Telecom Operators Entitled to CENVAT Credit on Towers and Shelters as Capital Goods/Inputs: CESTAT in Bharti Airtel Case [Read Order]
CESTAT held that telecom operators like Bharti Airtel are entitled to CENVAT credit on towers and prefabricated shelters as capital goods or inputs used for providing telecommunication services.
Bharti - Airtel - Taxscan
Bharti - Airtel - Taxscan
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that telecom operators are entitled to avail CENVAT credit on towers and prefabricated shelters as capital goods or inputs used for providing telecommunication services.
Bharti Airtel Limited, the appellant, is engaged in providing telecommunication and cellular mobile network services using both active infrastructure such as Base Station Controllers and antennas, and passive infrastructure such as towers and prefabricated buildings.
The department disputed the availment of CENVAT credit on towers, shelters, and related services, alleging that they were immovable property and not eligible for credit under the CENVAT Credit Rules, 2004.
Multiple show cause notices were issued for the period from October 2003 to March 2009, and the adjudicating authority confirmed the demands with interest and equal penalties. Aggrieved, the appellant approached the tribunal.
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The appellant’s counsel argued that the issue was already settled by the Supreme Court in the appellant’s own case, which held that towers and shelters are essential accessories to antennas and Base Transceiver Stations and qualify as capital goods or inputs used for providing output service.
The counsel relied on several judgments of high courts and tribunals which supported the admissibility of credit on such infrastructure. They further argued that the issue was interpretational in nature and, hence, interest and penalties were not sustainable.
The revenue counsel argued the findings of the impugned orders and contended that towers and shelters are immovable and cannot be considered goods eligible for CENVAT credit.
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The two-member bench comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the issue is no longer open to dispute, as the Supreme Court has already held that towers and prefabricated shelters are accessories to antennas and Base Transceiver Stations and fall within the definitions of capital goods and inputs under the CENVAT Credit Rules.
The tribunal explained that these items are indispensable for providing mobile telecommunication services and are used directly in rendering the output service. The tribunal pointed out that, in view of the Supreme Court’s decision, the demands raised by the department could not be sustained. The tribunal allowed all four appeals filed by Bharti Airtel with consequential relief and set aside the demands, interest, and penalties.
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