Supreme Court of India
M/S BHARTI AIRTEL LTD.versusTHE COMMISSIONER OF CENTRAL EXCISE, PUNE
- Citation
- 2024 INSC 880
- Decided
- 20 November 2024
- Disposal
- Disposed off
- Bench
- B V NAGARATHNA
Holding
Mobile towers and prefabricated buildings are movable goods, accessories of capital goods, and inputs, thereby qualifying for CENVAT credit under the CENVAT Credit Rules, 2004.
Summary
The Supreme Court examined whether mobile service providers (MSPs) could claim CENVAT credit on excise duties paid for mobile towers and prefabricated buildings (PFBs) used in their networks. The dispute arose from conflicting decisions of the Bombay High Court, which held the towers and PFBs to be immovable property and not eligible for credit, and the Delhi High Court, which treated them as movable capital goods and inputs eligible for credit. Applying the General Clauses Act, Transfer of Property Act, and the definition of "goods" under the Sale of Goods Act, the Court applied tests of permanency, intendment, functionality, and marketability, concluding that the towers and PFBs are movable and qualify as "goods". It further held that they are accessories of the antenna and BTS, falling within the definition of "capital goods" under Rule 2(a)(A)(iii) of the CENVAT Rules, and also qualify as "inputs" under Rule 2(k). Consequently, MSPs are entitled to claim CENVAT credit on the excise duties paid for these items. The Court set aside the Bombay High Court judgment and allowed the appeals of the MSPs, affirming the Delhi High Court's view.
Issues considered
- Whether mobile towers and prefabricated buildings are immovable property or movable goods for the purpose of CENVAT credit.
- Whether such towers and PFBs qualify as "capital goods" under Rule 2(a)(A) of the CENVAT Credit Rules, 2004.
- Whether the towers and PFBs can be treated as "inputs" under Rule 2(k) of the CENVAT Credit Rules.
- Whether the revenue circular restricting credit on these items is enforceable.
- Whether the attachment of towers and PFBs to the earth creates a permanent annexation that defeats credit eligibility.
Legislation cited
- Bureau of Indian Standards Act, 2016
- Central Excise Act, 1944
- Central Excise Tariff Act, 1985
- Central Goods and Services Tax Act, 2017
- Central Sales Tax Act, 1956
- Competition Act, 2002
- Consumer Protection Act, 2019
- Customs Act, 1962
- Finance Act, 1944
- General Clauses Act, 1897s. 3(26), s. 3(36)
- Micro, Small and Medium Enterprises Development Act, 2006
- Motor Vehicles Act, 1988
- Sale of Goods Act, 1930s. 2(7)
- Transfer of Property Act, 1882s. 3
Headnote
Issue for Consideration Whether the mobile service providers who pay excise duties on various items for setting up their business more particularly for erection of mobile towers and peripherals like pre-fabricated buildings etc. can take the benefit of CENVAT Credit Rules, 2004 for the purpose of payment of service tax on the output services rendered by them. Headnotes† CENVAT Credit Rules, 2004 – Rules 3, 2(k), 2(a)(A)(i), (iii) – “inputs”; “goods”/“capital goods” – General Clauses
Subjects
Mobile Service ProvidersCENVAT CreditCapital GoodsInputsService TaxExcise DutyImmovable PropertyMovable PropertyAccessoryGeneral Clauses ActTransfer of Property ActSale of Goods Act
Judgment
[2024] 11 S.C.R. 1525 : 2024 INSC 880
M/s Bharti Airtel Ltd.
v.
The Commissioner of Central Excise, Pune
(Civil Appeal No(s). 10409-10410 of 2014)
20 November 2024
[B.V. Nagarathna and
Nongmeikapam Kotiswar Singh,* JJ.]
Issue for Consideration
Whether the mobile service providers who pay excise duties
on various items for setting up their business more particularly
for erection of mobile towers and peripherals like pre-fabricated
buildings etc. can take the benefit of CENVAT Credit under the
CENVAT Credit Rules, 2004 for the purpose of payment of service
tax on the output services rendered by them.
Headnotes†
CENVAT Credit Rules, 2004 – Rules 3, 2(k), 2(a)(A)(i), (iii) –
“inputs”; “goods”/“capital goods” – General Clauses Act –
ss.3(36), 3(26) – Transfer of Property Act, 1882 – s.3 – Mobile
Service Providers (MSPs), if entitled to CENVAT credit on
mobile towers and prefabricated buildings (PFBs) – Conflicting
views of the High Court of Bombay and Delhi:
Held: Applying the tests of permanency, intendment, functionality
and marketability, it is evident that mobile towers and PFBs are
not immovable but movable within the meaning of Section 3 of
the Transfer of Property Act, r/w Section 3(36) of the General
Clause Act – Considering the nature of annexation of the tower
to the earth, it is seen that the annexation is not for permanent
annexation to the land or the building as the tower can be removed
or relocated without causing damage to it – The attachment of the
tower to the building or the land is not for the permanent enjoyment
of the building or the land – Further, the tower is fixed to the land
or building for enhancing the operational efficacy and proper
functioning of the antenna which is fixed on the tower by making
it stable and wobble free The fact that the tower, if required can be
removed, dismantled in the Completely knocked down condition
* Author
1526 [2024] 11 S.C.R.
Digital Supreme Court Reports
and Semi-knocked down condition and sold in the market is not
disputed – Mobile towers and PFBs are movable properties and
hence, “goods” – Towers and shelters (PFBs) support the Base
Transceiver System (BTS)/antenna for effective transmission of
mobile signals and thus, enhance their efficiency and since these
articles are components/accessories of BTS/antenna which are
admittedly “capital goods” falling under Chapter 85 within sub-clause
(i) of Rule 2(a)(A) of CENVAT Rules, these items consequently are
covered by the definition of “capital goods” within the meaning of
sub-clause (iii) read with sub-clause (i) of Rule 2(a)(A) of CENVAT
Rules – Further, since these are used for providing output service,
i.e., mobile telecommunication service, and since these are
“capital goods” received in the premises of the provider of output
service as contemplated under Rule 3(1)(i), the Assessees would
be entitled to CENVAT credit on the excise duties paid on these
goods – Thus, tower and the PFBs are not immovable property
but are “goods”/ “capital goods” within the meaning of Rule 2(a)
(A)(iii) and since these are used for providing output service,
these can be considered to be “inputs” within the meaning of Rule
2(k) – CENVAT credit can be availed in respect of these goods for
payment of service tax – Any item so long it qualifies as a “good”
and is “used” for providing output service, would come within the
purview of “input” under Rule 2(k) and excise duty paid on such
items can be claimed as CENVAT credit which may in turn be used
for payment of service tax for the output service provided by the
MSPs – Judgment of the Delhi High Court in Vodafone Mobile
Services Limited v. CST, Delhi 2019 [(27) G.S.T.L. 481 (Del.)]
upheld, while that of the Bombay High Court in Bharti Airtel case
is set aside. [Paras 11.9.9, 11.9.18, 11.11.12, 11.12.1,11.13, 11.14]
Words and Phrases – “accessory” – Meaning – Whether mobile
towers, prefabricated buildings (PFBs) are accessories of
antenna and Base Transceiver System (BTS):
Held: Any such item which adds to the beauty, convenience or
effectiveness of some other items can be said to be accessory of
that other thing and it may or may not be essential for functioning
of main machinery – The tower is a structure fixed to the earth or
building on which microwave antenna is fastened to provide the
necessary height and stability to the antenna by making it steady
and wobble free – The function of antenna as part of the BTS
is to receive and transmit radio signal and is used for providing
[2024] 11 S.C.R. 1527
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
mobile telecom service to the subscribers – Without tower, antenna
cannot effectively function for the purpose it is used – Thus, tower
is an accessory of antenna – Further, PFBs also enhance the
efficacy and functioning of mobile antenna as well as BTS – PFBs
are also accessories to the antenna and BTS which are “capital
goods” falling under Chapter 85 of the Schedule to the Central
Excise Tariff – The restricted meaning of accessory given by the
CESTAT and not differed from by the Bombay High Court is not
wholly correct in as much as the meaning of accessory can have
different ascribed meanings. [Paras 11.1.5, 11.1.6, 11.11.10]
Circulars/Notices – Circular contrary to the statute must be
withdrawn – Revenue relied upon a circular issued by the
Central Board of Excise and Customs, Department of Revenue,
Ministry of Finance specifying that angles, channels, beam of
steel and prefabricated shelter etc. are used by cellular phone
service providers for erecting towers and making housing/
storage units and are used in making of products and cannot
be called excisable goods, being attached to the earth and are
not chargeable to excise duty – Circular further stated that
these inputs are not used for providing taxable service and
the credit of excise duty paid on such items is not available
to the telecom service providers – Enforceability of Circular:
Held: Revenue/Department may issue any such circular based
on their understanding of the matter and the Revenue authorities/
officers are bound to follow it yet, in view of the findings arrived
at in the present proceedings, the said circular would be of no
avail – Circular not enforceable to the extent it is contrary to the
findings in these proceedings and to be withdrawn. [Para 11.9.20]
Words and Phrases – “use”; “goods”/“capital goods”;
“inputs” – CENVAT Credit Rules, 2004 – Rule 2(k) – Sales of
Goods Act, 1930 – s.2(7) – Transfer of Property Act, 1882 –
s.3 – General Clauses Act, 1897 – ss.3(36), 3(26) – “movable
property”; “immovable property” – Nature of the property –
Criteria for determination – Tests of permanency, intendment,
functionality and marketability – Principles summarised.
Case Law Cited
Vodafone Mobile Services Limited v. CST, Delhi, 2019 [(27) G.S.T.L.
481 (Del.) – approved.
1528 [2024] 11 S.C.R.
Digital Supreme Court Reports
Bharti Airtel Limited v. The Commissioner of Central Excise Pune
Judgment of the Bombay High Court dated 26.08.2014 in
Central Excise Appeal Nos.73 of 2012 and No. 119 of 2012 –
disapproved.
T.T.G Industries Ltd. Vs. CCE [2004] Supp. 2 SCR 659 : (2004)
4 SCC 751 – distinguished.
Triveni Engineering & Industries Ltd. & Anr v. Commissioner of
Central Excise [2000] Supp. 2 SCR 199 : (2000) 7 SCC 29; Mittal
Engineering Works (P) Ltd. v. Collector of Central Excise, Meerut
[1996] Supp. 8 SCR 796 : (1997) 1 SCC 203; Quality Steel Tubes
(P) Ltd. v. Collector of Central Excise [1994] Supp. 6 SCR 439 :
(1995) 2 SCC 372 – held inapplicable.
CCE v. Hindustan Sanitaryware & Industries [2002] Supp. 2 SCR
224 : (2002) 7 SCC 515; Commr. of Customs v. Rupa and Co.
Ltd. [2004] Supp. 3 SCR 99 : (2004) 6 SCC 408; Commr. of
C.Ex., Jaipur v. Rajasthan Spinning & Weaving Mills Ltd. [2010]
8 SCR 396 : (2010) 12 SCC 186; Board of Revenue v. Phelps
& Co. (P) Ltd. (1972) 4 SCC 121; J.K. Cotton Spg. & Wvg. Mills
Co. Ltd. v. STO AIR 1965 SC 1310; Collector of C.E. v. Jay
Engineering Works Ltd. [1988] Supp. 3 SCR 998 : 1989 Supp
(1) SCC 128; M/s. Annapurna Carbon Industries Co. v. State of
Andhra Pradesh [1976] 3 SCR 561 : (1976) 2 SCC 273; Mehra
Brothers v. Joint Commercial Officer [1990] Supp. 3 SCR 61 :
(1991) 1 SCC 514; Commissioner of Central Excise, Indore v.
Cethar Vessels Ltd. & Ors. [2007] 6 SCR 701 : (2009) 17 SCC
551; Municipal Corporation of Greater Bombay v. Indian Oil
Corporation [1990] Supp. 3 SCR 365 : 1991 Supp (2) SCC 18;
Saraswati Sugar Mills v. Commissioner of central Excise, Delhi-III
[2011] 13 SCR 579 : (2014) 15 SCC 625; Commissioner of Central
Excise, Ahmedabad v. Solid and Correct Engineering Works &
Ors [2010] 4 SCR 476 : (2010) 5 SCC 122; Sirpur Paper Mills
Ltd. v. Collector of Central Excise, Hyderabad [1997] Supp. 6
SCR 431 : (1998) 1 SCC 400; Narne Tulaman Manufacturers
Pvt. Ltd. Hyderabad v. Collector of Central Excise, Hyderabad
[1988] Supp. 3 SCR 1 : (1989) 1 SCC 172; Indian Chamber of
Commerce v. Commissioner of Income Tax WB [1976] 1 SCR
830 : AIR 1976 SC 348; Oblum Electrical Industries Pvt. Ltd. v.
Collector of Customs [1997] Supp. 3 SCR 681 : (1997) 7 SCC
581; J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales
Tax Officer, Kanpur [1965] 1 SCR 900; Collector of Central
[2024] 11 S.C.R. 1529
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
Excise v. Hyundai Unitech Electrical Transmission Ltd. (2015)
17 SCC 181; Commissioner of Central Excise v. Virdi Brothers
and Ors. [2006] Supp. 10 SCR 830 : (2007) 15 SCC 24; CCE
v. Globus Store Pvt. Ltd. (2011) 15 SCC 200; Commissioner of
Central Excise, Bolpur v. M/s Ratan Melting & Wire Industries
[2008] 14 SCR 653; Commissioner of Central Excise, Mumbai,
v. Hindoostan Spinning and Weaving Mills Ltd. & Anr [2009] 6
SCR 478 : (2009) 14 SCC 221; Ranadey Micronutrients & Ors. v.
Collector of Central Excise [2022] 18 SCR 28; Tata Teleservices
Ltd. v. Bharat Sanchar Nigam Ltd. & Ors. [2008] 7 SCR 308 :
(2008) 10 SCC 556; Saraswati Sugar Mills v. Commissioner of
Central Excise, Delhi-III [2011] 13 SCR 579 : (2014) 15 SCC
625; Member, Board of Revenue, West Bengal v. M/s. Phelps &
Co. (P) Ltd. (1972) 4 SCC 121 – referred to.
CCE V. SLR Steels Ltd., 2011 SCC Online Kar 4345, (2012) 280
ELT 176 (Kant); CCE v. ICL Sugars Ltd., 2011 SCC Online Kar
4254, (2011) 271 ELT 360 (Kant); CCE v. Sai Sahmita Storage
Ltd. (2011) SCC OnLine AP 956, (2011) 23 STR 341 (AP); Bannari
Amman Sugars Ltd. v. CCE, 2009 SCC OnLine Kar 814, (2010)
250 ELT 326 (Kant); CCE v. N.R.C. Ltd., 2008 SCC OnLine
Bom 1894; Deepak Fertilizers & Petrochemicals Corpn. Ltd. v.
C.C.E., Belapur, 2012 SCC OnLine CESTAT 3055; Industrial
Machinery Manufacturers (P) Ltd. v. State of Gujarat, 1963 SCC
Online Guj 84 : (1965) 16 STC 380 (Guj); Indus Towers Ltd.
v. CTO, 2012 SCC Online AP 628 : (2012) 52 VST 447 (AP);
Banco Products (India) Ltd. v. Commissioner of C. Ex., Vadodara-I,
2009 SCC OnLine CESTAT 1043; Singh Alloys and Steel Ltd. v.
Assistant Collector of Central Excise, 1993 SCC OnLine Cal 441;
Commissioner of Sales Tax, Maharashtra State, Bombay v. L.D.
Bhave & Sons, 1981 SCC OnLine Bom 438; Vandana Global Ltd.
v. Commissioner of Central Excise, Raipur, 2010 (253) E.L.T. 440
(Tri.-LB); Cellular Operators Association of India & Ors. V. Municipal
Corporation of Delhi etc., 2011 SCC OnLine Del 2003; Collector
of Central Excise v. Hutchison Max Telecom P. Ltd., 2007 SCC
OnLine Bom 702; Godfrey Phillips India Ltd. vs. Union of India,
1985 SCC OnLine Bom 345; Union Carbide India Ltd. vs. CCE,
Calcutta-1, 1996 SCC OnLine CEGAT 1355; M/s Indus Towers
Ltd. vs. CTU, Hyderabad, 2012 SCC OnLine AP 628; Industrial
Machinery Manufacturers Pvt. Ltd. vs. State of Gujarat (1965) 16
STC 380 (Guj) – referred to.
1530 [2024] 11 S.C.R.
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Books and Periodicals Cited
CENVAT Credit Rules, 2004; Black’s Law Dictionary, (Fifth Edition);
Oxford Dictionary.
List of Acts
CENVAT Credit Rules, 2004; General Clauses Act, 1897; Transfer
of Property Act, 1882; Sale of Goods Act, 1930; Central Excise
Tariff Act, 1985; Central Excise Act, 1944; Finance Act, 1944; The
Central Goods And Services Tax Act, 2017; The Central Sales Tax
Act, 1956; The Customs Act, 1962; Competition Act, 2002; The
Motor Vehicles Act, 1988; The Micro, Small And Medium Enterprises
Development Act, 2006; The Bureau of Indian Standards Act, 2016;
Consumer Protection Act, 2019.
List of Keywords
Mobile Service Providers; Mobile telecommunication service;
Bharti Airtel case; Vodafone case; Excise duties; Mobile towers;
Pre-fabricated buildings (PFBs); Benefit of CENVAT Credit; CENVAT
Rules; CESTAT; Service tax; Immovable property; Movable property;
Trees and shrubs; Earth/building, Walls; Attached to the earth;
Antenna; Permanency Test, Intendment Test, Functionality Test;
Marketability Test, Mobile signals; Components; Accessory; “capital
goods”; “inputs”; “goods”; Base Transceiver System (BTS); Mobile
Station (MS); Electricity generating sets (gensets); Completely
knocked down condition (CKD); Semi-knocked down condition
(SKD); Shelter; Output services; Rooted in the earth; Imbedded/
fixed in the earth; Permanent beneficial enjoyment; Dismantled;
Annexation; Permanently annexed/fastened; Removed; Relocated;
Mobility; Radio signals; Transmission; Circular.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal No(s). 10409-
10410 of 2014
From the Judgment and Order dated 26.08.2014 of the High Court
of Judicature at Bombay in EA Nos. 73 and 119 of 2012
With
Civil Appeal No. 5832 of 2018, Civil Appeal Nos. 5032-5035, 5039-
5040, 5038, 5056, 5036-5037 of 2021, Civil Appeal Nos. 7119 and
[2024] 11 S.C.R. 1531
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
7179 of 2015, Civil Appeal Nos. 1077 and 1078 of 2016, Civil Appeal
No. 5112 of 2021, Civil Appeal Nos. 1201, 1205, 1203, 1204 and
1202 of 2018 and Civil Appeal No.62 of 2022
Appearances for Parties
Vikramjit Banerjee, A.S.G., Rupesh Kumar, Harish N Salve,
Sr. Advs., Ms. Anuradha Dutt, Tushar Jarwal, Rahul Sateeja, Vikrant
A. Maheshwari, Sanyam Agarwal, Raghav Dutt, Ms. Pakhi Jain,
Ms. B. Vijayalakshmi Menon, Mahesh Agarwal, Rishi Agrawala,
Ms. Sayaree Basu Mallik, Abhinabh Garg, E. C. Agrawala, M. P.
Devanath, V Lakshmikumaran, Yogendra Aldak, Kunal Kapoor, Ms.
Apeksha Mehta, Ms. Neha Choudhary, Ms. Umang Motiyani, Ms.
Falguni Gupta, Aayush Agarwal, Ms. Charanya Lakshmikumaran,
Ms. Swarupma Chaturvedi, Sughosh Subramanyam, Kumar
Gaurav, Syed A Haseeb, Divyansh Hanu Rathi, V C Bharathi,
B K Satija, Vishnu Jain, Mani Munjal, Akshat Kaushik, Siddhartha
Sinha, Abhishek Singh, Suraj Mishra, G. S. Makker, Mukesh Kumar
Maroria, Punit Dutt Tyagi, Mahfooz Ahsan Nazki, Gurmeet Singh
Makker, Puneet Agarwal, Yuvraj Singh, Ms. Shruti Garg, Amrendra
Kumar Singh, Chetan Kumar Shukla, Santosh Kumar, Rahul Bhatt,
Gajendra Maheshwari, Siddharth Punj, Ms. Priyamwada Sharma,
Ms. Rashmi Singhania, B. Krishna Prasad, K. R. Sasiprabhu,
Vappangi Sai Varaprasad, Vipin Jain, Raghav Shankar, Bhavuk
Agarwal, Vishal Agarwal, Vishnu Sharma A S, Ms. Shilpa Balani,
Prakhar Agarwal, Advs. for the appearing parties.
Judgment / Order of the Supreme Court
Judgment
Nongmeikapam Kotiswar Singh, J.
1. The core issue involved in this set of appeals is whether the mobile
service providers (MSPs) who pay excise duties on various items
for setting up their business more particularly for erection of mobile
towers and peripherals like pre-fabricated buildings (PFBs) etc. can
take the benefit of CENVAT Credit under the CENVAT Credit Rules,
2004 (hereinafter referred to as the “CENVAT Rules”) for the purpose
of payment of service tax on the output services rendered by them.
With respect to the same, conflicting views have been given by two
High Courts, namely the High Court of Bombay and High Court of
1532 [2024] 11 S.C.R.
Digital Supreme Court Reports
Delhi. The Bombay High Court has ruled against the MSPs, favouring
the Revenue, holding that MSPs are not entitled to CENVAT credit
on mobile towers and prefabricated buildings. Whereas, the Delhi
High Court has held to the contrary extending the benefit of CENVAT
credit to the MSPs. The decisions of both the High Courts have been
challenged before this Court by the respective aggrieved parties, by
way of the present set of appeals.
1.1 In the lead judgment of the Bombay High Court which has been
challenged before this Court in Civil Appeal No. 10409-10 of
2014, namely Bharti Airtel Limited v. The Commissioner of
Central Excise, Pune (Bharti Airtel, for short) rendered on
26.08.2014 in Central Excise Appeal Nos.73 of 2012 and No.
119 of 2012, the Bombay High Court held that mobile towers
and other components do not fall within the definition of “capital
goods” as defined under Rule 2(a)(A) of the CENVAT Rules,
nor are these “inputs” within the meaning of Rule 2(k) and,
hence, the MSP is not entitled to CENVAT credit on duty paid
on these items.
1.2 The aforesaid decision of the Bombay High Court in Bharti
Airtel (supra) has been reiterated in the following cases:
(i) Central Excise Appeal No.126 of 2015 and Central Excise
Appeal No.127 of 2015 vide order dated 10.09.2015 which
has been assailed before this Court in CA No.7119 of 2015
(Vodafone India Limited v. Commissioner of Central
Excise) and CA No.7179 of 2015 (Vodafone India Limited
v. Commissioner of Central Excise);
(ii) Central Excise Appeal No.191 of 2015 and Central Excise
Appeal No.190 of 2015 vide order dated 12.10.2015
against which CA No.1077 of 2016 (Tata Teleservices
Ltd. vs. Commissioner of Central Service Tax) and CA
No.1078 of 2016 (Tata Teleservices Maharashtra Ltd. v.
Commissioner of Central Service Tax) have been filed
before this Court;
(iii) Central Excise Appeal No.159 of 2015, out of which CA
No.5112 of 2021 (Idea Cellular Ltd. vs. Commissioner
of Service Tax) has arisen;
[2024] 11 S.C.R. 1533
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
(iv) Central Excise Appeal No.1 of 2016, Central Excise Appeal
No.2 of 2016, Central Excise Appeal No.4 of 2016, Central
Excise Appeal No.6 of 2016, Central Excise Appeal No.7 of
2016 which have been challenged in CA No.1201 of 2018
(Reliance Communications v. Commissioner of Service
Tax), CA No.1205/2018 (Reliance Communications v.
Commissioner of Service Tax), CA No.1203 of 2018
(Reliance Communications v. Commissioner of Service
Tax), CA No.1204 of 2018 (Reliance Communications v.
Commissioner of Service Tax) and the CA No.1202 of
2018 (Reliance Communications v. Commissioner of
Service Tax);
(v) Central Excise Appeal No.7 of 2017 rendered on
02.04.2018 which has been challenged in CA No.5832
of 2018 (M/s Reliance Communication Infrastructure
v. Commissioner of Service Tax, Mumbai).
1.3 The Delhi High Court in the case of Vodafone Mobile
Services Limited v. CST, Delhi 2019 [(27) G.S.T.L. 481
(Del.)] (Vodafone, for short) decided on 31.10.2018 arising
out of C.E.A.C. Nos.12-13 of 2016, 6 of 2017 and 4 of 2018,
SERTA Nos.14-20 of 2016, on the contrary, held that towers
and other associated structures like prefabricated buildings
(PFBs) are covered by the definition of “capital goods” and
are “inputs” as defined under CENVAT Rules and hence,
MSPs are entitled to input credit on excise duty paid towards
installation of mobile towers and PFBs. This judgement of the
Delhi High Court has been challenged before this Court in CA
Nos. 5032-5035/2021(Commissioner of Service Tax vs. Indus
Towers Ltd.), CA No. 5039-5040/2021 (Commissioner of
Service Tax vs. M/s Bharti Infratel Ltd.), CA No. 5038/2021
(Commissioner of Excise vs. Tower Vision India Pvt. Ltd.)
and CA No. 5036-5037/2021 (Commissioner of Service
Tax vs. Vodafone Mobile Services Ltd.).
1.4 Following the aforesaid decision of the Delhi High Court in the
Vodafone (supra), CESTAT, Principal Bench, Delhi in SA Appeal
No.52342 of 2015 allowed the CENVAT Credit to the MSPs.
This decision of the CESTAT, Delhi has been challenged in CA
1534 [2024] 11 S.C.R.
Digital Supreme Court Reports
No.62/2022 (Commissioner Central Excise and Service Tax
LTU vs. Mahanagar Telephone Nigam Ltd.)
2. Most of the Assessees before us are mobile service providers (MSPs).
The MSPs typically provide sim cards to the subscribers either in
physical or electronic form, on activation of which the subscribers
are able to enjoy wireless telecommunication service. For rendering
these services, the service providers usually own and operate the
infrastructure such as cell towers, Base Transceiver System (BTS)
along with accompanying network equipment and structures like
pre-fabricated building (PFBs), electricity generating sets (gensets),
battery back-up and stabilisers for uninterrupted power supply to
ensure seamless telecom service to the subscribers.
2.1 Some of the Assessees, on the other hand, are merely
providing passive infrastructure support service to the mobile
telecommunication companies at telecom sites which consists
of towers and other accompanying ancillaries including PFBs
as mentioned above.
3. The process of mobile telecommunication begins when a subscriber
uses a wireless mobile handset which is also known as Mobile
Station (MS) to make a call after activation of the sim card. The
mobile handset, which is a radio equipment, performs the signal
processing function of digitizing, encoding, error protecting, encrypting
and modulating to transmitted signals. When it receives signals
from other mobile stations, it performs the inverse functions. The
mobile handset sends a signal, an electromagnetic wave, which is a
modulated version of the user’s voice or data. The signal emanating
from the handset is received by the antenna mounted on the tower.
Thereafter, the signal received by the antenna is sent through cables
to the Base Station Sub-system (BSS). BSS is a set of base station
equipment like Base Transceiver Station (BTS) and Base Station
Controller (BSC). BSC essentially controls one or more BTS or BS.
Base Transceiver Station (BTS) housed at the base of the tower is
kept in secured and safe conditions in the prefabricated house or
building (PFB). The BTS then converts the electromagnetic signal
into a digital format that can be processed by the network. The
processed signal is then transmitted to the mobile switching centre
(MSC). The MSC then routes the calls or data to the destination
through another tower or series of towers and by a reverse process
[2024] 11 S.C.R. 1535
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
of conversion from digital mode to electromagnetic wave, the signal
is received at the destination.
3.1 The said activities require constant electricity supply to the
equipment to function. To prevent any interruption in the supply
of electricity, the MSPs invariably keep electricity generator
sets (gensets) and UPS Batteries along with stabilisers etc.
which are kept near the base of the tower, usually housed in
the portable PFBs to protect from damage.
3.2 From the above, what is evident is that to dispense wireless
telecom service, the sim cards, antenna, BTS along with
other equipment play a critical role. The antenna and BTS
are intrinsically linked. Antenna, tower, BTS, generation set,
PFBs typically constitute essential components for providing
seamless mobile telecommunication service to the consumers/
subscribers.
4. The mobile towers are bought and brought at the site either in
completely knocked down condition (CKD) or semi-knocked down
condition (SKD) by the service provider. The tower is installed at
an appropriate site based on technological viability. It is on this
mobile tower that the antenna which receives and transmits the
electromagnetic signal is hoisted and fixed at an appropriate height
as may be technically determined. The mobile tower, in turn, is fixed
to the ground or on the top of a building to provide stability and make
it wobble free as the antenna cannot function effectively if the same
is not kept at a particular height and is not stable and prevented
from shaking due to wind, rain or any other reason.
5. The MSPs or the infrastructure providers purchase these items from
the manufacturers for installation at the appropriate locations. It is
the excise duties paid on purchase of the mobile towers or parts
thereof either in CKD or SKD condition and for erection of PFBs
which are sought to be claimed by MSPs as CENVAT credit. This
credit is thereafter utilised for payment as service tax for the output
service provided by the MSPs to the consumers. This credit availed
is the subject matter of dispute in these proceedings wherein the
two High Courts have given contrary views.
6. In view of the conflicting decisions of the two High Courts, in order
to ascertain which of the two views is the correct one, it would be
1536 [2024] 11 S.C.R.
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appropriate to examine the findings and reasons assigned by each
of these High Courts for coming to different conclusions.
7. Before we proceed to examine the decisions of the two High Courts,
it may be apposite to refer to the relevant provisions of the CENVAT
Rules as the issues dealt with by the two High Courts and before us
are to be examined in the light of the provisions of the CENVAT Rules.
7.1 Rule 3(1) of the CENVAT Credit Rules, 2004 enables a
provider of taxable service to claim CENVAT credit paid on
any “capital goods” or “input” received in the premises of the
service provider. As to what are “capital goods” and “input”
have been defined under Rule 2(a)(A) and the Rule 2(k) of
the CENVAT Rules. Consequently, if the mobile towers and
prefabricated buildings, which are the items in issue here,
qualify as “capital goods” or “inputs” received in the premises
of the mobile service provider, the mobile service provider will
be entitled to claim CENVAT credit which can be further used
for paying service tax for the output services rendered by the
mobile service provider.
7.2 While Rule 3(1) is the enabling provision for taking CENVAT
credit, Rule (4) provides that the CENVAT credit in respect of
“inputs” may be taken immediately on receipt of inputs in the
factory of the manufacturer or in the premises of the service
provider.
For better clarity, we reproduce the relevant provisions of the
CENVAT Rules.
Rule 2(a) (A) defines “capital goods” and Rule 2(k) defines
“input” which reads as below: -
Rule 2(a)(A)
“2. In these rules, unless the context otherwise requires, -
(a) “capital goods” means:-
(A) the following goods, namely:-
(i) all goods falling under Chapter 82, Chapter 84,
Chapter 85, Chapter 90, heading No. 68.02 and
sub-heading No. 6801.10 of the First Schedule
to the Excise Tariff Act;
[2024] 11 S.C.R. 1537
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
(ii) pollution control equipment;
(iii) components, spares and accessories of the
goods specified at (i) and(ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank,
used –
(1) in the factory of the manufacturer of the final
products, but does not include any equipment
or appliance used in an office; or
(2) for providing output service.”
Rule 2(k)
“2(k) “input” means-
(i) all goods, except light diesel oil, high speed diesel
oil and motor spirit, commonly known as petrol,
used in or in relation to the manufacture of final
products whether directly or indirectly and whether
contained in the final product or not and includes
lubricating oils, greases, cutting oils, coolants,
accessories of the final products cleared along with
the final product, goods used as paint, or as packing
material, or as fuel, or for generation of electricity
or steam used in or in relation to manufacture of
final products or for any other purpose, within the
factory of production;
(ii) all goods, except light diesel oil, high speed diesel
oil, motor spirit, commonly known as petrol and motor
vehicles, used for providing any output service.
Explanation 1. - The light diesel oil, high speed diesel oil
or motor spirit, commonly known as petrol, shall not be
treated as an input for any purpose whatsoever.
1538 [2024] 11 S.C.R.
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Explanation 2. - Input include goods used in the manufacture
of capital goods which are further used in the factory of
the manufacturer;
Rule 3 is the enabling provision to take CENVAT credit,
relevant portion of which reads as follows: -
Rule 3
“3.(1) A manufacturer or producer of final products or a
provider of taxable service shall be allowed to take credit
(hereinafter referred to the CENVAT credit) of –
(i) the duty of excise specified in the First Schedule
to the Tarrif Act, leviable under the Excise Act:
……………………………………………….
paid on –
(i) any input or capital goods received in the factory
of manufacture of final product or premises of
the provider of out service on or after the 10th
day of September, 2004; and
(ii) any output service received by the manufacturer
of final product or by the provider of output
services on or after the 10th day of September,
2004.
(2) …………….
(3) …………….
(4) ……………..
(5) CENVAT credit may be utilized for payment of -
(a) any duty of excise of any final product; or
(b) an amount equal to CENVAT credit taken
on inputs if such inputs are removed as
such or after being partially processed; or
(c) an amount equal to the CENVAT credit
taken on capital goods if such capital goods
are removed as such; or
[2024] 11 S.C.R. 1539
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
(d) an amount under sub-rule (2) of rule 16 of
Central excise Rules, 2002; or
(e) service tax on any output service:
……………………………………………
……………………………………………”
Rule 4
“Condition for allowing CENVAT credit.
4. (1) The CENVAT credit in respect of inputs may be
taken immediately on receipt of the inputs in the factory
of the manufacturer or in the premises of the provider of
output service:
Provided that…………….”
8. Since the Bombay High Court’s decision was rendered on an earlier
date i.e. on 26.08.2014, and the Delhi High Court rendered its decision
subsequently on 31.10.2018, we will first deal with the decision of
the Bombay High Court.
8.1 Shorn of unnecessary details, we will refer only to the relevant
facts by referring to the lead case of each of the High Courts
as the decisions arrived on examining these lead cases would
cover other appeals before us.
