CESTAT Sets Aside Rs.57.96 Lakh Demand in Bharat Sanchar Nigam Ltd. Appeal, Holds CENVAT Credit on Telecom Towers and Pre-fabricated Buildings Cannot Be Denied [Read Order]

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has held that CENVAT credit on telecom towers and pre-fabricated buildings used for providing mobile services is admissible, in line with settled precedent by the Supreme Court. The appeal filed by Bharat Sanchar Nigam Ltd (BSNL) was thus allowed.

The public sector telecom operator appealed against an order passed by the Commissioner of Central Excise & Service Tax, confirming a demand of Rs.57.96 lakh. The demand arose from a show cause notice alleging that BSNL had wrongly availed credit on towers installed for providing telecommunication services. The towers were believed to be neither capital goods nor inputs under the CENVAT Credit Rules. Another ground was that it had been availed on the basis of documents issued by the Input Service Distributor (ISD) which were allegedly not prescribed under Rule 9.

Before the Bench, the appellant contended that the issue of admissibility of credit on towers and pre-fabricated buildings was no longer res integra, as the Supreme Court had settled the issue in Bharti Airtel Ltd & Others. It was also argued that denial of credit on the basis of ISD documents had already been set aside by the Tribunal in BSNL’s own case earlier.

The Bench, comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) heard both sides and perused the records.

The Tribunal noted that the Supreme Court, in Bharti Airtel Ltd., had held that telecom towers and pre-fabricated buildings are indispensable for the effective functioning of antennas and therefore have a clear nexus with the provision of output telecommunication services. The Apex Court had further held that such towers qualify as “inputs” under Rule 2(k) of the CENVAT Credit Rules and are not to be treated as immovable property.

On the issue of credit availed on ISD documents, the Tribunal observed that where the receipt of services and admissibility of credit were not in dispute, substantive CENVAT credit could not be denied merely on procedural grounds. It was noted that the Department had failed to establish any infirmity in the documents.

In view of the binding precedent of the Supreme Court and the settled position of law, the Tribunal held that the denial of CENVAT credit was unsustainable. Accordingly, the appeal filed by BSNL was allowed.

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