Pranav B Prem

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai Bench, comprising Justice S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member), allowed appeals filed by Vodafone India Ltd., setting aside excise duty demands on the denial of CENVAT credit for telecom towers and prefabricated buildings used in setting up mobile network infrastructure. The Tribunal followed the binding precedent laid down by the Supreme Court in M/s Bharti Airtel Ltd. v. Commissioner of Central Excise, Pune, decided on 20.11.2024.

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The Appellant, Vodafone India Ltd., had availed CENVAT credit on various items such as towers, steel components, nuts and bolts, and prefabricated shelters used for establishing Base Transceiver Stations (BTS) across India. These items were received in knocked-down condition, assembled on-site, and used for providing taxable telecom services. The credit was taken under Rule 2(k) of the CENVAT Credit Rules, 2004, which defines eligible “inputs.”

Background and Department’s Stand

The Revenue issued Show Cause Notices alleging that the towers and shelters were immovable property and hence ineligible for credit under Rule 2(k). The period under dispute was from April 2012 to March 2015, and the total CENVAT credit denied through the Order-in-Original dated 18.10.2016 was ₹23,13,27,754, with corresponding penalty and interest under Rule 14 of the CCR, 2004 read with Section 11A(4) and Section 11AB of the Central Excise Act.

The department contended that the towers and shelters became part of the earth once erected and hence were immovable property. It relied on the Bombay High Court’s earlier judgment which had ruled against Vodafone for a prior period.

Vodafone’s Submissions

Vodafone argued that the Supreme Court’s judgment in Bharti Airtel (2024) conclusively settled the issue. The apex court had ruled that telecom towers and shelters were movable goods and could qualify as “inputs” if used for providing output services. The appellant further submitted that the towers and shelters were repeatedly dismantled, transported, and reinstalled as per operational requirements and hence could not be classified as immovable. It was also pointed out that the Revenue’s continued denial of CENVAT credit, despite the clear Supreme Court verdict, amounted to re-litigation of a settled issue and an abuse of process.

Findings of the Tribunal

The Tribunal took note of the Supreme Court’s findings in Bharti Airtel, particularly the observation that telecom towers and shelters:

• Are not embedded into the earth in such a way as to lose their identity as movable property.

• Are fastened using nuts and bolts only for the purpose of functional stability.

• Can be dismantled and reused, thereby lacking the element of permanence required for being treated as immovable.

The CESTAT Mumbai held that the legal foundation of the demand stood nullified due to the Supreme Court ruling. It observed: “In view of the authoritative pronouncement of the Hon’ble Supreme Court, which is binding under Article 141 of the Constitution of India, the Orders-in-Original confirming the denial of CENVAT credit on telecom towers and prefabricated shelters are liable to be set aside.”

The Tribunal further emphasized that even the Bombay High Court's earlier view (which had affirmed denial of credit) was no longer a valid precedent since it had been overruled by the apex court. It concluded that: “Revenue cannot take a different stand for subsequent periods on the same set of facts, especially when the highest court has conclusively settled the matter.”

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Verdict

The CESTAT allowed both appeals, setting aside the Orders-in-Original dated 18.10.2016 and 27.07.2018. The denial of CENVAT credit on telecom towers and shelters used by Vodafone India Ltd. was held to be unsustainable in law.

Appearance

Shri Vinay Jain, Advocate a/w Ms. Shambhavi Dewalkar, C.A. for the Appellants

Shri Dhananjay Dahiwale, Authorized Representative for the Respondent

Cause Title: Title: M/s Vodafone India Ltd.  V. Commissioner of Service Tax-III

Case No: Service Tax Appeal No. 85085 of 2017

Coram: Justice S.K. Mohanty [Judicial Member], M.M. Parthiban [Technical Member]