Decision of the Bombay High Court
9. The proceeding in the lead case of Bharti Airtel (supra) was set
into motion by a show cause notice dated 25.04.2006 issued by
the Commissioner of Excise to M/s. Bharti Airtel Limited, an MSP
(Assessee) alleging inter alia, that the Assessee had wrongly taken
and utilised CENVAT Credit on certain goods which do not qualify as
“capital goods” within the meaning of CENVAT Credit Rules, 2004 and
thus, availing such credit was contrary to the definition under Rule
2(a)(A) and Rule 4 of the CENVAT Rules. The goods mentioned in
the said show cause notice include amongst others: (i) towers and
parts of towers; (ii) prefabricated building (PFB) used as a shelter
for protecting transmission devices which are the primary concern
of these proceedings.
1540 [2024] 11 S.C.R.
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9.1 In the said show cause notice, it was alleged that a tower,
after erection, becomes immovable property having been fixed
to the earth and thus, cannot be considered to be a “good”
and hence was not “capital good” within the meaning of the
CENVAT Rules. It was alleged that the tower even in CKD or
SKD condition would fall under Chapter 7308 of the Central
Excise Tariff Act, 1985 which does not find mention either in
clause (i) or clause (ii) of Rule 2(a)(A) or in Rule 2(k) of the
CENVAT Rules. It was also alleged that tower or parts of the
tower cannot be claimed for CENVAT Credit as these are
not components, spares or accessories of “capital goods”
as specified in sub-clauses (i) and (ii) of Rule 2(a)(A) within
the meaning of Rule 2(a)(A)(iii). Consequently, the Revenue
sought not only the recovery of wrongfully claimed CENVAT
credit but also imposed penalty and interests on account of
misstatement of ineligible claim.
9.2 As regards prefabricated buildings (PFBs), it was alleged that
these are used as shelter for protecting transmission devices
etc. and not for providing output service i.e. telecommunication
service and hence, cannot be considered “capital goods” within
the meaning of Rule 2(a)(A).
Further, it was also alleged that these cannot be said to be
“inputs” for providing mobile service within the meaning of
Rule 2(k).
9.3 The response of the Assessee in respect of the said show
cause notice was that towers and parts of towers are “capital
goods” and “inputs” for which CENVAT credit is admissible for
the output service rendered by the Assessee.
9.4 In regard to the prefabricated buildings (PFBs), the Assessee
explained that these are also eligible for CENVAT credit as
“capital goods” and in any case as “inputs” for providing mobile
telecom service to the subscribers. It was contended that the
aforesaid articles are covered within the meaning of “capital
goods” under Rule 2(a)(A) and “inputs” under Rule 2(k).
9.5 It was also contended on behalf of the Assessee that credit
in respect of “inputs” can be availed immediately on receipt of
the goods in the premises of the service provider under Rule
[2024] 11 S.C.R. 1541
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
4(1) of the CENVAT Rules. Thus, the Assessee was entitled
to CENVAT credit the moment these articles were received in
the premises of the service provider and the Assessee need
not wait until these goods are actually installed for providing
services to the consumers.
9.6 It was contended by the Assessee that tower is a part of the
“Base Transceiver Station” (BTS) and antenna, all of which
form components of an integrated telecom system. It was
further contended that the tower acts as an accessory of
BTS and antenna and without the tower, antenna and BTS
cannot function properly. Consequently, mobile service cannot
be provided by the service provider without tower, antenna
and BTS. It has been contended that BTS and antenna are
covered by Chapter 85 under Rule 2(a)(A) and are “capital
goods”. Since BTS/antenna are “capital goods” under the
CENVAT Rules, the tower, being a part of BTS/antenna will
be also deemed as “capital good” by virtue of sub-clause (iii)
of Rule (a)(A). Since these goods, namely tower, BTS and
antenna are used for providing output telecom service to the
subscribers/consumers, the mobile service provider will be
entitled to claim CENVAT credit not only on BTS and antenna
but also on tower, being an accessory to “capital goods” in
the form of BTS and antenna.
9.7 The Assessee further contended that for effective and
uninterrupted transmission and receipt of electromagnetic
radio signals by the antenna which is installed on the mobile
tower, additional peripheral equipment such as battery back-
up, rectifier, UPS, gensets etc., are also necessary which
are purchased by the service provider and brought at the
site and installed and housed in the prefabricated shelters or
buildings without which the antenna installed on the mobile
tower and BTS will become inoperative. Thus, apart from
mobile tower, the prefabricated building/shelter, where these
ancillary items which are indispensable components of the
mobile telephone system are securely housed, becomes
an integral part of the mobile telephone system. It was also
contended that since it is through these items including the
prefabricated building that the mobile telephone service is
1542 [2024] 11 S.C.R.
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provided as an output to the subscribers, these articles,
including the prefabricated shelters/buildings will be eligible
for CENVAT input credit.
9.8 The Revenue rejected the aforesaid pleas of the Assessee
by holding that various goods/items like tower, antenna, pre-
fabricated building (PFB) etc. have independent and definite
functions and cannot be treated as a single integrated unit and
accordingly, these items/goods cannot be treated as capital
goods and CENVAT credit cannot be allowed. The Revenue
held that only equipment like BTS, transmitter, antenna which
are used in providing telecom service and which are covered
under various Chapters under Rule 2(a)(A) are eligible for
CENVAT credit vide order dated 19.12.2006 of the Commis-
sioner of Excise/Revenue.
9.9 Being aggrieved by the aforesaid order of the Commissioner,
the Assessee approached the Customs Excise and Service Tax
Appellate Tribunal (CESTAT) by filing Appeal No. ST/49/2007
challenging the order dated 19.12.2006.
9.10 It may be noted that after the Commissioner, Excise/Revenue
rejected the plea of the Assessee by order dated 19.12.2006,
another proceeding was initiated for recovery of penalty which
culminated in the passing of order dated 23.03.2009 by the
Commissioner which was challenged before the Tribunal in
Appeal No. ST/145/2009.
9.11 The aforesaid two orders passed in the above appeals
namely ST/49/2007 and the ST/145/2009 were challenged
before the CESTAT which were disposed of by a common
order dated 06.01.2012 upholding the view of the Revenue,
against which the Assessee preferred appeals before the
Bombay High Court by filing Central Excise Appeal No. 73 of
2012 and Central Excise Appeal No. 119 of 2012 which were
finally disposed of by the Bombay High Court on 26.08.2014
vide a common judgment upholding the findings recorded
by the Tribunal in support of the Revenue to the effect that
subject items are neither “capital goods” under Rule 2(a)
(A) nor “inputs” under Rule 2(k) of the CENVAT Rules and
hence duties paid on these items were not admissible to
[2024] 11 S.C.R. 1543
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
the Assessee for CENVAT credit. Against the aforesaid
decision of the Bombay High Court, the present Appeal No.
73 of 2012 and Appeal No. 119 of 2012 have been preferred
before this Court.
9.12 The Bombay High Court, while examining the aforesaid issues
framed the following questions of law:-
“1. Whether in the facts and circumstances of the
case, the Appellate Tribunal was correct and
justified in holding that the Appellant was not
entitled to credit of duty paid on tower parts,
green shelter, printers and office chairs?
2. Whether in the facts and circumstances of the
case, the Appellate Tribunal was correct and
justified in holding that the Appellant was not
entitled to credit of duty paid on tower parts,
green shelter on the ground that tower/green
shelter is “immovable property” and hence,
do not qualify as “capital goods” or “inputs” as
defined under the CENVAT Credit Rules, 2004?
3. Whether in the facts and circumstances of the
case, the Appellate Tribunal was correct and
justified in holding that tower would not qualify
as “part” or “component” or “accessory” of the
capital goods i.e. antenna?”
The Bombay High Court decided all the above questions of
law against the Assessee and in favour of the Revenue.
9.13 In deciding the abovementioned issues, the Bombay High
Court considered the following aspects:
(i) That the aforesaid goods are not “capital goods” within
the meaning under Rule 2(a)(A) of the CENVAT Rules,
since these are immovable property.
(ii) That these goods are not the components/accessories
of antenna within the meaning of Rule 2(a)(A)(iii).
(iii) That these goods are not “inputs” within the meaning
of Rule 2(k).
1544 [2024] 11 S.C.R.
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In considering the aforesaid aspects the Bombay High Court analysed
the relevant provisions of CENVAT Rules, as to what amounts to
“capital goods” and “input” and also the provisions of Rule 3 which
provides for credit on excise duty paid in discharging liability towards
service tax.
9.14 The Bombay High Court, after considering the definition
clauses in the CENVAT Rules, took the view that the goods
in question i.e. tower and parts thereof which are fastened
and fixed to the earth after their erection become immovable
properties and therefore, these cannot be goods and hence
not “capital goods” within the meaning of the CENVAT Rules.
The Bombay High Court also took the view that the tower and
parts thereof in the CKD or SKD condition, would fall under
Chapter Heading 7308 of the Central Excise Tariff Act, but
the aforesaid heading is not specified either in clause (i) or
clause (ii) of Rule 2(a)(A) of the CENVAT Rules to be treated
as “capital goods”.
The Bombay High Court further opined that since these are neither
components, spares and accessories of goods falling under any
of the Chapters or Headings of the Central Excise Tariff Schedule
as specified in Rule 2(a)(A)(i), the goods in question would not be
“capital goods” for the purpose of CENVAT credit.
9.15 The Bombay High Court also did not find favour with the
contention of the Assessee that tower is an accessory of
antenna since, without tower, antenna cannot be installed,
and consequently, antenna cannot function and hence tower
should be treated as part or component of antenna.
9.16 In coming to the above stated conclusions, the Bombay High
Court considered various decisions, cited by both the contesting
parties, some of which we will advert to briefly.
9.16.1 Before the Bombay High Court, the Assessee in support
of the contention that the tower and parts thereof and PFBs
are not immoveable properties, relied upon the following, inter
alia, decisions:
(i) CCE V. SLR Steels Ltd., 2011 SCC Online Kar 4345
(2012) 280 ELT 176 (Kant).
[2024] 11 S.C.R. 1545
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
(ii) CCE v. ICL Sugars Ltd., 2011 SCC Online Kar 4254
(2011) 271 ELT 360 (Kant).
(iii) CCE v. Sai Sahmita Storage Ltd. (2011) SCC OnLine
AP 956 (2011) 23 STR 341 (AP).
(iv) Bannari Amman Sugars Ltd. v. CCE, 2009 SCC OnLine
Kar 814 (2010) 250 ELT 326 (Kant).
(v) CCE v Hindustan Sanitaryware & Industries (2002)
7 SCC 515.
(vi) CCE v. N.R.C. Ltd., 2008 SCC OnLine Bom 1894.
(vii) Commr. of Customs v. Rupa and Co. Ltd. (2004) 6
SCC 408.
(viii) Deepak Fertilizers & Petrochemicals Corpn. Ltd. v.
C.C.E., Belapur, 2012 SCC OnLine CESTAT 3055.
(ix) Commr. of C.Ex., Jaipur v. Rajasthan Spinning &
Weaving Mills Ltd. (2010) 12 SCC 186.
9.16.2 The Bombay High Court, however, held that the
aforesaid decisions are not applicable to the present case
and proceeded to examine the plea of the Assessee that
since the antenna is fitted onto the tower and shelter is used
for providing telecommunication services, they would qualify
as “inputs” under Rule 2(k) of the CENVAT Credit Rules. In
support of this contention, the Assessee had placed reliance
on the following decisions:-
(i) Industrial Machinery Manufacturers (P) Ltd. v. State
of Gujarat, 1963 SCC Online Guj 84 : (1965) 16 STC
380 (Guj).
(ii) Board of Revenue v. Phelps & Co. (P) Ltd. (1972) 4
SCC 121.
(iii) J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO, AIR
1965 SC 1310.
(iv) Indus Towers Ltd. v. CTO, 2012 SCC Online AP 628:
(2012) 52 VST 447 (AP).
(v) Collector of C.E. v. Jay Engineering Works Ltd., 1989
Supp (1) SCC 128.
1546 [2024] 11 S.C.R.
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(vi) Banco Products (India) Ltd. v. Commissioner of C.
Ex., Vadodara-I, 2009 SCC OnLine CESTAT 1043.
(vii) Singh Alloys and Steel Ltd. v. Assistant Collector of
Central Excise, 1993 SCC OnLine Cal 441
The Bombay High Court, however, did not find the aforesaid
decisions applicable to the present case.
9.16.3 The Bombay High Court then proceeded to examine the
alternate plea of the Assessee that the tower is an accessory
of antenna and without towers, antenna cannot be installed
and hence it cannot function, and therefore, tower should be
treated as a part or component or accessory of the antenna.
The contention of the Assessee was that the antenna falls
under Chapter 85 of the Schedule to the Central Excise
Tariff Act and is thus “capital good” within the meaning of
Rule 2(a)(A)(i) and (ii), therefore, tower being an accessory
of antenna, will be eligible for availing CENVAT credit under
Rule 2(a)(A)(iii).
Some more cases relied upon by the Assessee were as follows.
(i) M/s. Annapurna Carbon Industries Co. v. State of
Andhra Pradesh (1976) 2 SCC 273.
(ii) Commissioner of Sales Tax, Maharashtra State,
Bombay v. L.D. Bhave & Sons, 1981 SCC OnLine
Bom 438.
(iii) Mehra Brothers v. Joint Commercial Officer (1991)
1 SCC 514.
The Bombay High Court on examination held these decisions
not to be applicable to the present case.
9.17 The Bombay High Court then considered the contentions
advanced on behalf of the Revenue which were as follows :-
i) Since towers and parts thereof are fixed to the earth,
thus, after being installed become immovable property
and hence, cannot be considered as “goods” and
consequently cannot be “capital goods”.
ii) The tower in CKD/SKD condition would be classifiable
under Chapter Heading 7308 of the Central Excise Tariff
[2024] 11 S.C.R. 1547
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
Act. However, Chapter Heading 7308 is not specified
either in Clause (i) or Clause (ii) of Rule 2(a)(A) of the
CENVAT Rules. Consequently, since tower is not one
of the items specified in the Rules as “capital goods”,
duties paid for parts of the tower cannot be claimed as
CENVAT Credit.
iii) Even if it is assumed that CENVAT credit on the parts
of the towers would be admissible under Clause (iii) of
Rule 2(a)(A), there is an explicit condition that the said
goods should be components, spares and accessories
of the goods specified in Clauses (i) and (ii) of Rule 2(a)
(A). As tower is not a “capital good” under the aforesaid
clauses, duty paid on its parts, therefore, is not admissible
for availing CENVAT credit.
iv) Only those articles which go into composition of another
article can be considered as components or parts of the
latter. Though GSM and the network antenna are specified
under Tariff Chapter Heading 8517, tower on which the
antenna is placed is not classified as such under the
said Tariff chapter Heading 8517. Thus, tower cannot
be considered to be a component to the antenna within
the meaning of Rule 2(a)(A)(iii) as it does not enter into
the composition of the antenna.
(v) As regards, availing the CENVAT credit in respect of
“input”, it was submitted by the Revenue that only a
manufacturer can avail such credit and not a service
provider.
9.17.1 In support of the contentions, the Revenue cited a
number of judgments before the Bombay High Court, some
of which are referred as below:
(i) Vandana Global Ltd. v. Commissioner of Central
Excise, Raipur, 2010 (253) E.L.T. 440 (Tri.-LB).
(ii) Quality Steel Tubes (P) Ltd. v. Collector of Central
Excise (1995) 2 SCC 372.
(iii) Triveni Engineering & Industries Ltd. & Anr v.
Commissioner of Central Excise (2000) 7 SCC 29.
1548 [2024] 11 S.C.R.
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(iv) Mittal Engineering Works (P) Ltd. v. Collector of
Central Excise, Meerut (1997) 1 SCC 203.
(v) Commissioner of Central Excise, Indore v. Cethar
Vessels Ltd. & Ors. (2009) 17 SCC 551.
(vi) Municipal Corporation of Greater Bombay v. Indian
Oil Corporation, 1991 Supp (2) SCC 18.
(vii) Cellular Operators Association of India & Ors. V.
Municipal Corporation of Delhi etc., 2011 SCC OnLine
Del 2003.
(viii) Collector of Central Excise v. Hutchison Max Telecom
P. Ltd., 2007 SCC OnLine Bom 702.
(xi) Saraswati Sugar Mills v. Commissioner of central
Excise, Delhi-III (2014) 15 SCC 625).
9.18. The Bombay High Court after analysing the facts of the present
case, in the light of the case laws cited by the contesting
parties and relevant provisions of the CENVAT Rules, rejected
the contention of the Assessees that they were entitled to
credit of the duties paid on these items since BTS is a single
integrated system consisting of tower, GSM or Microwave
Antennas, PFB, isolation transformers, electrical equipments,
generator sets, feeder cables etc., and these are to be treated
as “composite system” classified under Chapter Heading 85.25
of the Tariff Act and hence be treated as “capital goods” and
credit be allowed. The Bombay High Court held that each
of the components had independent functions and, hence,
these cannot be treated and classified together as a single
composite unit.
9.19 The Bombay High Court held that all capital goods are not
eligible for credit and only those “capital goods” which fall
under Rule 2(a)(A)(i) and (ii) relatable to the output services
and mentioned in the CENVAT Rules will be available for
credit. The goods in question namely, the tower and parts
thereof and PFB cannot be considered to be “capital goods”
for the purpose of CENVAT credit as they are neither
mentioned nor are components, spares or accessories of
goods falling under any of the Chapters or Headings of the
[2024] 11 S.C.R. 1549
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
Central Excise Tariff Schedule as specified in Rule 2(a)(A).
In the CKD or SKD condition, the tower and parts thereof
would fall under Chapter Heading 7308 of the Central Excise
Tariff Act and the said Heading is not specified in sub-clause
(i) or sub-clause (ii) of Rule 2(a)(A) of CENVAT Rules so as
to be capital goods.
9.20 The Bombay High Court held that admittedly, the goods in
question do not fall within the definition of “capital goods”,
since towers and parts thereof, once fastened and fixed to the
earth, post their erection, become immovable and therefore
cannot be classified as goods. Consequently, they cannot
be considered capital goods as defined under Rule 2(a)(A).
Hence, the Assessee cannot claim the credit of duty paid
on these items. The Court further clarified that only items
specified as capital goods under Rule 2(a)(A) would be eligible
for CENVAT credit.
9.21 The Bombay High Court further held that the goods in question
would not be capital goods for the purpose of CENVAT Credit
as they are neither components, spares or accessories of
goods falling under any of the chapters or headings of the
Central Excise Tariff Schedule as specified in sub-clause (i)
of the definition of “capital goods”. Thus they are not covered
by sub-clause (iii) of Rule 2(a)(A).
9.22 The Bombay High Court repelled the contention of the
Assessee that tower is an accessory of antenna and without
tower, antenna cannot be installed and as such the antenna
cannot function and that the tower should be treated as a
part of antenna.
The Bombay High Court held that towers are structures
fastened to the earth on which antennas are installed and,
hence, cannot be considered to be an accessory or part of
the antenna.
9.23 The Bombay High Court also held that these items cannot
be considered to be “inputs” within the meaning of Rule 2(k)
of the CENVAT Rules as the Assessee is a service provider
and not a manufacturer of capital goods.
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Further since tower and PFBs are in the nature of immovable,
non-marketable and non-excisable goods, these cannot be
classified as “inputs” to fall within the definition Rule 2(k) of
the CENVAT Rules.
9.24 In view of the aforesaid conclusions arrived by the Bombay
High Court, it was held that the subject items are neither
“capital goods” under Rule 2(a)(A) nor “inputs” under Rule
2(k) of the CENVAT Rules and hence CENVAT credit of the
duty paid thereon was not admissible to the Assessee.
Decision of the Delhi High Court
10. The proceedings before the Delhi High Court arose out of the decision
rendered by the CESTAT, New Delhi against an Appeal preferred
under Section 35E of the Central Excise Act, 1944 and Section 83
of the Finance Act, 1944.
10.1. The Assessee, Vodafone, provided cellular telecommunication
services and paid service tax as applicable. It availed CENVAT
credit on excise duty paid on towers, parts thereof and
prefabricated shelter/building purchased by it for providing
the output services. The credit so availed was utilized to pay
service tax on the output services i.e. cellular mobile services
to the customers.
10.2. A show cause notice was issued by the Revenue to the
Assessee alleging, inter alia, that Vodafone had wrongly
claimed and utilized CENVAT Credit in contravention of
provisions of Rule 2(a)(A) of the CENVAT Rules, and was
liable for penalty recoverable from it under the provisions of
Rule 14 of the CENVAT Rules read with Section 73 of the
Central Excise Act. According to the Revenue, the Assessee
had claimed and used credit in respect of goods which do not
qualify as “capital goods” within the meaning of CENVAT Rules.
The plea of the Assessee was that these were capital goods
within the meaning of Rule 2(a)(A)(i) and (ii) of the CENVAT
Rules. Moreover, these were “inputs” used for providing output
service, hence the benefit of Rule 3 should be available to
the Assessee.
[2024] 11 S.C.R. 1551
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
10.3 It was also the plea of the Assessee that the credit in respect
of “inputs” can be availed immediately on receipt of the goods
in the premises of the service provider under Rule 4(1).
10.4 Further, the plea of the Assessee was that BTS constitutes
an integrated system for the purpose of providing the benefits
of mobile service and is classified under Heading 85.25 of
Central Excise Tariff Act, 1985 (CETA) which also comprises of
the tower as one of its parts, without which the output service
cannot be provided. Hence, it was contended that the tower
and parts thereof are parts of eligible “capital good”, i.e. BTS
which are used for providing output services. Hence, excise
duty paid on tower and its parts were eligible for the credit.
10.5 On similar lines, it was contended that a PFB is purchased
for housing electrical equipment i.e. transformers/batteries/
stabilizers, rectifiers etc. which are necessary to enable
the antenna to provide uninterrupted signals. The aforesaid
configuration is supported by a Diesel Generating Set (Genset)
to be used as a backup source of electricity supply in case
of failure of the main power supply. It was contended that
since BTS as a whole is to be treated as a single integrated
system which is classified under Chapter Heading 85.25 of
CETA, and thus, BTS being an eligible “capital good”, the
parts thereof i.e., the towers and other accessories are also
eligible for credit under Rule 2(a)(A)(iii).
10.6 The Commissioner, however, did not agree with the aforesaid
contention that these items form a composite integrated
system classifiable under Chapter 85.25 of CETA and held
that these goods had independent functions and could not
be classified as a single unit. It was the view of the Revenue
that all capital goods are not eligible for credit but only those
which are used for providing output service would be eligible
for credit. Thus, only telecom equipment like BTS, transmitters
which are used for providing telecom services alone would
be eligible for input credit and the not the other goods as
insisted by the Assessee.
10.7 The Assessee appealed to the CESTAT, by which time the
Bombay High Court had already rendered its decision in Bharti
Airtel (supra), in view of which two members of the Bench of
1552 [2024] 11 S.C.R.
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the CESTAT rendered two different opinions, hence, it was
referred to a larger bench of the CESTAT, which, however,
accepted the contentions of Revenue by holding that goods in
question were neither “capital goods” and nor “inputs”, leading
to the filing of the appeal before the Delhi High Court wherein
the Delhi High Court decided in favour of the Assessee.
10.8 In deciding the said appeal, the Delhi High Court framed the
following questions of law:-
i) Whether the CESTAT was right in concluding that the
towers, shelter and accessories used by the Appellants
for providing telecom are immovable property?
ii) Whether the Appellants are entitled to claim CENVAT
credit on the towers, shelter as ‘accessories’ either as
capital goods or input goods in terms of Rule 2(a) or 2(k)
of the CENVAT Rules?
iii) Whether the CESTAT erred in applying nexus test with
reference to MS Angles and Channels, whereas according
to the Appellants what was brought to the site were
towers, shelter and accessories for providing services?
iv) Whether the Appellants were justified, in terms of Rule
4 (1) of the CENVAT Rules, in claiming CENVAT credit
of excise duty paid by the manufacturer of towers and
shelters after receipt of such towers and shelters at their
premises (i.e. tower sites)?
v) Whether the emergence of immovable structure at an
intermediate stage (assuming without admitting) is a
criterion for denial of CENVAT credit?
10.9 The Delhi High Court examined the aforesaid issues framed,
in the following manner:
10.9.1 As regards the first issue as to whether towers, shelters
and accessories used by the Assessee for providing business
support services were immovable property or not, the Delhi
High Court, after examining the relevant statutory provisions
under Section 3(36) of the General Clauses Act, 1897 and
Section 3 of the Transfer of Property Act, 1882, elaborately
[2024] 11 S.C.R. 1553
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
discussed the concept of immovable property, referring to a
number of decisions including in Commissioner of Central
Excise, Ahmedabad v. Solid and Correct Engineering
Works & Ors (2010) 5 SCC 122; Sirpur Paper Mills Ltd.
v. Collector of Central Excise, Hyderabad (1998) 1 SCC
400; Narne Tulaman Manufacturers Pvt. Ltd. Hyderabad v.
Collector of Central Excise, Hyderabad, 1989 (1) SCC 172;
Quality Steel Tubes (P) Ltd. v. Collector of Central Excise,
U.P. (1995) 2 SCC 372 1995 and Mittal Engineering Works
(P) Ltd. v. Collector of Central Excise, Meerut (1997) 1 SCC
203; Triveni Engineering & Indus Ltd. v Commissioner of
Central Excise (2000) 7 SCC 29 and other decisions rendered
by the Delhi High Court, and applied the permanency test to
come to the definitive finding that the entire tower and shelter
are fabricated in the factories of the respective manufacturers
and thereafter, are supplied in CKD condition to the mobile
service providers. It was held that these are merely fastened
to the civil foundation to make these wobble free and stable.
It was also held that tower and PFB can be unbolted and
reassembled without any damage and relocated to a new site.
These are thus not permanently annexed to the earth for the
beneficial enjoyment of the land of the owner as observed
in para 37 of the decision of the Delhi High Court which is
reproduced below:
“37. 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.
1554 [2024] 11 S.C.R.
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(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.”
It was thus held that these are not immovable properties as
held by the Tribunal.
10.9.2 Having held that these are not immovable but moveable,
the Delhi High Court went on to examine the second issue as
to whether the Assessee is entitled to claim CENVAT Credit
on the tower and PFB either as “capital goods” or as “inputs”
in terms of Rule 2(a)(A)(i) or Rule 2(k) of the CENVAT Rules,
and whether these would qualify as accessories within the
meaning of Rule 2(a)(A)(iii).
10.9.3 After analysing the provisions of Rule 2(a)(A) of the
CENVAT Rules, the Delhi High Court held that for goods to
be termed as “capital goods”, the following conditions must
be fulfilled:
(i) they must fall, inter alia, under Chapter 85 of the first
Schedule to the Central Excise Tariff Act (CET) or must
be components, parts or spares of such goods falling
under Chapter 85 of the first Schedule to the CET; and
(ii) must be used for providing output service.
10.9.4 The Delhi High Court noted that all components, spares
and accessories of such capital goods under Chapter 85,
would also be treated as capital goods since CENVAT credit
is available to accessories of capital goods.
10.9.5 As to what amounts to an accessory, the Delhi High
Court, after analysis of the relevant rules and case laws, took
the view that an accessory is an article or device that adds to
the convenience or effectiveness but is not essential to the
main machinery. It was held that tower has to be considered
as an essential component/part of the “capital good” being BTS
and the antenna. The Antenna which receives and transmits
signals and used for providing output mobile service cannot
be installed high above the ground without the tower.
[2024] 11 S.C.R. 1555
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
10.9.6 It was also held that BTS is an integrated system which
includes antenna, and each component in the BTS has to work
in tandem to provide cellular connectivity to phone users to
provide efficient services.
10.9.7 Further, it was held that the tower is part of the
active infrastructure as the antenna cannot be placed at
the appropriate altitude to generate uninterrupted frequency
without the support of the tower and the PFBs are accessories
for the placement of various BTS equipment and other items
for these to remain in a dust-free environment with ambient
temperature.
10.9.8 The Delhi High Court then concluded that tower and
PFB/Shelter support the BTS for effective transmission of
mobile signals and therefore, enhance the efficiency of BTS
and antenna. The towers and shelters, therefore, act as
components and parts and in alternative as accessories to
the BTS and antenna and thus are covered by the definition
of “capital goods”.
10.9.9 The Delhi High Court accordingly found fault with the
Tribunal in interpreting the definition of “capital goods” and
observed that the Tribunal merely adopted the ratio laid down
in the case of Bharti Airtel (supra) of the Bombay High Court
without proper analysis. The Delhi High Court was of the
opinion that the view of the Bombay High Court in the aforesaid
case of Bharti Airtel (supra) and subsequent decisions was
contrary to the settled judicial precedents including in Solid
and Correct Engineering (supra).
10.9.10 The Delhi High Court further examined as to whether
towers and PFBs/shelters would qualify as “inputs” under Rule
2(k) of the CENVAT Rules.
10.9.11 After examining the principles laid down in Godfrey
Phillips India Ltd. vs. Union of India, 1985 SCC OnLine
Bom 345; Indian Chamber of Commerce vs. Commissioner
of Income Tax, WB, AIR 1976 SC 348; Union Carbide
India Ltd. vs. CCE, Calcutta-1, 1996 SCC OnLine CEGAT
1355; Oblum Electrical Industries Pvt. Ltd. vs. Collector
of Customs, 1997 (7) SCC 581; J.K. Cotton Spinning and
1556 [2024] 11 S.C.R.
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Weaving Mills Co. Ltd. vs. Sales Tax Officer, Kanpur (1965)
1 SCR 900, the Court came to the conclusion that the term
“all goods” mentioned under Rule 2(k) of the CENVAT Rules
would cover all the goods used for providing output services
except those which are specifically excluded in the Rules. It
held that the definition is wide enough to bring all goods which
are used for providing any output service.
10.9.12 Applying the functional utility test, the Delhi High
Court held that if an item is required for providing output
service by the service provider on a commercial scale, the
test would be satisfied. It was held that in the present case,
the BTS is an integrated system and each of its components
have to work in tandem with one another in order to provide
the required connectivity to the cellular phone users and for
efficient telecommunication services and because of these
utility and functions, these items would be considered to be
“inputs” within the ambit of Rule 2(k) of the CENVAT Rules.
10.9.13 As regards the question as to whether the CESTAT
erred in applying the nexus test with reference to MS angles
and channels, the Delhi High Court found fault with the finding
of the CESTAT that there was no nexus between the input
and output service and held that CESTAT had erroneously
ignored the decision of the Andhra Pradesh High Court in the
case of M/s Indus Towers Ltd. vs. CTU, Hyderabad, 2012
SCC OnLine AP 628 which held that towers and shelters are
indeed used and are integrally connected to the rendition of
telecommunication services. The channels, which according to
the Assessee, were in fact towers, shelters and accessories,
were bought and brought to the site in CKD/SKD condition and
put to use for mounting/installing telecommunication antenna
and other equipment for providing output telecom services.
However, the Revenue contended that these goods were used
for assembling towers and shelters and do not fall within the
definition of Rule 2(a)(A) i.e. “capital goods” and that these are
items falling under Chapter 73 and the same is not included
in Rule 2(a)(A) of the CENVAT Rules.
10.9.14 The Delhi High Court accepted the plea of the
Assessee by invoking the nexus test as enunciated in
[2024] 11 S.C.R. 1557
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
Collector of Central Excise vs. Hyundai Unitech Electrical
Transmission Ltd. (2015) 17 SCC 181 and took the view
that MS angles and channels have gone into making towers
and shelters which in turn are used for providing infra-
support services/telecom services and hence are amenable
to CENVAT credit.
10.9.15 Coming to the fourth question framed by the Delhi High
Court as to whether the Assessee could claim CENVAT credit
on receipt of such towers and shelters at their premises, which
the CESTAT had denied on the ground that upon installation,
towers and shelters become immovable property and hence
are not eligible for CENVAT credit as “inputs”. The Delhi High
Court, however, accepted the plea of the Assessee that Rule
4(1) of the CENVAT Rules allows credit on inputs on receipt
in the premises of the output service provider.
10.9.16 The Delhi High Court ruled in favour of the Assessee
that it is entitled to the credit immediately on receiving the
inputs irrespective of the subsequent treatment i.e. by way of
fastening, bolting etc. whether or not it results into an immovable
property, by holding that the subsequent treatment of capital
goods or inputs after receipt by the provider of output service
is not relevant for the purpose of availing credit in terms of
Rule 3(1) of the CENVAT Rules. According to the Delhi High
Court, the only condition which is required to be satisfied is
that the said goods must be used for providing the output
services, which was not in dispute.
10.9.17 The Delhi High Court accepted the plea of the Assessee
that there was no break in the chain linking availability and
actual availing of CENVAT credit. The towers and shelters
were purchased in CKD condition and not as mere angles,
channels, beams or bars and there is neither loss of identity
of goods, nor emergence of a new entity with fresh identity
with a distinct character, name or use and thus, there is no
transformation to or new value addition to the parts assembled
as towers and shelters. The identity of the inputs received (as
parts of tower) and the inputs installed (as tower on assembling
the parts thereof) are one and the same and in the absence
of any manufacturing operation, there is no breakage of the
credit chain.
1558 [2024] 11 S.C.R.
Digital Supreme Court Reports
10.9.18 The Delhi High Court on analysis of the case laws cited
on behalf of the respective parties held that the definition of
“input” does not contain any condition relating to emergence of
immovable property rendering it ineligible for taking credit and
eligibility of credit must be determined at the time of receipt
of goods in terms of Rule 4(1) of the CENVAT Rules and as
such credit cannot be denied.
10.9.19 The Delhi High Court held that denial of CENVAT
credit to the Assessee on the premise that the towers, on
erection, resulted in an immovable property is erroneous and
contrary to the judgment of this Court in the case of Solid
and Correct Engineering (supra). The towers which are
received in CKD condition are re-assembled and erected at
the site, subsequently giving rise to a structure that remains
immovable so long it is used for the reason of safety, stability
and commercial reasons of use.
10.9.20 The Delhi High Court clarified that entitlement of
CENVAT credit is determined at the time of receipt of the goods
and the fact that such goods are later on fixed/fastened to the
earth for use would not make them non-excisable commodities
when received.
10.9.21 As regards the fifth question as to whether emergence
of immovable structure at an intermediate stage will be a
ground for denial of CENVAT credit, the Delhi High Court
held that in view of the decision in Solid and Correct
Engineering (supra), even if, in the intermediate stage, an
immovable structure emerges, it is of no consequence in as
much as entitlement of CENVAT credit is to be determined
at the time of the receipt of goods and not at a later stage. It
was held that if the goods that are received qualify as “inputs”
or “capital goods”, the fact that they are later fixed/fastened
to the earth for use would not make them non-excisable
commodity when received.
