification also contains a condition that the capitalgoods (hich are imported are installed in the

importers; factory or premises and a certificate to that

effect has to be produced ithin & months of the date of

the import.

@e are a;raid that this udg5e2t is o; a27 assista2ce to the a66ella2t. &he

observatio2s o; the %u6re5e !ourt i2 6aragra6h clearl7 i2dicates that the ter5

ca6ital goods 3as de;i2ed i2 the Noti;icatio2 so as to i2clude goods 3hich are

used i2 the 5a2u;acture o; that 6roduct a2d also goods 3hich 3ould be reuired

;or 5a2u;acture or 6roductio2 o; other goods i2cludi2g 6acagi2g 5achi2er7 a2d

eui65e2ts. I2 vie3 o; the 3ide de;i2itio2 o; the ter5 ca6ital goods as

i2ter6reted8 the %u6re5e !ourt has co5e to the co2clusio2 that the Assessee 3as

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e2titled ;or the be2e;it o; the e>e56tio2 2oti;icatio2. ?o3ever8 i2 the 6rese2t

case8 the ter5 ca6ital goods as de;i2ed i2 Rule ,aA does 2ot i2clude to3er

a2d 6arts thereo; or the P+ so that the said goods uali;7 as ca6ital goods a2d

beco5e e2title to credit o; the dut7 6aid thereo2.

d I2 the decisio2 o; the %u6re5e !ourt i2 the case o; 1ndian

Far'ers Fertilisers Coop.1td. Vs. C.C."., %h'eda+ad, (996(86) ".1.$.

(.C.))4the issue 3as E3hether the a55o2ia used i2 the o;;4site 6la2ts is also

a55o2ia 3hich is used else3here i2 the 5a2u;acture o; ;ertilisers. A2

e>e56tio2 Noti;icatio2 2o.1)/:14 !.'. 3as issued u2der the 6rovisio2s o; Rule

o; the !e2tral '>cise Rules 3hereb7 the !e2tral Gover25e2t e>e56ted ra3

2a6htha ;alli2g u2der ite5 2o.: o; the +irst %chedule to the !e2tral '>cises a2d

%alt Act819==8 ;ro5 the 6a75e2t o; e>cise dut7 i2 e>cess o; Rs.=.*: 6er ilolitre

at 1 degrees ce2tigrade. &he e>e56tio2 Noti;icatio2 a66lied Hi2 res6ect o; such

ra3 2a6htha as is used i2 the 5a2u;acture o; A55o2ia 6rovided such A55o2ia

is used else3here i2 the 5a2u;acture o; ;ertilisersK a2d the 6rocedure set out i2

!ha6ter 4( o; the said Rules 3as ;ollo3ed. &he a66ella2t4assessee 3as i2 the

5a2u;acture o; urea 3hich 3as a ;ertiliLer a2d utilised ;or the 6ur6ose ra3

2a6htha. &he ra3 2a6htha 3as obtai2ed at the co2cessio2al rate o; dut7 a2d 3as

used ;or 6roduci2g a55o2ia 3hich i2 tur2 3as used 6artl78 directl7 i2 the urea

6la2t a2d 6artl78 directl78 i2 the 6roductio2 o; urea b7 bei2g e56lo7ed i2 o;;4site

6la2ts viL. the 3ater treat5e2t 6la2t8 stea5 ge2eratio2 6la2t8 i2ert gas ge2eratio2

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6la2t a2d e;;lue2t treat5e2t 6la2t8 all o; 3hich 3ere 6art o; the i2tegral 6rocess

o; the 5a2u;acture o; urea. %ho3 cause 2otices 3ere issued to the a66ella2t cise dut7 at

;ull rate o2 the ra3 2a6htha used ;or 5ai2g a55o2ia 3hich has bee2 used i2

3ater treat5e2t 6la2t8 stea5 ge2eratio2 6la2t8 i2ert gas ge2eratio2 6la2t a2d

e;;lue2t treat5e2t 6la2t o2 the grou2d that such ra3 2a6htha 3as 2ot used i2 the

5a2u;acture o; ;ertilisers4 urea. &he de5a2d 3as co2;ir5ed. I2 a66eal b7 the

a66ella2ts8 the !ollector o; !e2tral '>cise a2d !usto5s u6held the co2te2tio2 o;

