[BREAKING] Telecom Towers, Pre-Fab Buildings Qualify as Capital Goods for GST/CENVAT Input Tax Credit: Rajasthan HC [Read Order]

In a recent ruling, the Rajasthan High Court has concurred with the Supreme Court decision in Bharti Airtel and held that telecom towers and pre-fabricated buildings qualify as capital goods eligible for input tax credit under the CENVAT regime.

The decision was delivered in Commissioner of Central Goods and Service Tax, Jaipur vs. Bharti Hexacom Limited, dismissing an appeal filed by the department against a 2018 order of the Central Excise Service Tax Appellate Tribunal ( CESTAT ).

E-Filing Mistakes Can Be Costly! Avoid penalties now - Click Here

The division bench, comprising Justice Avneesh Jhingan and Justice Maneesh Sharma, upheld the tribunal’s order that favored Bharti Hexacom Ltd., a leading telecom service provider. The case revolved around the admissibility of CENVAT credit availed by the company on mobile towers and associated material during the period from September 1, 2004 to March 1, 2006.

The central goods and services tax/excise department had earlier issued a demand order on March 12, 2015, invoking the extended period of limitation, contending that Bharti Hexacom had wrongly claimed CENVAT credit on items that, in its view, did not qualify as input or capital goods.

E-Filing Mistakes Can Be Costly! Avoid penalties now - Click Here

The respondent had successfully challenged this demand before CESTAT, which ruled in their favor on June 12, 2018. The department, aggrieved by this outcome, had approached the High Court.

The High Court admitted the appeal on January 22, 2019, to examine two key legal questions:

1. Whether CESTAT erred in setting aside the demand for the extended period despite there being no dispute on the inadmissibility of credit during the relevant period.

E-Filing Mistakes Can Be Costly! Avoid penalties now - Click Here

2. Whether CESTAT was justified in ignoring the fact that the credit details were not disclosed by the assessee to the department.

In its detailed order, the High Court noted that at the time of availing credit, there were divergent judicial views on the issue from different High Courts, including Bombay and Delhi. This divergence, it held, indicated the absence of deliberate concealment by the assessee — a prerequisite for invoking the extended limitation period.

E-Filing Mistakes Can Be Costly! Avoid penalties now - Click Here

Importantly, the Court referred to the Supreme Court’s 2024 landmark ruling in Bharti Airtel Ltd. vs. Commissioner of Central Excise, which settled the legal position. The apex court had categorically held that telecom towers and prefabricated structures were not immovable properties and fell within the ambit of capital goods, thereby qualifying for CENVAT credit.

Read More: Supreme Court allows Telecom Operators CENVAT Credit on Infrastructure Duties

Following the Supreme Court’s authoritative judgment, the Rajasthan High Court concluded that the core issue of admissibility was already resolved in favor of the assessee. As such, the question of invoking the extended period of limitation became infructuous, and the department’s appeal was dismissed accordingly.

E-Filing Mistakes Can Be Costly! Avoid penalties now - Click Here

The decision reaffirms that CENVAT/input tax credit entitlement cannot be denied where legal interpretations have evolved over time, and penal provisions cannot be applied retrospectively in such contexts.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates