Towers and Shelters are not Immovable Properties: Delhi HC allows Cenvat Credit to Vodafone [Read Judgment]

In a ruling favoring Vodafone Mobile Services Limited, a division bench of the Delhi High Court has held that the towers and shelters are not immovable properties for the purpose of granting Cenvat Credit to the Company.

The CESTAT, in its order, dismissed an appeal by the company and held that cenvat credit cannot be allowed as the goods are not capital goods.

Before the Court, the Revenue contended that the towers and shelters are not per se immovable property but transform and become immovable as they are permanently embedded in the earth in as much as they are fixed to a foundation embedded in the earth.

The bench comprising Justices Ravindra Bhatt and Sanjeev Sachdeva observed that in Vodafone India Limited, the Bombay High court held that towers and shelters purchased by the assessee for providing telecommunication service to be immovable property and hence, the assessee was not entitled to the credit of duty paid on them.

The bench noted that the entire tower and shelter is fabricated in the factories of the respective manufacturers and these are supplied in CKD condition. They are merely fastened to the civil foundation to make it wobble free and ensure stability. They can be unbolted and reassembled without any damage in a new location. The detailed affidavit filed by the assessees demonstrate that installation or assembly of towers and shelters is based on a rudimentary “screwdriver” technology. They can be bolted and unbolted, assembled and re-assembled, located and relocated without any damage and the fastening to the earth is only to provide stability and make them wobble and vibration free; devoid of intent to annex it to the earth permanently for the beneficial enjoyment of the land of the owner.

It was further observed that the towers and shelters support the BTS ineffective transmission of the mobile signals and therefore, enhance their efficiency. The towers and shelters plainly act as components/ parts and in the alternative as the accessory to the BTS and would are covered by the definition of “capital goods”.

“On an application of the above tests to the cases at hand, this court sees no difficulty in holding that the manufacture of the plants in question do not constitute annexation and hence cannot be termed as immovable property for the following reasons: (i) The plants in question are not per se immovable property. (ii) Such plants cannot be said to be “attached to the earth” within the meaning of that expression as defined in Section 3 of the Transfer of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed,” the bench said.