10.9.22 The Delhi High Court also held that in the present
case the tower and PFB shelters are not immovable property
for in the event of requirement of relocation, these towers and
PFB shelters can be removed and shifted to another location.
[2024] 11 S.C.R. 1559
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
10.9.23 In the light of the aforesaid findings, the Delhi High
Court held that the Assessees are entitled to seek CENVAT
credit on the towers and pre-fabricated buildings (PFBs) and
such other accessories.
10.10 What emerges from the above discussion is that the Bombay
High Court and Delhi High Court differed fundamentally
on the issue as to whether towers, parts thereof and pre-
fabricated buildings, with which we are primarily concerned
in the present proceedings, are “capital goods” within the
meaning of CENVAT Credit Rules, 2004 so as to enable the
Assessees to claim CENVAT credit on the duty paid on the
purchase of these.
10.10.1 The other area of disagreement is that even if these
items themselves may not qualify as “capital goods”, but if
they are found to be accessories or components of “capital
goods”, they would be covered by the deeming provision of
“capital goods” under Rule 2(a)(A)(iii).
10.10.2 Further, another aspect where the two High Courts
differed is whether these goods can be considered as “inputs”
for the “output” of services rendered by the service providers
for if these are treated as “inputs”, the mobile service providers
can claim CENVAT credit for the output services i.e. telecom
services provided by them.
10.10.3 While the Bombay High Court held that towers and
the parts thereof and prefabricated buildings are not “capital
goods” since these are immovable property and also cannot
be said to be “inputs”, thus, the Assessee is not entitled to
claim CENVAT credit, whereas, the Delhi High Court took the
contrary view that towers, parts thereof and pre-fabricated
buildings are not immovable property and these can be
considered as “capital goods” as defined under the CENVAT
Rules. Since these are “capital goods”, these are liable to
excise duty, of which the service provider can take CENVAT
credit. The Delhi High Court also held that these goods can
be said to be “inputs” for providing output service and hence
eligible for CENVAT credit.
1560 [2024] 11 S.C.R.
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Analysis by this Court :
11. From the above discussion, what is evident is that the entire
controversy revolves around the core issue as to whether the mobile
service providers (MSPs) are entitled to claim CENVAT credit on
excise duties paid on mobile tower, its parts thereof and prefabricated
buildings (PFBs) in terms of the Rule 3 of the CENVAT Rules and
whether the credit so claimed can be used to pay service tax for the
output services rendered by the MSPs.
11.1 As discussed above, Rule 3(1) of the CENVAT Rules enables
a provider of taxable service to claim CENVAT credit on
duties paid on any “capital goods” or “input” received in the
premises of the service provider. Thus, if the mobile towers
and prefabricated buildings, which are the items in issue here,
qualify as “capital goods” or “inputs” received in the premises
of the mobile service provider, the mobile service provider will
be entitled to claim CENVAT credit which can be further used
for paying service tax for the output services rendered by the
mobile service provider.
11.2 In the light of the provisions of the CENVAT Rules, if it is held
that towers and/or parts thereof and prefabricated buildings
(PFBs) are “capital goods” or “inputs” used for providing output
service within the meaning of the aforesaid CENVAT Rules,
then CENVAT credit can be claimed on these items.
11.2.1 For this we will first examine the attributes of “capital
goods” for if these items are to be considered “capital goods”,
these must first have the traits of “goods”.
11.2.2 We, therefore, now focus our attention in understanding
what is meant by “goods”, for if these items do not qualify as
goods then these obviously cannot be “capital goods” and the
benefit of CENVAT credit under the Rules will not be available,
since such credit is available only in respect of “goods”.
11.2.3 The word “goods” has not been defined in the CENVAT
Rules. Hence, we will refer to other statutes to understand its
meaning. The term “goods” has been defined in an expansive
manner, in the widest amplitude, under Article 366 (12) of the
Constitution of India so as to include all materials, commodities
and articles.
[2024] 11 S.C.R. 1561
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
11.2.4 However, since this definition is too broad in nature,
it may not help us in our enquiry to determine whether the
items in consideration are “goods” or not, for the purpose of
CENVAT Rules.
11.2.5 “Goods” has not been defined in the Central Excise
Act, 1944. We, therefore, look into other statutes. The term
“goods” has been defined under various statutes some of
which may be mentioned as below.
(i) Sale of Goods Act, 1930
Section 2(7):
“goods” means every kind of movable property other than
actionable claim and money; and includes stocks, shares,
growing crops, grass, and things attached to forming part
of the land which are agreed to be severed before sale
or under contract of sale.
(ii) The Central Goods And Services Tax Act, 2017
Section 2(52):
“goods” means every kind of movable property other
than money and securities but includes actionable claim,
growing crops, grass and things attached to or forming
part of the land which are agreed to be severed before
supply or under a contract of supply.
(iii) The Central Sales Tax Act, 1956
Section 2(d):
“goods” includes all materials, articles, commodities and
all other kinds of movable property, but does not include
[newspapers] actionable claims, stocks, shares and
securities.
(iv) The Customs Act, 1962
Section 2(22):
goods includes—(a) vessels, aircrafts and vehicles;
(b) stores; (c) baggage; (d) currency and negotiable
instruments; and (e) any other kind of movable property.
1562 [2024] 11 S.C.R.
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(v) Competition Act, 2002
Section 2(i):
“goods” means goods as defined in the Sale of Goods
Act, 1930 (8 of 1930) and includes— (A) products
manufactured, processed or mined; (B) debentures,
stocks and shares after allotment; (C) in relation to goods
supplied, distributed or controlled in India, goods imported
into India.
(vi) The Motor Vehicles Act, 1988
Section 2(13):
“goods” includes live-stock, and anything (other than
equipment ordinarily used with the vehicle) carried by
a vehicle except living persons, but does not include
luggage or personal effects carried in a motor car or in a
trailer attached to a motor car or the personal luggage of
passengers travelling in the vehicle.
(vii) The Micro, Small And Medium Enterprises
Development Act, 2006
Section 2(f):
“goods” means every kind of movable property other than
actionable claims and money.
(viii) The Bureau of Indian Standards Act, 2016
Section 2(14):
“goods” includes all kinds of movable properties under the
Sale of Goods Act, 1930, other than actionable claims,
money, stocks and shares;
(ix) Consumer Protection Act, 2019
Section 2(21):
“goods” means every kind of movable property and
includes “food” as defined in clause (j) of sub-section (1)
of section 3 of the Food Safety and Standards Act, 2006
(34 of 2006).
[2024] 11 S.C.R. 1563
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
11.2.6 From the above, it appears that the definition of “goods”
under the Sales of Goods Act, 1930 seems to be the basis of
the term “goods” in other Statutes. Hence, we would primarily
rely on the definition given in the Sale of Goods Act.
11.2.7 The items in consideration viz., towers and prefabricated
buildings are neither actionable claim nor money, nor do they
come within the inclusive clause of the definition, viz., stocks,
shares, growing crops, grass, and things attached to forming
part of the land which are agreed to be severed before sale
or under contract of sale.
11.2.8 If these items are movable properties, these will be
“goods”, in which case our further enquiry will be to examine
whether these belong to the category of “capital goods” as
enumerated in Rule 2(a)(A) only under which the Assessees
will be entitled to claim CENVAT credit under the Rules.
11.2.9 On the other hand, if these are held to be immovable
property, as the Revenue insists and also as has been held by
the Bombay High Court, we may not be required to proceed
further in the enquiry with reference to Rule 2(a)(A) for claim
of CENVAT credit on “capital goods”.
11.3 Thus, the focus of our inquiry now will be to ascertain whether
these items namely, towers, its parts thereof and prefabricated
buildings are movable or immovable properties.
11.3.1 As to what is a movable property has been defined
and can be understood from the expansive meaning assigned
to it under Section 3(36) of the General Clauses Act, 1897
which states that,
“movable property shall mean property of every
description except immovable property”.
11.3.2 The aforesaid definition categorically indicates that
movable and immovable properties are mutually exclusive.
Thus, if it is found that these items are not immovable
properties, these invariably can be treated as movable
properties under Section 3(36) of the General Clause Act and
thus will be “goods” within the meaning of Section 2(7) of the
1564 [2024] 11 S.C.R.
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Sale of Goods Act, 1930 and hence may qualify as “capital
goods” within the meaning of Rule 2(a)(A) subject to fulfilling
other conditions mentioned therein.
11.3.3 As to what is immovable property has been explained
under Section 3 of the Transfer of Property Act, 1882 which
specifies that “immovable property does not include standing
timber, growing crops or grass”.
11.3.4 It has been also defined under Section 3(26) of the
General Clauses Act, though not exhaustively, but in an
inclusive manner by providing that “immovable property” shall
include “land, benefits to arise out of land and things attached
to the earth, or permanently fastened to anything attached to
the earth”.
11.3.5 Therefore, we have to consider whether these items are
attached to the earth or are permanently fastened to anything
attached to the earth, for if these are found to be so, these
will be immovable properties and hence cannot be “goods”
and consequently, cannot be “capital goods” within the scope
of the CENVAT Rules.
11.4 As to what amounts to “attached to earth” as mentioned under
Section 3(26) of the General Clauses Act, has been explained
under Section 3 of the Transfer of Property Act, 1882 to mean
as rooted in the earth, as in the case of trees and shrubs;
imbedded in the earth, as in the case of walls or buildings; or
attached to what is so imbedded for the permanent beneficial
enjoyment of that to which it is attached.
11.5 For easy reference, the aforesaid definition clauses of the
Transfer of Property Act, 1882 and the General Clauses Act,
1897 as may be relevant are reproduced below.
Section 3(36) of the General Clauses Act.
“movable property” shall mean property of every
description, except immovable property;
Section 3(26) of the General Clauses Act.
“immovable property” shall include land, benefits to
arise out of land, and things attached to the earth,
[2024] 11 S.C.R. 1565
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
or permanently fastened to anything attached to
the earth.
Section 3 of the Transfer of Property Act.
“immovable property” does not include standing
timber, growing crops or grass.
Under Section 3 of the Transfer of Properties Act,
“attached to the earth” means:
(a) rooted in the earth, as in the case of trees
and shrubs;
(b) imbedded in the earth, as in the case of walls
or buildings; or
(c) attached to what is so imbedded for the
permanent beneficial enjoyment of that to
which it is attached.
11.6 From the above, it is now clear that if these items, namely
towers and parts thereof and prefabricated buildings/shelters
are considered to be “goods”, these cannot be immovable
properties. Conversely, if these are not rooted in the earth, nor
imbedded in the earth nor attached to what is so imbedded
for the permanent beneficial enjoyment of that to which it is
attached, these cannot be immovable properties and can
qualify to be movable properties and hence, “goods”.
11.6.1 Since, towers and parts thereof and prefabricated
buildings/shelters apparently appear to be fixed on the earth
or building, these seem to be immovable properties at the first
blush. However, the first appearance may not be decisive to
indicate the real character of these items, whether these are
immovable or movable properties, as demonstrated by the
conflicting views of the two High Courts on this issue. Hence,
we need to delve further to arrive at the correct position in
law on this issue.
11.7 In order to determine whether any property is movable or
immovable, this Court, in the light of the statutory provisions
has applied certain principles. It has also been noted that
1566 [2024] 11 S.C.R.
Digital Supreme Court Reports
such determination may be done not based on a single test
but after applying several criteria on the facts of each case.
We will now refer to some of the decisions relied upon by the
contesting parts.
11.7.1 This Court, in Solid and Correct Engineering (supra),
applied the intendment and functionality test to determine
whether any article is movable or immovable. The issue in
the said case was whether the asphalt drum/hot mix plant,
though apparently appearing to be immovable and fixed to
the structure embedded to the earth, can be considered to
be movable. After examining the expression “attached to the
earth” as mentioned in Section 3 of the Transfer of Property
Act, the observations of this Court were as follows:
“25. It is evident from the above that the expression
“attached to the earth” has three distinct dimensions
viz. (a) rooted in the earth as in the case of trees
and shrubs, (b) imbedded in the earth as in the
case of walls or buildings, or (c) attached to what
is imbedded for the permanent beneficial enjoyment
of that to which it is attached. Attachment of
the plant in question with the help of nuts and
bolts to a foundation not more than 1½ ft deep
intended to provide stability to the working of the
plant and prevent vibration/wobble free operation
does not qualify for being described as attached
to the earth under any one of the three clauses
extracted above. That is because attachment of
the plant to the foundation is not comparable or
synonymous to trees and shrubs rooted in earth.
It is also not synonymous to imbedding in earth
of the plant as in the case of walls and buildings,
for the obvious reason that a building imbedded
in the earth is permanent and cannot be detached
without demolition. Imbedding of a wall in the earth
is also in no way comparable to attachment of a
plant to a foundation meant only to provide stability
to the plant especially because the attachment
[2024] 11 S.C.R. 1567
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
is not permanent and what is attached can be
easily detached from the foundation. So also the
attachment of the plant to the foundation at which
it rests does not fall in the third category, for an
attachment to fall in that category it must be for
permanent beneficial enjoyment of that to which
the plant is attached. It is nobody’s case that the
attachment of the plant to the foundation is meant
for permanent beneficial enjoyment of either
the foundation or the land in which the same is
imbedded.”
11.7.2 This Court found that the machine was fixed and
attached to the earth primarily for the purpose of providing
wobble-free operation of the machine and held that there was
no necessary intent to make the same permanent, thus, it does
not amount to permanently fixing, embedding as attachment
in the sense that would make the machine a part and parcel
of the earth permanently, and held as follows:
“43. It is noteworthy that in none of the cases relied
upon by the Assessee referred to above was there
any element of installation of the machine for a
given period of time as is the position in the instant
case. The machines in question were by their very
nature intended to be fixed permanently to the
structures which were embedded in the earth. The
structures were also custom made for the fixing of
such machines without which the same could not
become functional. The machines thus becoming
a part and parcel of the structures in which they
were fitted were no longer movable goods. It was
in those peculiar circumstances that the installation
and erection of machines at site were held to be by
this Court, to be immovable property that ceased
to remain movable or marketable as they were at
the time of their purchase. Once such a machine
is fixed, embedded or assimilated in a permanent
structure, the movable character of the machine
1568 [2024] 11 S.C.R.
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becomes extinct. The same cannot thereafter be
treated as movable so as to be dutiable under
the Excise Act. But cases in which there is no
assimilation of the machine with the structure
permanently, would stand on a different footing.
44. In the instant case all that has been said by the
assessee is that the machine is fixed by nuts and
bolts to a foundation not because the intention was
to permanently attach it to the earth but because
a foundation was necessary to provide a wobble
free operation to the machine. An attachment of
this kind without the necessary intent of making the
same permanent cannot, in our opinion, constitute
permanent fixing embedding or attachment in the
sense that would make the machine a part and
parcel of the earth permanently. In that view of the
matter we see no difficulty in holding that the plants
in question were not immovable property so as to
be immune from the levy of excise duty.”
11.7.3 While deciding the said issue, the Court referred to
Triveni Engineering (supra), Sirpur Paper Mills Ltd. (supra),
Quality Steel Tubes (P) Ltd. (supra), Mittal Engg. Works (P)
Ptd. (supra), T.T.G Industries Ltd. Vs. CCE (2004) 4 SCC 751
and examined various characteristics of the property including
marketability and lack of permanency to determine whether
the property in issue was movable or immovable.
11.7.4 In Triveni Engineering (supra), this Court applied the
marketability test, in which it took the view that if the goods
in question are capable of being taken into the market and
sold, the same cannot be treated to be as immovable but
movable property.
This Court observed that “marketability” itself indicates
movability of the property in issue.
11.7.5 This Court was of the view and thus held that if the
goods that were fixed to the earth were capable of being
dismantled without doing any damage or change in the nature
of goods, it would indicate the “absence of permanency” and
[2024] 11 S.C.R. 1569
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
such a good cannot be deemed to be immovable property,
as held in the following paragraph:
“20. Further, in the instant case, it is a common
ground that a turbo alternator comes into existence
only when a steam turbine and alternator with
all their accessories are fixed at the site and
only then it is known by a name different from
the names of its components in the market. The
Tribunal recorded the finding that fixing of steam
turbine and the alternator is necessitated by the
need to make them functionally effective to reduce
vibration and to minimise disturbance to the coupling
arrangements and other connections with the
related equipments. It also noted that removal of the
machinery does not involve any dismantling of the
turbine and alternator in the sense of pulling them
down or taking them to pieces but only undoing
the foundation bolts arrangement by which they
are fixed to the platform and uncoupling of the
two units and, therefore, the turbo alternator did
not answer the test of permanency laid down by
this Court in the case of Municipal Corporation of
Greater Bombay. In our view, the findings recorded
do not justify the conclusion of the Tribunal
inasmuch as on removal, a turbo alternator gets
dismantled into its components - steam turbine and
alternator. It appears that the Tribunal did not keep
in mind the distinction between a turbo alternator
and its components. Thus, in our view, the test of
permanency fails.”
As regards marketability it was held as follows: -
“21. The marketability test requires that the goods as
such should be in a position to be taken to the market
and sold and from the above findings it follows that
to take it to the market the turbo alternator has to
be separated into its components — turbine and
the other alternator — but then it would not remain
turbo alternator, therefore, the test is incorrectly
1570 [2024] 11 S.C.R.
