Win for BSNL: CESTAT Rules Materials used in Mobile Tower Installation Qualify as ‘Inputs’ u/r 2(k) of Cenvat Credit Rules [Read Order]

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that materials used in the installation of mobile towers and Base Transceiver Stations (BTS) by Bharat Sanchar Nigam Limited (BSNL) qualify as ‘inputs’ under Rule 2(k) of the CENVAT Credit Rules, 2004.

BSNL, the appellant, is a public sector undertaking engaged in providing telecommunication services across India. During a special audit conducted by the Service Tax Department, it was observed that BSNL had availed CENVAT credit on materials such as angles, channels, and beams used in the erection of telecom towers and BTS during the period from July 1, 2008 to March 31, 2009.

Tax Planning For NRIs - CLICK HERE

The department argued that such items were ineligible for credit as they were neither capital goods nor inputs under the CENVAT Credit Rules. A show cause notice was issued, and the adjudicating authority confirmed the demand with interest and penalty under Rule 15(1) of the CENVAT Credit Rules, 2004.

Read More: New ISD Rules Effective April 2025: How Debit and Credit Notes Affect ITC Distribution

BSNL filed an appeal before the CESTAT. The appellant argued that the matter was no longer res integra in view of the Supreme Court's judgment in Bharati Airtel Ltd. v. CCE, Pune, (2024) 24 Centax 266 (SC), which held that telecom towers and associated materials used in providing mobile telecommunication services are movable goods and qualify as ‘inputs’ for the purpose of availing CENVAT credit.

The department’s counsel argued that such materials formed part of immovable property and were not directly used in providing output services. They argued that the structure of a telecom tower was not an input in the strict sense as envisaged under the rules and was therefore not eligible for credit.

Read More: DGFT Operationalises Trade Helpdesk for Swift Redressal of Import and Export Issues amid Global Tariff Changes [Read Notification]

The two-member bench comprising P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) relied on the Supreme Court’s interpretation in Bharati Airtel Ltd., where it was held that when the definition of “input” is tied to the provision of output service, it should not be interpreted restrictively.

The Apex Court had clarified that telecom towers and prefabricated buildings, being movable and essential for the delivery of telecom services, meet the definition of inputs under Rule 2(k) of the CENVAT Credit Rules. The Tribunal held that BSNL was entitled to avail the CENVAT credit on the said items. The appeal was allowed with consequential relief as per law.

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