Telecom towers & PBFs are 'goods' & qualify as Inputs under Rule 2(k): CESTAT allows Vodafone Idea to avail CENVAT Credit [Read Order]

The Allahabad bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) allowed Vodafone Idea to avail CENVAT credit on telecom towers and prefabricated buildings (PFBs) as the bench reached the conclusion that these structures qualify as "goods" and can be considered "inputs" under Rule 2(k) of the CENVAT Credit Rules, 2004.

In this case, the appellant provides communications services and receives Cenvat credit. During the review of the appellant's record, it was discovered that the appellant had claimed credit for a variety of things, including 'Tower', 'Shelter', 'Electric Setup', electronic equipment, and prefabricated shelters. 

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To the displeasure of the appellant, Revenue deemed the Cenvat credit for these purchases inadmissible. The appellant was issued show cause notices and later proceeded with adjudication.

One of the issues in this present case was whether telecom towers and PFBs could be classified as "inputs" under Rule 2(k) of the CENVAT Credit Rules, which defines "input" as all goods used for providing any output service.

The Revenue had challenged the admissibility of CENVAT credit on these structures, arguing that they were immovable property and not "goods" eligible for credit.

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The tribunal relied on the decision of Bharti Airtel Ltd. V/s CCE, Pune SCC OnLine SC 3374 dated 20.11.2024 in which the Supreme Court observed that telecom towers and PFBs are indeed "goods" and not immovable property and that these structures are essential for providing mobile telecommunication services and are therefore "inputs" under Rule 2(k).

The bench observed that the definition of "input" under Rule 2(k) is broad and includes any goods used directly or indirectly for providing output services. It noted that telecom towers and PFBs are indispensable for the effective functioning of antennas, which receive and transmit radio signals, making them crucial for delivering mobile telecommunication services

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The tribunal also referred to earlier judicial precedents, including a Gujarat High Court's decision, which held that even equipment not directly involved in the manufacturing process but essential for the quality of the final product could be considered "inputs."

The CESTAT reached the conclusion that telecom towers and PFBs, though not electrical equipment themselves, are essential for the proper functioning of antennas and thus qualify as "inputs" under Rule 2(k).

The CESTAT allowed Vodafone Idea's appeals and dismissed the Revenue's appeal

To Read the full text of the Order CLICK HERE

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