Order date – 26 September 2022

Facts – 

• The Appellant, M/s Bharti Infratel Limited, is engaged in the provision of telecom infrastructural support services to various telecom companies and discharges service tax on the same under the category of 'support service of business or commerce’.
• For providing the output service of BSS, the appellant purchased various capital goods namely lead acid batteries, air conditioners, transmission racks, fire alarms, smoke detectors. and availed CENVAT credit thereon. The credit availed on capital goods were utilized by the appellant in discharging the output service tax liability.
• The appellant, thereafter, removed certain capital goods after their usage which was waste/scrap.
• At the time of removal, neither credit was reversed, nor any amount was paid as the appellant believed that there was no requirement of payment/reversal by an output service provider under rule 3(5A) of the CENVAT Credit Rules 20043 during the relevant period.
• During the course of investigation, the appellant also deposited an amount of Rs. 12,00,00,000/- under protest. Thereafter, a show cause notice dated 27.10.2015 proposing recovery of amount in terms of rule 3(5A) of Credit Rules along with interest and penalty was issued to the appellant, which was later confirmed by the authorities.
• Aggrieved, the appellant filed an appeal.

Issue – 

• Whether the demand made on the amount required to be paid in terms of rule 3(5A) of the Credit Rules for capital goods cleared as scrap is sustainable?

Order – 

• The Tribunal relied on the decision of the Division Bench of Tribunal in Bharti Infratel Ltd., and observed that the appellant has also undertaken an internal procedure for determination of the nature of the capital goods to be cleared by it.
• The goods are thereafter sent to OEM and Chartered Engineer for further verification as to whether the goods qualify as scrap. Only when the goods have been certified that they were sold as to scrap management companies having registration under Hazardous Waste Management Rules.
• It is, therefore, clear that the capital goods cleared by the appellant would qualify as scrap and no amount was required to be paid while clearance of the same by the appellant.
• Therefore, the amount earlier paid by the appellant and which has been appropriated in the impugned order shall be refunded to the appellant with applicable rate of interest.
• Order was set aside and the appeal was allowed.