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applied. Though, there is no finding that without
fixing to the platform such turbo alternator would
not be functional, it is obvious that when without
fixing, it does not come into being, it can hardly be
functional.”
11.7.6 In the case of Sirpur Paper Mills Ltd. (supra), this
Court again applied the test of marketability. The issue which
arose for consideration in the said case was whether paper
machines assembled at site were liable for duties under the
Excise Act. It was the plea of the Assessee that since the
machine was embedded in concrete base, it became an
immovable property though embedding was for providing a
wobble-free operation of the machine. This Court rejected the
plea and held that merely because the machine was attached
to the earth for efficient working and wobble- free operation,
it did not per se render the said property immovable since
the said machine can be sold in the market. It was then
observed as follows:
“5. Apart from this finding of fact made by the
Tribunal, the point advanced on behalf of the
appellant, that whatever is embedded in earth must
be treated as immovable property is basically not
sound. For example, a factory owner or a house-
holder may purchase a water pump and fix it on a
cement base for operational efficiency and also for
security. That will not make the water pump an item
of immovable property. Some of the component of
water pump may even be assembled on site. That
too will not make any difference to the principle.
The test is whether the paper making machine can
be sold in the market. The Tribunal has found as a
fact that it can be sold. In view of that finding, we
are unable to uphold the contention of the appellant
that the machine must be treated as a part of the
immovable property of the company. Just because
a plant and machinery are fixed in the earth for
better functioning, it does not automatically become
an immovable property.”
[2024] 11 S.C.R. 1571
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
11.7.7 In Quality Steel Tubes (P) Ltd. (supra), this Court was
examining whether “the tube mill and welding head” erected
and installed by the Assessee for manufacture of tubes and
pipes out of duty-paid raw material were exigible to duty. By
applying the marketability test, this Court rejected the plea of
the Assessee by holding that these were erected and installed
in the premises and embedded in the earth and these are no
longer movable goods that could be brought to market for
sale since these ceased to be goods within the meaning of
Section 3 of the General Clauses Act. It was thus held that,
“5. ………………..The basic test, therefore, of
levying duty under the Act is twofold. One, that
any article, must be a goods and second, that it
should be marketable or capable of being brought
to market. Goods which are attached to the earth
and thus become immoveable and do not satisfy the
test of being goods within the meaning of the Act
nor it can be said to be capable of being brought
to the market for being bought and sold. Therefore,
both the tests, as explained by this Court, were not
satisfied in the case of appellant as the tube mill or
welding head having been erected and installed in
the premises and embedded to earth they ceased
to be goods within meaning of Section 3 of the Act.”
11.7.8 The test of marketability was also applied in the case
of Mittal Engg. Works (P) Ptd. (supra).
11.7.9 Much reliance was placed by the Revenue on the T.T.G.
Industries Ltd. (supra) in which this Court, by relying on the
permanency test as also applied in the Municipal Corporation
of Greater Bombay (supra) held that if the article cannot be
shifted without first being dismantled and thereafter re-erected
at another site, it cannot be considered to be a movable
property but an immovable property.
In the aforesaid case, the machinery was erected at the site
on a specially made concrete floor at a very high level of 25
feet from the ground level and the sheer weight, even without
being fastened by nuts and bolts, rendered it incapable of being
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shifted to another site without dismantling and re-erecting.
Given these facts, this Court held that it can be said to be
immovable property.
In Municipal Corporation of Greater Bombay (supra) this
Court observed as follows:
“32. The tanks, though, are resting on earth on their
own weight without being fixed with nuts and bolts,
they have permanently been erected without being
shifted from placed to place. Permanency is the test.
The chattel whether is movable to another place of
use in the same position or liable to be dismantled
and re-erected at the latter place? If the answer is
yes to the former it must be a movable property
and thereby it must be held that it is not attached
to the earth. If the answer is yes to the latter it is
attached to the earth.”
11.7.10 In T.T.G. Industries Ltd. (supra), this Court also placed
reliance on Quality Steel Tubes and Mittal Engineering
works Ltd. (supra).
This Court in T.T.G. Industries Ltd. (supra) held as follows:
“27. Keeping in view the principles laid down in
the judgments noticed above, and having regard
to the facts of this case, we have no doubt in our
mind that the mudguns and the drilling machines
erected at site by the appellant on a specially made
concrete platform at a level of 25 feet above the
ground on a base plate secured to the concrete
platform, brought into existence not excisable goods
but immovable property which could not be shifted
without first dismantling it and then re-erecting it at
another site. We have earlier noticed the processes
involved and the manner in which the equipments
were assembled and erected. We have also noticed
the volume of the machines concerned and their
weight. Taking all these facts into consideration and
having regard to the nature of structure erected for
[2024] 11 S.C.R. 1573
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
basing these machines, we are satisfied that the
judicial member of the CEGAT was right in reaching
the conclusion that what ultimately emerged as a
result of processes undertaken and erections done
cannot be described as “goods” within the meaning
of the Excise Act and exigible to excise duty. We
find considerable similarity of facts of the case in
hand and the facts in Mittal Engineering and Quality
Steel Tubes (supra) and the principles underlying
those decisions must apply to the facts of the case
in hand. It cannot be disputed that such drilling
machines and mudguns are not equipments which
are usually shifted from one place to another, nor
it is practicable to shift them frequently. Counsel
for the appellant submitted before us that once
they are erected and assembled they continue to
operate from where they are positioned till such
time as they are worn out or discarded. According
to him they really become a component of the plant
and machinery because without their aid a blast
furnace cannot operate. It is not necessary for us
to express any opinion as to whether the mudgun
and the drilling machines are really a component
of the plant and machinery of the steel plant, but
we are satisfied that having regard to the manner
in which these machines are erected and installed
upon concrete structures, they do not answer the
description of “goods” within the meaning of the
term in the Excise Act.”
It may be noted that while this Court invoked permanency test
in T.T.G. Industries Ltd. (supra), what was also observed was
that if the machinery cannot be shifted and re-erected without
dismantling, it would show that it is an immovable property.
11.7.11 In the present case, while mobile tower cannot be
shifted to another location without dismantling it, it is to be
noted that mobile tower itself was bought and brought in
a completely knocked-down (CKD) or semi-knocked-down
1574 [2024] 11 S.C.R.
Digital Supreme Court Reports
(SKD) condition and it was erected and installed at the site
after assembling the parts. If the said mobile tower is to be
shifted to another location, it obviously has to be dismantled
and restored to its SKD or CKD condition and thereafter re-
erected, which however, would not entail any damage to it.
Thus, the present case of the mobile towers differs from the
factual matrix of T.T.G. Industries Ltd. (supra).
11.7.12 Before us, the Revenue has also placed reliance on
the Commissioner of Central Excise Versus Virdi Brothers
and Ors. (2007) 15 SCC 24 and CCE Versus Globus Store
Pvt. Ltd. (2011) 15 SCC 200, in which this Court relied on a
Circular issued by the Central Board of Excise and Custom,
Department of Revenue, Ministry of Finance, Government of
India under No. 58/1/2002-CX dated 15.01.2002 in which it
was mentioned under Clause (e) that,
“(e) If items assembled or erected at site and
attached by foundation to earth cannot be dismantled
without substantial damage to its components and
thus cannot be reassembled, then the items would
not be considered as movable and will, therefore,
not be excisable goods.”
11.7.13 In the present case, as discussed above, the tower has
been bought and brought to the site in a semi or completely
knocked-down condition and assembled and if the same
is required to be re-located to another location it can be
dismantled in its original semi-knocked-down or completely
knocked down condition without causing any damage to the
tower itself and as such the Clause (e) of the Circular referred
to the above cannot be applied.
11.7.14 It may be also noted that the CESTAT, in its order
observed that the Revenue does not contest or dispute the
fact that wherever BTS/ BSC site has to be relocated, all the
equipment like BTS/BSC, microwave, UPS, tower, antenna
etc., are required to be dismantled as individual components
and then they are required to be moved from the existing
site and reassembled at a new site. The CESTAT, however,
observed that this involves damage to certain parts like cable
[2024] 11 S.C.R. 1575
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
trays etc. which are embedded/fixed to the civil structure
as also the BTS microwave equipment itself. Thus, all the
components of the newly set up structure cannot be shifted
as an illustration to the room housing the equipment. Apart
from it, the CESTAT was of the opinion that the goods cannot
be re-erected as in the previous place as requirement of each
place is different. The structures cannot be shifted without
damage. Apart from that various items and components are
embedded in the earth. Therefore, the structure would not
be considered as movable.
11.7.15 Therefore, the finding of the CESTAT is that even
though the tower can be relocated to another site, it would
entail damages to it.
11.7.16 There can no dispute that if the newly set up BTS/
BSC is relocated to another site it may entail certain damages.
However, what is important to be noted is that the damage
is qua the BTS/BSC or cables connecting the various
components, but not the tower itself or PFB with which we
are concerned. If the tower or the PFB can be dismantled and
relocated in another site without causing any damage to either
the tower or PFB, the mobility or the marketability of these
items is retained. Thus, as far as the tower and PFBs are
concerned, these exhibit the character of a movable property.
11.8 In view of the above decisions, we are of the opinion that
merely because certain articles are attached to the earth,
it does not ipso facto render these immovable properties. If
such attachment to earth is not intended to be permanent
but for providing support to the goods concerned and make
their functioning more effective, and if such items can still be
dismantled without any damage or without bringing any change
in the nature of the goods and can be moved to market and
sold, such goods cannot be considered immovable.
11.8.1 We may summarise some of the principles applied by
the Courts in the decisions referred to above to determine the
nature of the property as follows:
1. Nature of annexation: This test ascertains how firmly
a property is attached to the earth. If the property is
1576 [2024] 11 S.C.R.
Digital Supreme Court Reports
so attached that it cannot be removed or relocated
without causing damage to it, it is an indication that it
is immovable.
2. Object of annexation: If the attachment is for the
permanent beneficial enjoyment of the land, the property
is to be classified as immovable. Conversely, if the
attachment is merely to facilitate the use of the item itself,
it is to be treated as movable, even if the attachment is
to an immovable property.
3. Intendment of the parties: The intention behind
the attachment, whether express or implied, can be
determinative of the nature of the property. If the parties
intend that the property in issue is for permanent addition
to the immovable property, it will be treated as immovable.
If the attachment is not meant to be permanent, it indicates
that it is movable.
4. Functionality Test: If the article is fixed to the ground
to enhance the operational efficacy of the article and for
making it stable and wobble free, it is an indication that
such fixation is for the benefit of the article, such the
property is movable.
5. Permanency Test: If the property can be dismantled and
relocated without any damage, the attachment cannot
be said to be permanent but temporary and it can be
considered to be movable.
6. Marketability Test: If the property, even if attached to
the earth or to an immovable property, can be removed
and sold in the market, it can be said to be movable.
11.9 The plea of the Revenue is that the items in issue are attached
to the earth, fixed permanently and not marketable, hence
immovable, as also accepted by the Bombay High Court.
11.9.1 What is “attached to the earth” to make it an immovable
property would have to possess any of the three attributes
as specified under Section 3 of the Transfer of Property of
Act, namely,
[2024] 11 S.C.R. 1577
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
(a) rooted in the earth, as in the case of trees and shrubs;
(b) imbedded in the earth, as in the case of walls or buildings;
or
(c) attached to what is so imbedded for the permanent
beneficial enjoyment of that to which it is attached:
11.9.2 The present items in issue are not the ones which are
rooted in the earth as in the case of trees and shrubs [sub-
clause (a)]. Therefore, the next consideration will be whether
these are embedded in the earth, as in the case of walls or
buildings [sub-clause (b)], or whether these are attached to
what is so embedded for the permanent beneficial enjoyment
of that to which these are attached to the earth [sub-clause (c)].
The attachment of tower to the earth/building, however, does
not partake of the character of walls or buildings imbedded
in the earth.
11.9.3 It is on the tower that the antennas are mounted and
affixed at proper height, to make these stable. Since the
antennas are used for receiving and sending radio signals,
these need to be attached at a certain height, and these are
required to be stable and wobble-free. It is not in dispute that
the mobile tower is attached and fastened to the earth or
building to provide stability to the same and to make antennas
unshakable due to wind, rain or any other external force(s).
11.9.4 The mobile tower is bought and brought in the CKD
or SKD form from the manufacturers and same is installed at
the site by assembling the parts which also consists of MS
angles and channels. The tower, after being assembled and
fixed to the earth or a building can be dismantled without
any change in the nature of the tower, and the tower can be
removed and shifted to any other location as per the needs
and requirements of the service provider and also can be
re-sold in the market in the same form and hence both, the
functionality and marketability tests as applied in the aforesaid
cases of Solid and Correct Engineering (supra), Triveni
Engineering (supra) and Sirpur Paper Mills Ltd. (supra)
can be said to be fulfilled in the present case.
1578 [2024] 11 S.C.R.
Digital Supreme Court Reports
11.9.5 The tower is brought to the site in CKD or SKD form
and assembled at the site. If it is to be dismantled, it only
involves unbolting of the nuts and bolts. Dismantling the
tower may entail some damages, but such damages will be
on the cables which may be required to be stripped of but no
damage is caused to the tower. If one says that there may
be some damage caused, it will be with reference to the BTS
which consists of the antenna, connected by cables and other
electrical equipment. But there is no damage to the tower per
se. Similarly, in case of PFB, there is no damage to it, though
damage may be caused to the wiring or cables connecting
the various parts of the Base Transceiver System (BTS) or
the Base Station Sub-System (BSS).
11.9.6 The tower which is affixed to the earth and thus
appears to be immovable, can be dismantled from the existing
site and re-assembled without causing any change in its
character. It can be moved to any other place and also sold
in the market. These attributes negate the permanency test,
which is a characteristic of immovable property. The tower
when fixed to the earth or the building or the civil foundation
by nuts and bolts does not get assimilated with the earth or
building permanently. Such affixing is only for the purpose
of maintaining stability of the tower and keep it wobble free
so that the antenna which is hoisted on it can receive and
transmit the electromagnetic signals effectively and without
any disturbance. Affixing of the tower to the earth or building
is not for the permanent beneficial enjoyment of the land or
building, but to make it stable for effective functioning of the
antenna for seamless rendering of mobile services by the
service provider to the consumers/subscribers. Same is the
case with pre-fabricated buildings (PFB).
11.9.7 If we thus apply the functionality test, it can be stated
that the attachment of tower to the earth /building is not for
the benefit of the land or the building but for better functioning
of the antenna which is fixed on the tower. Thus, based
on functionality test it can be said that tower is a movable
property, as also held in Municipal Corporation of Greater
Bombay (supra).
[2024] 11 S.C.R. 1579
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
11.9.8 These items are not embedded in the earth as in the
case of walls or buildings so as to fall under clause (b) of the
definition of “attached to the earth” as provided under Section
3 of the Transfer of Property of Act.
Neither do these items fall under clause (c) of the definition
of “attached to the earth” and nor are these intended to be
for permanent beneficial enjoyment of the building or land to
which these are attached.
In this regard, it may be apposite herein to mention what was
stated in Solid & Correct Engg. Works (supra) as follows:-
“25. It is evident from the above that the expression
“attached to the earth” has three distinct dimensions
viz. (a) rooted in the earth as in the case of trees
and shrubs, (b) imbedded in the earth as in the
case of walls or buildings, or (c) attached to what
is imbedded for the permanent beneficial enjoyment
of that to which it is attached. Attachment of the
plant in question with the help of nuts and bolts to
a foundation not more than 1½ ft deep intended
to provide stability to the working of the plant and
prevent vibration/wobble free operation does not
qualify for being described as attached to the earth
under any one of the three clauses extracted above.
That is because attachment of the plant to the
foundation is not comparable or synonymous to trees
and shrubs rooted in earth. It is also not synonymous
to imbedding in earth of the plant as in the case of
walls and buildings, for the obvious reason that a
building imbedded in the earth is permanent and
cannot be detached without demolition. Imbedding of
a wall in the earth is also in no way comparable to
attachment of a plant to a foundation meant only to
provide stability to the plant especially because the
attachment is not permanent and what is attached
can be easily detached from the foundation. So
also the attachment of the plant to the foundation
at which it rests does not fall in the third category,
for an attachment to fall in that category it must
1580 [2024] 11 S.C.R.
Digital Supreme Court Reports
be for permanent beneficial enjoyment of that to
which the plant is attached. It is nobody’s case
that the attachment of the plant to the foundation
is meant for permanent beneficial enjoyment of
either the foundation or the land in which the same
is imbedded.”
11.9.9 Applying the tests of permanency, intendment,
functionality and marketability, it is quite clearly evident
that these items are not immovable but movable within the
meaning of Section 3 of the Transfer of Property Act, read
with Section 3 (36) of the General Clause Act.
If we consider the nature of annexation of the tower to the earth,
it is seen that the annexation is not for permanent annexation
to the land or the building as the tower can be removed or
relocated without causing damage to it.
It is also to be noted that the attachment of the tower to the
building or the land is not for the permanent enjoyment of the
building or the land.
Further, the tower is fixed to the land or building for enhancing
the operational efficacy and proper functioning of the antenna
which is fixed on the tower by making it stable and wobble
free.
The fact that the tower, if required can be removed, dismantled
in the CKD and SKD and sold in the market is not disputed.
