# M/s Bharti Airtel Ltd v. The Commissioner of Central Excise, Pune

- **Citation:** 2024 INSC 880
- **Court:** Supreme Court of India
- **Decided:** 2024-11-20
- **Case number:** Civil Appeal No. 5832 of 2018
- **Bench:** B.V. Nagarathna, Nongmeikapam Kotiswar Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-bharti-airtel-ltd-v-the-commissioner-of-central-excise-pune-37715
- **Pages:** 77

## Headnote

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
build

## Text

_Characters 0–39,126 of 155,223. This is a partial read: ask again with offset=39126 for what follows._

[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.
Digital Supreme Court Reports
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). 1040910410 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, 50395040, 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.
Digital Supreme Court Reports
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.
Digital Supreme Court Reports
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.
Digital Supreme Court Reports
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 backup, 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.
Digital Supreme Court Reports
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, prefabricated 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 Commissioner 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.