the a66ella2ts i2so;ar as the a55o2ia 3as used i2 the 3ater treat5e2t 6la2t8

stea5 ge2eratio2 6la2t a2d i2ert gas ge2eratio2 6la2t. ?o3ever8 as regards the

e;;lue2t treat5e2t 6la2t 3as co2cer2ed8 the !ollector too a vie3 that the

e;;lue2ts 3ere 3aste 6roduced a;ter the ;ertilisers had bee2 5a2u;actured a2d

that treat5e2t o; e;;lue2t ca22ot be directl7 li2ed to the 6rocess o; 5a2u;acture

o; ;ertiliLer a2d the e;;lue2t treat5e2t 6la2t could 2ot be said to be i2tegral 6art

o; the 6rocess o; 5a2u;acture o; ;ertiliLers. &he de5a2d o2 the a66ella2t4

assessee i2so;ar as it related to the e;;lue2t treat5e2t 6la2t 3as8 there;ore u6held.

&here 3ere cross a66eals ;iled be;ore the &ribu2al b7 the assessee a2d b7 the

reve2ue. &he &ribu2al reversed the decisio2 o; the !ollector i2so;ar as it held

that o;;4site 6la2ts other tha2 e;;lue2t treat5e2t 6la2t 3ere 6art o; the 6rocess o;

5a2u;acture o; ;ertiliLers. It held that A55o2ia 3as used ;or the 5ai2te2a2ce o;

the 6la2t a2d eui65e2t 5ea2t ;or testi2g a2d co55issio2i2g the 6la2t a2d could

2ot be said to be utilised i2 5a2u;acture. It 3as held that the 6ur6ose o; 3ater

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treat5e2t bei2g esse2tial ;or the 6rotectio2 o; the boiler a2d other 6rocess

eui65e2t ;ro5 corrosio28 ;or5atio2 o; scales8 etc. the a55o2ia used ;or the

said 6ur6ose could 2ot be said to be used i2 the 5a2u;acture o; ;ertiliLers. As

regards the ;i2di2gs o; the !ollector8 i2 so ;ar as the e;;lue2t treat5e2t 6la2t 3as

co2cer2ed8 the sa5e 3ere u6held. I2 this co2te>t8 re;erri2g to its earlier decisio2s

i2 the case o; H-/s.#.B.!otto2 %6i22i2g @eavi2g -ills !o.td. "s. %ales &a>

O;;icer8 Ba26ur a2d A2r.8 19:1 %!R 900K a2d H!ollector o; !e2tral '>cise8

!alcutta4II vs. 'aste2d Pa6er I2dustries td.8 199= %!! ,== held that the

treat5e2t o; e;;lue2ts ;ro5 a 6la2t is a2 esse2tial a2d i2tegral 6art o; the 6rocess

o; 5a2u;acture i2 the 6la2t a2d that the a66aratus used ;or such treat5e2t o;

e;;lue2ts i2 a 6la2t 5a2u;acturi2g a 6articular e2d 6roduct is 6art a2d 6arcel o;

the 5a2u;acturi2g 6rocess o; that e2d 6roduct. It 3as held that the a55o2ia

used i2 the treat5e2t o; e;;lue2ts ;ro5 the urea 6la2t o; the assessee 3as

there;ore8 reuired to be held to be used i2 the 5a2u;acture o; urea a2d the ra3

2a6htha used i2 the 5a2u;acture o; such a55o2ia 3ould be e2titled ;or

e>e56tio2. &his co2clusio2 3as reached o2 the basis o; the observatio2s that the

e>e56tio2 Noti;icatio2 did 2ot reuire that the a55o2ia should be used directl7

i2 the 5a2u;acture o; ;ertilisers a2d that it reuires o2l7 that the a55o2ia should

be used i2 the 5a2u;acture o; ;ertilisers. It 3as observed that e>e56tio2

2oti;icatio2 5ust be so co2strued as to give due 3eight to the liberal la2guage it

uses.

+ro5 6erusal o; the ;acts a2d the observatio2s o; the %u6re5e

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!ourt i2 this decisio2 as relied u6o2 b7 the a66ella2ts8 it is clear that the %u6re5e

!ourt had co2strued the 6rovisio2s o; the 2oti;icatio2 b7 3hich e>e56tio2 3as

gra2ted. As the 2oti;icatio2 did 2ot bar use o; A55o2ia ;ro5 a27 i2direct use i2

the ;actor o; the assessee8 the %u6re5e !ourt held that the 3ater treat5e2t 6la2t8

stea5 ge2eratio2 6la2t a2d i2ert gas ge2eratio2 6la2ts are 6art a2d 6arcel o;

co56osite 6rocess a2d that A55o2ia used i2 these a2cillar7 6la2ts is also used

i2 5a2u;acture o; ;ertiliser.