Application of the tests evolved and discussed above on these
items clearly points to the movability as opposed to immovability
of these items. We are, thus, of the view that mobile towers
and PFBs are movable properties and hence, “goods”.
11.9.10 What we have also noticed is that the Bombay High
Court has held that since the towers and parts thereof are
fastened and fixed to the earth and after their erection, they
become immovable, and therefore, these cannot be classified
as goods. While this conclusion is based on the classic
definition of immovable property based on one criterion,
as noticed earlier, that may not be the sole consideration
to determine whether a property is immovable or movable.
[2024] 11 S.C.R. 1581
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
Even if the property is embedded to the earth and appears
ex-facie immovable, if there are other indicators which show
the characteristics of a movable property, as for instance,
susceptibility to removal of the property from the fixture
without causing any damage to its basic structure and change
in character, ability of relocation to a new location and if the
same can be sold thereby showing marketability, and lack of
intention to make it a permanent fixture, in spite of the said
property being embedded to the earth by way of fixing, the
property may still be considered to be movable as has been
held in many of the cases referred to above including in Solid
and Correct Engineering (supra).
11.9.11 It also appears that the decision of this Court in
Solid and Correct Engineering (supra) was not brought
to the notice of the Bombay High Court and thus escaped
consideration. The Bombay High Court without considering
above-mentioned aspects proceeded on the premise that
these items namely tower, its parts thereof and PFBs are
immovable properties. In paragraph no. 52 of the impugned
judgment, while dealing with the case of CCE Vs. Sai Samhita
Storages (P) Ltd., (supra) rendered by the Division Bench
of the Andhra Pradesh High Court, the Bombay High Court
observed that,
“The towers are admittedly immovable structures
and non-marketable and non-excisable. We,
therefore, are of the clear opinion that this judgment
of the Division Bench of the Andhra Pradesh High
Court is inapplicable in the facts of the present
case.”
11.9.12 We are of the opinion that the aforesaid finding was
erroneous for the reason that there was no admission on the
part of the Assessee that towers are immovable structures and
in fact, that was the disputed issue before the Court which
was required to be determined.
11.9.13 The Revenue, however, relied on Triveni Engineering
& Industries Ltd. (supra) to contend that there is neither
mobility nor marketability in the tower but it is permanently
1582 [2024] 11 S.C.R.
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fastened to the earth or building. In this regard, para 13 and
14 of the judgment in Triveni Engineering & Industries Ltd.
(supra) may be referred to
“13. A perusal of the entry shows that a turbo
alternator does not find a place therein eo nomine.
The question then will be whether a “turbo alternator”
falls within the meaning of “electric-generating set”.
To bring a “turbo alternator” under that heading it
must be shown to have the attributes of excisable
“goods” as understood in the excise law. They are
mobility and marketability. The article in question
should be capable of being brought and sold in the
market — a test which is too well established by a
series of decisions of this Court to be elaborated
here.
14. There can be no doubt that if an article is
an immovable property, it cannot be termed as
“excisable goods” for purposes of the Act. From a
combined reading of the definition of “immovable
property” in Section 3 of the Transfer of Property
Act, Section 3(25) of the General Clauses Act, it
is evident that in an immovable property there is
neither mobility nor marketability as understood in
the excise law. Whether an article is permanently
fastened to anything attached to the earth requires
determination of both the intention as well as the
factum of fastening to anything attached to the earth.
And this has to be ascertained from the facts and
circumstances of each case.”
11.9.14 Hence, it is to be noted that the tower, though appears
to be fastened to the earth, cannot be said to be permanently
fastened to the earth or a building for the beneficial enjoyment of
the land or the building. The tower possesses the characteristics
of mobility as the same can be dismantled and relocated to
another place or site.
Therefore, in our opinion, the decision in Triveni Engineering
& Industries Ltd. (supra) cannot be applied in the present
case, considering the factum and intention behind fastening
[2024] 11 S.C.R. 1583
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
of the tower for purpose of keeping the antenna stable and
wobble free and that it can be relocated.
11.9.15 Reliance has been also placed by the Revenue on
Quality Steel Tubes (P) Ltd. (supra) by drawing our attention
to para 5 and 6 of the judgment which read as follows:
“5. In several decisions rendered by this Court
commencing from Union of India v. Delhi Cloth and
General Mills Co. Ltd. [AIR 1963 SC 791 : 1977 ELT
199] to Indian Cable Co. Ltd. v. CCE [(1994) 6 SCC
610 : (1994) 74 ELT 22] the twin test of exigibility of
an article to duty under Excise Act are that it must
be goods mentioned either in the Schedule or under
Item 68 and must be marketable. In Delhi Cloth Mills
[AIR 1963 SC 791 : 1977 ELT 199] it having been
held that the word ‘goods’ applies to those goods
which can be brought to market for being bought
and sold it is implied that it applies to such goods as
are moveable. The requirement of the goods being
brought to the market for being bought and sold has
become known as the test of marketability which
has been reiterated by this Court in CCE v. Ambalal
Sarabhai Enterprises [(1989) 4 SCC 112 : 1989 SCC
(Tax) 162 : (1989) 43 ELT 214]. The Court has held
in Union Carbide India Ltd. v. Union of India [(1986)
2 SCC 547 : 1986 SCC (Tax) 443] that even if the
goods was capable of being brought to the market, it
would satisfy the test of marketability. The basic test,
therefore, of levying duty under the Act is twofold.
One, that any article must be goods and second, that
it should be marketable or capable of being brought
to market. Goods which are attached to the earth
and thus become immovable and do not satisfy the
test of being goods within the meaning of the Act
nor it can be said to be capable of being brought
to the market for being bought and sold. Therefore,
both the tests, as explained by this Court, were not
satisfied in the case of appellant as the tube mill or
welding head having been erected and installed in
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the premises and embedded to earth ceased to be
goods within meaning of Section 3 of the Act.
6. Learned counsel for the Revenue urged that even
if the goods were capable of being brought to the
market it would attract levy. True, but erection and
installation of a plant cannot be held to be excisable
goods. If such wide meaning is assigned it would
result in bringing in its ambit structures, erections and
installations. That surely would not be in consonance
with accepted meaning of excisable goods and its
exigibility to duty.
11.9.16 The Revenue has also relied on the decision in Mittal
Engineering Works (P) Ltd. (supra) by referring to paras 9
and 10 of the said judgment which are reproduced as below:
“9. Upon the material placed upon record and
referred to above, we are in no doubt that the
mono vertical crystalliser has to be assembled,
erected and attached to the earth by a foundation
at the site of the sugar factory. It is not capable of
being sold as it is, without anything more. As was
stated by this Court in the case of Quality Steel
Tubes (P) Ltd. [(1995) 2 SCC 372] the erection and
installation of a plant is not excisable. To so hold
would, impermissibly, bring into the net of excise
duty all manner of plants and installations.
10. The Tribunal took an unreasonable view of
the evidence. It was the case of the appellants,
not disputed by the Revenue, that mono vertical
crystallisers were delivered to the customers
in a knocked-down condition and had to be
assembled and erected at the customers’ factory.
Such assembly and erection was done either by
the appellants or by the customer. Where it was
done by the appellants, fabrication materials of
the customer were used and the customer sent to
the appellants debit notes in regard to their value.
Where the assembly and erection was done by
the customer, there was no occasion for it to send
[2024] 11 S.C.R. 1585
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
to the appellants a debit note. The fact that there
was no debit note in respect of one customer could
not reasonably have led the Tribunal to conclude
that in the case of that customer a complete mono
vertical crystalliser had left the appellants’ factory
and that, therefore, mono vertical crystallisers
were marketable. The Tribunal ought to have
remembered that the record showed that mono
vertical crystallisers had, apart from assembly, to
be erected and attached by foundations to the earth
and, therefore, were not, in any event, marketable
as they were.”
11.9.17 Relying on the aforesaid decisions, it has been
contended by the Revenue that the tower once assembled
and fixed to the earth/building, ceases to be marketable and
hence cannot be said to be moveable.
11.9.18 However, as discussed above, the tower and
PFBs, after being dismantled without being damaged, can
be relocated or sold, thereby possessing the character of
marketability. As such these decisions would not be applicable
in the present case.
For the same reason, the decision in T.T.G Industries Ltd.
(supra) also relied upon by the Revenue will not help the
cause of the Revenue.
11.9.19 The Revenue has also sought to rely upon a circular
under F.No.137/315/2007-CX.4, dated 26.02.2008 issued
by the Central Board of Excise and Customs, Department
of Revenue, Ministry of Finance specifying that angles,
channels, beam of steel and prefabricated shelter, PUF
panels are used by the cellular phone service providers for
erecting towers and making housing/storage units and are
used in making of products and cannot be called excisable
goods, being attached to the earth and are not chargeable
to excise duty. The circular further mentions that these inputs
for civil structures are not used for providing taxable service
and accordingly the circular clarified that credit of excise duty
paid on such items is not available to the telecom service
providers.
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11.9.20 We are of the considered opinion that though the
Revenue/ Department may issue any such circular based on
their understanding of the matter and the Revenue authorities/
officers are bound to follow it, yet, in view of the findings
arrived at by us in these proceedings, the said circular would
be of no avail and to the extent the same is contrary to our
findings in these proceedings would not be enforceable and
would be liable to be withdrawn.
11.9.21 In Commissioner of Central Excise, Bolpur Vs.
M/s Ratan Melting & Wire Industries (2008) 14 SCR 653,
it was held that,
“6. Circulars and instructions issued by the Board
are no doubt binding in law on the authorities under
the respective statutes, but when the Supreme
Court or the High Court declares the law on the
question arising for consideration, it would not be
appropriate for the Court to direct that the circular
should be given effect to and not the view expressed
in a decision of this Court or the High Court. So far
as the clarifications/circulars issued by the Central
Government and of the State Government are
concerned they represent merely their understanding
of the statutory provisions. They are not binding
upon the court. It is for the Court to declare what
the particular provision of statute says and it is not
for the Executive. Looked at from another angle, a
circular which is contrary to the statutory provisions
has really no existence in law. (emphasis added)
The aforesaid proposition of law was reiterated in Commissioner
of Central Excise, Mumbai, Vs. Hindoostan Spinning and
Weaving Mills Ltd. & anr (2009) 14 SCC 221.
11.9.22 In a recent judgment in Ranadey Micronutrients &
Ors. v. Collector of Central Excise (2022) 18 S.C.R. 28, it
was held that while the departmental circulars in operation
are binding upon the officers of the Revenue, to the extent
it is contrary to the statute must be withdrawn by holding as
follows:
[2024] 11 S.C.R. 1587
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
“15. There can be no doubt whatsoever, in the
circumstances, that the earlier and later circulars
were issued by the Board under the provisions
of Section 37B, and the fact that they do not so
recite does not mean that they do not bind Central
Excise officers or become advisory in character.
There can be no doubt whatsoever that after 21st
November, 1994, Excise duty could be levied upon
micronutrients only under the provisions of heading
31.05 as “other fertilisers”. If the later circular is
contrary to the terms of the statute, it must be
withdrawn. While the later circular remains in
operation the Revenue is bound by it and cannot
be allowed to plead that it is not valid.” (emphasis
added)
11.10 We now proceed to the next stage of consideration. Even
if it is held that the mobile towers and PFBs are movable
properties and “goods”, the question which still requires to
be answered is whether these are “capital goods” within the
meaning of Rule 2(a)(A) of the CENVAT Rules. As discussed
above, every “good” is not “capital good” within the scope of
the CENVAT Rules, but only such goods which come within
meaning of sub-Clause (i) of Rule 2(a)(A) i.e. goods falling
under Chapter 82, Chapter 84, Chapter 85, Chapter 90 Heading
no. 68.2 and the sub-Heading no. 6801, 6801.1 and 6801.10
of the First Schedule to the Central Excise Tariff Act, which
are used for providing output service will be considered as
“capital goods” and eligible for CENVAT credit. Sub-clause
(ii) of Rule 2(a)(A) provides that pollution control equipment
used for providing output service can also be capital goods
with which we are not concerned.
11.10.1 However, it may be noted that neither tower nor
prefabricated shelter/building (PFB) finds mention under any
of the Chapters/Heading specified under sub-clause (i), nor
these are pollution control equipment to fall within sub-clause
(ii). Hence, these items on their own cannot be said to be
“capital goods” within the meaning of sub-clause (i) and (ii)
of Rule 2(a)(A).
1588 [2024] 11 S.C.R.
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11.11 However, it is to be noted that it has been provided under
sub-clause (iii) that components, spares and accessories of
goods specified in sub-clause (i) and sub-clause (ii) will also
be treated as “capital goods” if used for providing output
service within the meaning of CENVAT Rules. Therefore, we
have to examine whether towers and PFBs which on their
own are not “capital goods” within the scope of either of the
sub-clauses (i) and (ii) can be considered to be “capital goods”
under sub-clause (iii) by virtue of being accessories of any of
the “capital goods” mentioned under sub-clauses (i) and (ii)
of Rule 2(a)(A).
11.11.1 It is also not the case of the Assessees before us that
mobile towers and PFBs are goods falling under Chapter 82,
Chapter 84, Chapter 85, Chapter 90, Heading No. 68.02 and
sub-Heading No. 6801.10 of the First Schedule to the Central
Excise Tariff Act so as to be deemed as capital goods. It is the
case of the Assessees that the mobile tower is an accessory
of “antenna” which is part of “BTS” and since antenna and
BTS fall under Chapter 85 which are “capital goods”, mobile
tower being accessory of antenna and BTS is to be treated
as “capital good” by virtue of sub-clause (iii) of Rule 2(a)(A).
Similar is the case with PFBs.
11.11.2 Since, we have already held that mobile towers and
PFBs are not immovable properties and can be treated as
“goods”, we have to examine whether these are to be treated
as accessories of antenna and BTS (which are “capital goods”)
as claimed by the Assessees and if so, being accessory of
antenna/ BTS, all these are covered within the meaning
of “capital goods” under Rule 2(a)(A) (iii) and since these
accessories of capital goods are used for providing output
service i.e. mobile service, whether the service providers
would be entitled to take CENVAT credit by virtue of Rule 3(i)
of the CENVAT Rules.
11.11.3 In this regard, it is to be noted that the stand of the
Revenue is that the towers and PFBs have independent
functions and existence and have specific utilities and thus
these cannot form part of a composite system or a single
[2024] 11 S.C.R. 1589
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
unit and hence they cannot be considered to be accessories
of the antenna or BTS in contra-distinction to the plea of the
Assessees that these are accessories of antenna and BTS
which are “capital goods” falling under Chapter 85 of the First
Schedule to the Central Excise Tariff Act.
11.11.4 What is an accessory has been defined in Black’s
Law Dictionary, (Fifth Edition) as,
“anything which is joined to another thing as an
ornament or to render it more perfect, or which
accompanies it, or is connected with it as an incident,
or as subordinate to it, or which belongs to or with
it, adjunct or accompaniment. A thing to subordinate
importance. Aiding or contributing in secondary way
of assisting in or contributing to as a subordinate.”
Similarly, Oxford Dictionary defines “accessory” as:
“an extra piece of equipment that is useful but not
essential or that can be added to something else
as a decoration.”
11.11.5 What comes out from the above dictionary meaning
of “accessory” is that any such item which adds to the beauty,
convenience or effectiveness of some other items can be said
to be accessory of that other thing and it may or may not be
essential for functioning of main machinery. Seen from the
above perspective what is evident is that the tower is a structure
fixed to the earth or building on which microwave antenna is
fastened to provide the necessary height and stability to the
antenna by making it steady and wobble free. The function
of antenna as part of the BTS is to receive and transmit radio
signal and is used for providing mobile telecom service to the
subscribers. The tower itself is not an electrical component
of microwave antenna per-se, yet it is necessary and helps
in keeping the antenna at proper height and in a stable
position so that the antenna can transmit signals for ensuring
uninterrupted and seamless services to the subscribers. It
is with the aid of the tower that the potential of the antenna
is fully realised, making it function optimally. Without tower,
1590 [2024] 11 S.C.R.
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antenna cannot effectively function for the purpose it is used.
Hence, there can be no doubt that tower is to be considered
as an accessory of antenna.
11.11.6 Similarly, the PFB houses other BTS equipment and
alternative electricity source in the form of diesel generators
and other equipment to provide alternative and uninterrupted
power supply to the antenna so that in the event of failure of
main power supply, the generator can instantly provide backup
electricity supply to the antenna and BTS. The PFBs house
electric cables, other equipment related to antenna, BTS and
generator. Thus, PFBs enhance the efficacy and functioning
of mobile antenna as well as BTS and accordingly, PFBs
can also be considered as accessories to the antenna and
BTS which are “capital goods” falling under Chapter 85 of the
Schedule to the Central Excise Tariff.
11.11.7 That tower is to be treated as an accessory of antenna
or BTS and their relationship has been highlighted by this Court
in Tata Teleservices Ltd. Vs. Bharat Sanchar Nigam Ltd.
& Ors. (2008) 10 SCC 556 wherein the principles of cellular
networks have been discussed showing the inter dependency
of tower and antenna in the following words,
“xi) Principles of Cellular Networks:
Mobile communications reached the market in
1980. Even at that time the major challenge was
to implement advanced mobility features such as
handover, roaming and localization of subscribers
which required additional control channels between
terminal and serving base station.