e I2 the decisio2 o; the %u6re5e !ourt i2 the case o; =B..Cotton

pg. < A-g. ills Co.1td. Vs. ales $a# ffi!er, anpur, (99(9) ".1.$. 34

(.C.))/ the issue arose u2der the !e2tral %ales &a> Act819: i2 res6ect o; the

busi2ess o; the assessee deali2g i2 5a2u;acture o; cotto2 te>tiles8 tiles a2d other

co55odities ;or sale. &he assessee 3as deali2g i2 the goods 3hich 3ere

ordi2aril7 6urchased i2 the course o; i2ter4%tate trade ;or 3hich it had sought

registratio2 as dealer u2der %ectio2 )1 o; the !e2tral %ales &a> Act8 19: i2

res6ect o; the ite5s viL. coal. I2 the registratio2 certi;icate the %ales &a> O;;icer

ca2celled the s6eci;icatio2 a2d issued a sho3 cause 2otice as to 3h7 registratio2

should 2ot be a5e2ded so as to e>clude certai2 ite5s. &he assessee i2 re6l7 to

the sho3 cause 2otice co2te2ded that all the articles s6eci;ied i2 the certi;icate

3ere reuired i2 the 5a2u;acture a2d 6rocessi2g o; goods ;or sale. 7 a2 order

6assed b7 the %ales &a> O;;icer8 certai2 ite5s u2der the certi;icate o; registratio2

3ere deleted. Agai2st this actio2 o2 the 6art o; the %ales &a> O;;icer8 the

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Assessee had a66roached the Allahabad ?igh !ourt. &he ?igh !ourt held that

dra3i2g i2stru5e2ts8 6hotogra6hic 5aterials8 colours8 che5icals8 electricals8

5achi2er7 a2d buildi2g 5aterials such as ce5e2t8 li5e are 2ot co56rehe2ded i2

the e>6ressio2 Hi2 the 5a2u;acture or 6rocessi2g o; goods ;or saleK u2der

%ectio2 *b read 3ith Rule 1* a2d dis5issed the 6etitio2 ;iled b7 the

assessee. &he assessee had a66roached the %u6re5e !ourt. It is i2 this co2te>t

i2 co2strui2g the 6rovisio2s o; %ectio2 *b a2d Rule 1*8 it 3as observed that

b7 Rule 1* the !e2tral Gover25e2t has 6rescribed the goods re;erred to i2

%ectio2 *b8 such goods 5ust be i2te2ded ;or use i2 the 5a2u;acture or

6rocessi2g o; goods ;or sale or i2 5i2i2g or ge2eratio2 or distributio2 o; 6o3er8

a2d the i2te2ded use o; the goods 5ust be as s6eci;ied i2 Rule 1. It 3as

observed that u2der Rule 1* read 3ith %ectio2 *b 5ere i2te2tio2 to use the

goods i2 the 5a2u;acture or 6rocessi2g o; goods ;or sale8 3ill 2ot be a su;;icie2t

grou2d ;or s6eci;icatio2. &he i2te2tio2 5ust be to use the goods as ra3 5aterials8

as 6rocessi2g 5aterials8 as 5achi2er78 as 6la2t8 as eui65e2t8 as tools8 as stores8

as s6are 6arts8 as accessories8 as ;uel or as lubrica2ts. It is i2 this co2te>t8 it 3as

held that the e>6ressio2 Hi2 the 5a2u;acture o; goodsK should 2or5all7

e2co56ass the e2tire 6rocess carried o2 b7 the dealer o; co2verti2g ra3 5aterials

i2to ;i2ished goods a2d 3here a27 6articular 6rocess is so i2tegrall7 co22ected

3ith the ulti5ate 6roductio2 o; goods that but ;or that 6rocess8 5a2u;acture or

6rocessi2g o; goods 3ould be co55erciall7 i2e>6edie2t8 goods reuired i2 that

6rocess 3ould ;all 3ithi2 the e>6ressio2 Hi2 the 5a2u;acture o; goodsK.

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&he a;oresaid observatio2s o; the %u6re5e !ourt 3ere clearl7 i2

the co2te>t o; %ectio2 *b o; the !e2tral %ales &a> Act a2d Rule 1* as

releva2t i2 the said decisio2. ?o3ever8 the co2te>t i2 the 6rese2t case as ;alli2g

u2der the de;i2itio2 o; i26ut as de;i2ed u2der Rule , 3ould 2ot 6er5it the

i2ter6retatio2 as it beca5e 6ossible u2der the !e2tral %ales &a> Act as i2 this

decisio2 o; the %u6re5e !ourt8 as the to3ers a2d P+ ca22ot be co2sidered to

be a2 i2tegral 6art o; the out6ut services viL. teleco55u2icatio2 services8

i2as5uch as the teleco55u2icatio2 services beco5e viable o2 accou2t o;

a2te22a8 the to3ers a2d P+ are i55ovable i2 2ature ;i>ed to the earth a2d

ca22ot be regarded as esse2tial i26uts i2as5uch as a2 a2te22a ca2 be i2stalled

irres6ective o; to3er or o2e to3er ca2 i2stall 2u5ber o; a2te22as ;or di;;ere2t

service 6roviders a2d he2ce8 the sa5e ca22ot be regarded as i2tegral 6art o; the

out6ut services as bei2g 6rovided b7 the a66ella2ts.

; &he a66ella2ts the2 6laced relia2ce o2 the decisio2 o; A2dhra Pradesh

?igh !ourt i2 the case o; 1ndus $owers 1td. Vs. C$, ;*dera+ad, ((202) 52

V$ 44)48 o2 the basis o; 3hich o; 3hich the A66ella2t co2te2d that the to3ers

a2d the P+ bei2g e56lo7ed i2 erectio2 a2d 5ai2te2a2ce o; cell 6ho2e to3ers

are i2tegral to teleco55u2icatio2 2et3or a2d he2ce uali;7 as i26uts u2der the

!redit Rules. &he issue i2 the case o; I2dus &o3ers arises i2 the co2te>t o;

adudicatio2 o; a sales ta> dis6ute u2der the !e2tral %ales &a> Act 5ore

6articularl7 i2 regard to the co2structio2 o; %ectio2 1*b a2d d a2d = o;

the !e2tral %ales &a> Act819:8 i2 regard to 6urchase o; goods b7 the dealer ;ro5

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the outside %tate co56risi2g o; goods s6eci;ied i2 the certi;icate o; registratio2

u2der the !e2tral %ales &a> Act gra2ted to it agai2st the issue o; H!K ;or5 a2d

3ere goods e56lo7ed ;or erectio2 a2d 5ai2te2a2ce o; cell 6ho2e to3ers 3hich

3ere co2te2ded to be i2tegral to co55u2icatio2 2et3or. &he Divisio2 e2ch

o; A2dhra Pradesh ?igh !ourt re;erred to a2 earlier Divisio2 e2chs udg5e2t

i2 the case o; H%tate o; A2dhra Pradesh "s. harat %a2char Niga5 td.8

,01,=9 "%& 9 APK a2d observed that teleco55u2icatio2 to3ers are held

to be i55ovable 6ro6ert7. ear2ed !ou2sel ;or the A66ella2t has relied o2 the

;ollo3i2g observatio2 i2 the udg5e2tC4

H'1. #elecommunication toers are held by a Aivision +enchof this %ourt in +S3" (20124$ DS# $ (8B to be immovable

property. ?e are not informed at the +ar that the Cudgment in+S3" (2012 4$ DS# $ (8B has either been stayed or

appealed against or the ratio of the said decision stands

eclipsed. #his Cudgment has also analysed that the serviceproviders (passive infrastructure service providers provide

other assets li-e shelter, air*conditioning e:uipment, dieselgenerator, electrical iring, poer plant, etc., for their netor-

operations and concluded that sharing of infrastructure isincidental and only as a means of rendition of

telecommunication serviceI that the effective control andpossession of such e:uipment continues ith the passive service

providerI is not parted to the other service providers ho aremerely permitted use of this e:uipmentI and levying ta on the

proceeds received by the passive infrastructure provider from

sharing of their infrastructure ith other service providers,treating it as a sale under !planation D to sub*section (2 of

Section 2 of the 8BD8# 8ct,200), is ithout Curisdiction andillegal.

'$. n the facts and circumstances of this lis (adverted

to supra, in vie of the ratio deducible from the Cudgments ofthe Supreme %ourt in


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against issue of % forms and where the goods ha-e +eene'plo*ed in ere!tion and 'aintenan!e of !ell phone towers

whi!h are integral to tele!o''uni!ation network, fall ithin

the ambit of section (1 read ith section ('(b of the %S#8ct and are entitled to be taed accordingly. #he fact that the

goods purchased by the petitioners ere neither sold nor used inthe manufacture of goods for re*sale does not constitute

violation of the % forms. %onse:uently, levy of penalty, on thefactual parameters apparent on the record of these cases is

uns

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