A cellular network consists of a number of radio
cells where the term “cell” refers to geographic
coverage area of a BTS. The size of the coverage
area depends on the signal strength of the base
station and the degree of attenuation. Each BTS
is assigned a certain number of channels for
transmitting and receiving data which is called as
cell allocation (“CA”). To avoid interference between
[2024] 11 S.C.R. 1591
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
cells, it needs to be guaranteed that the neighbouring
base stations are also assigned cell allocations
of different channels. There are no sharp borders
between neighbouring cells. Most of the time they
overlap. In urban areas, a mobile device can hear
a set of around 10 base stations simultaneously,
and then it selects from this set of base station
within the strongest signal. The number of cells a
network is made up of is basically a function of the
size of area to be covered and the user penetration.
When building up a new network, operators first
concentrate on establishing a coverage in congested
urban areas before establishing base stations in
rural areas. If a network runs the risk of becoming
overloaded in a certain region, the operators can
increase the capacity by increasing the base stations
density.
A cellular network not only consists of base stations
but also comprises a network infrastructure for
interconnecting base stations, mobility support,
service provisioning and connection to other
networks like internet. Therefore, a cellular network
consists of several access networks, which
include the radio equipment which is necessary
to interconnect a terminal to the network. The
access networks are interconnected by the core
network. For example, in GSM, the access network
is referred to as Base Station Subsystem (“BSS”)
whereas the core network is denoted as Mobile
Switching and Management Subsystem (“SMSS”).
BSS is responsible for monitoring and controlling
the air interface. BSS consists of two different
components, namely Base Transceiver Station
(“BTS”) and Base Station Controller (“BSC”). BTS
stands for “base station”. It contains transmitter
and receiver equipment as well as an antenna.
The base station is equipped with very limited
capabilities for signalling a protocol processing.
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The bulk of the work, for example, allocation and
release of channels is done by the BSC. The BSC
is mainly responsible for control and execution
of handover, a function which is needed to keep
a circuit-switched connection if the subscriber
moves between base stations. Therefore, each
BSC controls several base stations, which are
connected to the BSC via fixed lines or radio link
systems. On the other hand, mobile Switching
and Management System is a fixed network of
switching nods and databases for establishing
connections from and to the mobile subscriber.
HLR and VLR are two important databases which
are the foundation of the Numbering Plan in
MSC. The switching components are the Mobile
Switching Centre (“MSC”) and the Gateway MSC
(“GMSC”). The MSC connects a number of BSCs.
to the network for the purposes of localization
and handover. Thus, it is the MSC which is
responsible for serving a limited geographic
region governed by all base stations connected
to the MSC over their BSCs. In a mobile network,
when a connection is to be established it is the
MSC which determines another switch depending
on the current location of the mobile subscriber.
For this purpose, MSC is also connected to local
network for each subscriber so as to implement
the numbering plan. The area from which the
call emanates, the identification of the nature
of the call whether from mobile or fixed wireline
is all done by the computer having the requisite
software in MSC.”
11.11.8 In this regard, we may also note the finding given by
the CESTAT which has not been disturbed by the Bombay
High Court regarding the contention of the Assessee that
towers are essential parts of the antennas and as such
without tower, the antennas cannot be placed at appropriate
and requisite height to receive and send signals and since
[2024] 11 S.C.R. 1593
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
towers are essential for the functioning of antennas, towers
should be treated as accessories of antennas. The CESTAT
did not find the said contention of Assessee acceptable on
the ground that tower cannot be considered to be a part of
antenna, since a component or part of any goods means
something which is required to make such goods a finished
item. The CESTAT held that only those articles which would
go into the composition of another article can be considered
to be component or part of the latter and that tower does not
enter into the composition of the antenna and hence it is not a
component/part of the antenna, relying on the decision of this
Court in Saraswati Sugar Mills v. Commissioner of Central
Excise, Delhi-III (2014) 15 SCC 625). In the aforesaid case
of Saraswati Sugar Mills (supra) it was held by this Court
that anything required to make the goods a finished item can
be described as component or part of the finished item. It
was held that iron and steel structures would not go into the
composition of vacuum pans, crystallizers etc. If an article is
an element in the composition of another article made out of it,
such an article may be described as a component of another
article. Thus, structures in question in the said case did not
satisfy the description of ‘component’.
11.11.9 While there can be no dispute about the aforesaid
proposition, we are of the view that it cannot be the only criterion
to determine what amounts to component of another article. In
order for any article to be considered a component of another
article, it does not necessarily mean that it has to be consumed
or used up for producing the said another article as in the
case of a manufacturing process. In our considered opinion, a
component of any good would also mean to include those which
make the good fully functional and make such a good more
effective as observed in M/s. Annapurna Carbon Industries
Co. (supra), wherein this Court held that an accessory would
mean an object or a device that is not essential in itself but
that adds to the beauty or convenience or effectiveness of
something else or is supplementary or secondary to something
of greater or primary importance, which assists in operating
or controlling the said good, and thus serves as its accessory.
1594 [2024] 11 S.C.R.
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It was thus held in Annapurna Carbon Industries Co. (supra)
that,
“10. We find that the term “accessories” is used in
the schedule to describe goods which may have
been manufactured for use as an aid or addition. A
sense in which the word accessory is used is given
in Webster›s Third New International Dictionary as
follows:
“An object or device that is not essential in
itself but that adds to the beauty, convenience,
or effectiveness of something else.”
Other meanings given there are: “supplementary
or secondary to something of greater or primary
importance”, “additional”, “any of several mechanical
devices that assist in operating or controlling the
tone resources of an organ”. “Accessories” are not
necessarily confined to particular machines for which
they may serve as aids. The same item may be an
accessory of more than one kind of instrument.”
11.11.10 Thus, in our opinion, the restricted meaning of
accessory given by the CESTAT and not differed from by the
Bombay High Court is not wholly correct in as much as the
meaning of accessory can have different ascribed meanings
as observed in the aforesaid decision.
11.11.11 There is no dispute to the fact that BTS is a composite
system consisting of the transmitter, receiver, antenna and
other equipment, and antenna can be said to be an integral
part of BTS. As discussed above, and not disputed by
the Revenue, tower is needed to keep the antenna at an
appropriate height and keep it stable. Without the tower, it is
not possible to hoist the antenna at the requisite height and
without it being securely fastened to the tower, antenna cannot
be kept firm and steady for proper receipt and transmission
of radio signals. Thus, there cannot be any doubt that a
mobile tower can be treated to be an accessory of antenna
and BTS. Accordingly, since in terms of sub-clause (iii) of
[2024] 11 S.C.R. 1595
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
Rule 2(a)(A), all components, spares and accessories of
such capital goods falling under sub-clause (i) would also be
treated as capital goods, a mobile tower can also be treated
as “capital good”.
11.11.12 We, therefore, agree with the conclusion arrived at by
the Delhi High Court that towers and shelters (PFBs) support
the BTS/antenna for effective transmission of mobile signals
and thus enhance their efficiency and since these articles are
components/accessories of BTS/antenna which are admittedly
“capital goods” falling under Chapter 85 within sub-clause (i) of
Rule 2(a)(A) of CENVAT Rules, these items consequently are
covered by the definition of “capital goods” within the meaning
of sub-clause (iii) read with sub-clause (i) of Rule 2(a)(A) of
CENVAT Rules. Further, since these are used for providing
output service, i.e., mobile telecommunication service, and
since these are “capital goods” received in the premises of
the provider of output service as contemplated under Rule
3(1)(i), the Assessees would be entitled to CENVAT credit on
the excise duties paid on these goods.
11.12 The alternative plea taken by the Assessee is that these items,
viz., mobile tower and the prefabricated buildings (PFBs) are
“inputs’ used for providing output service of telecommunication
and hence, being “inputs” under Rule 2(k) which are used for
providing output service i.e., mobile service, CENVAT credit
will be available in terms of Rule 3(1) which provides that a
provider of a taxable service shall be allowed to take credit
on duties paid on any input received in the premises of that
provider of output service on or after 10th September, 2004
and this may be utilised for payment of service tax on any
output service under Rule 3(1) read with Rule 3(4) of the
CENVAT Rules.
11.12.1 “Input” has been defined under Rule 2(k) to mean all
goods used for providing any output service. We have already
held that tower and the prefabricated buildings (PFBs) are not
immovable property but are “goods”/ “capital goods” within
the meaning of Rule 2(a)(A)(iii) and since these are used for
providing output service, i.e. mobile service, these can be
1596 [2024] 11 S.C.R.
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considered to be “inputs” within the meaning of Rule 2(k) and
CENVAT credit can be availed in respect of these goods for
payment of service tax.
The aforesaid definition clause under Rule 2(k) neither puts
any condition on it nor any qualifying words have been added
to the word “input”, except to mean goods used for providing
any output service. Hence, it would mean any “good” which
is used as “input” for providing taxable output service. Thus,
any item so long it qualifies as a “good” and is “used” for
providing output service, would come within the purview of
“input” under Rule 2(k) and excise duty paid on such items
can be claimed as CENVAT credit which may in turn be used
for payment of service tax for the output service provided by
the MSPs.
11.12.2 It may be also noted that there must be “use” of
such goods to qualify as “inputs”. Without stretching too
much the meaning of the words “use” and “input”, it can be
said, without any doubt, that tower and PFBs are used for
providing output service by way of inputs. The use of tower
and PFB cannot be said to be so remotely connected with
the output of service that these goods will go beyond the
ordinary meaning of “use”. Their usage in providing the output
service is not remote but proximate. In fact, without the use
of tower and PFB, it is inconceivable that the service provider
can provide mobile services effectively. Rather, towers and
PFBs are indispensable being accessories of antenna for
providing mobile services. In this regard one may refer to
the decision in Member, Board of Revenue, West Bengal
Vs. M/s. Phelps & Co. (P) Ltd. (1972) 4 SCC 121 wherein
it was held that,
“6. We have now to find out what exactly is the
meaning of the expression “for use by him in the
manufacture of goods for sale”. Identical words
are used in Section 8(b) of the Central Sales Tax
Act 1956. This court was called upon to find out
the scope of that expression in M/s. J.K. Cotton
Spinning & Weaving Mills Co Ltd. Vs. Sales Tax
[2024] 11 S.C.R. 1597
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
Officer, Kanpur and Anr. (AIR 1965 SC 1310).
Dealing with that expression this Court observed:
The expression “in the manufacture of
goods” would normally encompass the
entire process carried on by the dealer
of converting raw materials into finished
goods. Where any particular process is
so integrally connected with the ultimate
production of goods that but for that
process, manufacture or processing of
goods would be commercially inexpedient,
goods required in that process would, in
our judgment, fall within the expression “in
the manufacture of goods.
In the present case the assessee company has
sold the goods in question to certain manufactures
who were manufacturing iron steel materials. It is
also clear from question no. (i) that those gloves
were to be used by workmen who were engaged
in hot jobs or in handling corrosive substances in
the course of manufacture. That being so it cannot
be denied that those gloves had to be used in the
course of manufacture.”
11.12.3 It may be noted that in the definition of “input”
under Rule 2(k) when it relates to providing output service
it has been simply defined as all goods, except light diesel
oil, high speed diesel oil, motor spirit, commonly known as
petrol and the motor vehicles used for providing any output
service. However, when the word “input” is defined relating
to manufacture of product, it has been defined in a broad
and expensive manner to mean all goods except light diesel
oil, high speed diesel oil and motor vehicle spirit commonly
as petrol,
(i) used in or in relation to the manufacture of final
products,
(ii) whether directly or indirectly,
1598 [2024] 11 S.C.R.
Digital Supreme Court Reports
(iii) whether contained in the final product or not,
(iv) and includes lubricating oils, greases, cutting oils,
coolants, accessories of the final product cleared
along with the final products,
(v) goods used as paint, or as packing material, or as
fuel, or for generation of electricity or steam, used
in or in relation to manufacture of final products,
(vi) or for any other purpose, within the factory of
production.
Thus, “input” in relation to manufacturing of final product
would mean not only those which are directly used but also
indirectly used not only for manufacture of final product whether
contained in the final product or not but also used in relation
to manufacture of final product or for any of other purpose.
However, as mentioned above when “input” has been defined
with reference to providing output service, the definition clauses
does not explain it so elaborately but merely uses the simple
expression i.e. “used for providing any output service”.
In our view, even if the definition of “input” with reference to
output service may not have been explained in an expansive
manner as in the case of manufacture of final product
under Rule 2(k)(i), the definition of “input” with reference to
providing output service under Rule 2(k)(ii) need not be given
a restrictive meaning as sought to be done by the CESTAT
by holding that tower is not used directly for transmission of
signal. In our view since the subject matter is same, i.e., what
amounts to “input” though the end use is for two different
products, one tangible, in the form of final manufactured
product, and one intangible i.e., output service, applying
similar tests to determine what amounts to “input” would not
be impermissible.
11.12.4 We have also noted that the Bombay High Court had
taken the view that it cannot be said that it is impossible to
provide the service without the aid of the towers, thus showing
non dependency of antenna on tower.
[2024] 11 S.C.R. 1599
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
In our view, while theoretically antenna may receive and
transmit signal without the tower, practically, the same is not
feasible and tower is an essential accessory for keeping the
antenna at an appropriate height and in a stable position so
that there is no disturbance in receiving and transmission
of signal and there can be wider coverage of signal. The
link between antenna and tower is almost inseparable for
the effective functioning of antenna for providing mobile
telecommunication service and it cannot be said that the
nexus between antenna and tower is remote. Rather, in our
view, their relationship is quite proximate and inseparable for
proper functioning of antenna.
In this regard, we have noted the decision of the Gujarat High
Court in Industrial Machinery Manufacturers Pvt. Ltd. vs.
State of Gujarat (1965) 16 STC 380 (Guj) wherein the Gujarat
High Court held that humidifiers which are used by the textile
mills for improving the quality of the yarn produced in general,
and even though humidifiers were essentially electric motors
and not directly connected with the manufacturing process of
yarns, yet these were considered to be machineries for use in the
manufacture of yarn. The said finding by the Gujarat High Court
was based on the essentiality of the humidifiers. By applying the
same principle in the present case, towers and PFBs though
themselves are not electrical equipment, are essential for proper
functioning of antenna. Thus tower being essential to rendering
of output service of mobile telephony, these items certainly
can be considered to be “inputs” akin to antenna. Without the
towers and the PFBs, there cannot be proper service of mobile
telecommunication. Hence, these certainly would come within
the definition of “input” under Rule 2(k)(ii).
11.12.5 What we have noted also is that the CESTAT rejected
the plea of the Assessee that towers and parts thereof are
inputs under Rule 2(k) by observing that the towers are
admittedly immovable structures and hence ipso facto non-
marketable and non-excisable and these do not lead to
manufacture of goods and that towers and PFBs certainly
are not used for providing mobile services. By relying on
1600 [2024] 11 S.C.R.
Digital Supreme Court Reports
Explanation-2 to Rule 2(k) which provides that input includes
goods used in the manufacture of capital goods which are
further used in the factory of the manufacturer, the CESTAT
held that these items are not inputs. However, in our view,
invoking Explanation-2 is neither appropriate nor necessary
as sub-clause (ii) of Rule 2(k) itself clearly provides that
“input” means all goods, except light diesel oil, high speed
diesel oil, motor spirit, commonly known as petrol and motor
vehicles, used for providing any output service. Even though
tower and the PFBs are not electrical items/equipment in
the sense that these do not transmit signals, yet these
are indispensable for the effective functioning of antenna
by which the radio signals are received and transmitted
and accordingly, used for providing the mobile telephonic
services to the subscribers. Thus, towers and PFBs, though
are not electrical equipment for transmission of signals, yet
these are used for transmission of signal by the antennas.
Therefore, there can be no denying of the fact that there
is a close proximity and nexus between their functioning
and the ultimate transmission of radio signals which is the
output service rendered by the MSPs. Hence, the view of
the CESTAT which has not been disturbed by the Bombay
High Court does not commend our acceptance.
11.12.6 Having held that the tower and pre-fabricated buildings
(PFBs) are “goods” and not immovable property and since
these goods are used for providing mobile telecommunication
services, the inescapable conclusion is that they would also
qualify as “inputs” under Rule 2(k) for the purpose of credit
benefits under the CENVAT Rules.
11.13 For the foregoing reasons, we agree with the conclusions
arrived at by the Delhi High Court and uphold the judgment
rendered by it in Vodafone (supra) and dismiss the connected
appeals being CA No. 5032-5035 of 2021, CA No. 5039-5040
of 2021, CA No. 5038 of 2021, CA No. 5036-5037 of 2021,
CA No. 62 of 2022.
11.14 For the same reasons, we are unable to agree with the view
of the Bombay High Court and accordingly, set aside the
[2024] 11 S.C.R. 1601
M/s Bharti Airtel Ltd. v.
The Commissioner of Central Excise, Pune
judgment in Bharti Airtel (supra) rendered by it and allow the
connected appeals, being CA No. 10409-10 of 2014, CA No.
7119 of 2015, CA No. 7179 of 2015, CA No. 1077 of 2016,
CA No. 1078 of 2016, CA No. 5112 of 2021, CA No. 1201 of
2018, CA No. 1205 of 2018, CA No. 1203 of 2018, CA No.
1204 of 2018, CA No. 1202 of 2018, CA No. 5056 of 2021
and CA No. 5832 of 2018.
Consequently, all the appeals and connected applications are
disposed of in terms of the above findings and conclusions.
Result of the case: Appeals disposed of.
†
Headnotes prepared by: Divya Pandey
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