Are towers and PFBs used to support the BTS/antenna capital goods eligible for CENVAT credit under the CENVAT Credit Rules, 2004?
Cenvat Credit Rules, 2004 — Rule 2(a)(A) — Rule 2(l) — Capital goods — Towers and PFBs — Input services — Erection and commissioning — Notification No.3/2011 — Notification No.4/2004 — SEZ —
Cenvat Credit Rules, 2004 — Rule 2(a)(A) — Towers and PFBs — Accessories of BTS/antenna —
Held: Towers and PFBs are not immovable property but goods, and being components/accessories of BTS/antenna falling under Chapter 85 they are capital goods on which cenvat credit is available; the issue stands covered by Bharti Airtel. (¶3, 4, 6)
Cenvat Credit Rules, 2004 — Rule 2(l) — Input services — Erection and commissioning of towers —
Held further: Once towers and PFBs are not immovable property, services rendered in connection with their erection and commissioning are entitled to cenvat credit, the definition of input services in Rule 2(l) being wide and inclusive. (¶13, 14)
Notification No.3/2011 — Rent-a-cab, tour operator, authorized service station — Period 2004 to 2008 —
Held further: The Notification does not include rent-a-cab, tour operator and authorized service station, and being dated 01.03.2011 it is inapplicable to a period between 2004 and 2008 even for out-door catering. (¶20, 21)
Notification No.4/2004 — SEZ units — Exemption —
Held further: The exemption cannot be denied merely because the facility is used outside the SEZ unit. Assessees' appeals allowed; Revenue's appeals dismissed. (¶22, 23)
Are towers and PFBs used to support the BTS/antenna capital goods eligible for CENVAT credit under the CENVAT Credit Rules, 2004?
Yes. Towers and PFBs used to support the BTS/antenna are capital goods eligible for CENVAT credit under Rule 2(a)(A) of the CENVAT Rules. Both sides accepted that the point stands covered by the Supreme Court's ruling in the assessee's own case, Bharti Airtel, which treated towers and PFBs as goods rather than immovable property and, since they hold the antenna steady at the requisite height, as components/accessories of BTS/antenna falling under Chapter 85. The Court allowed the telecom operators' appeals on that footing. [¶3, ¶4, ¶6]
Is erection and commissioning of towers and PFBs encompassed within the input service definition in Rule 2(l) of the Cenvat Credit Rules, 2004?
Yes. Erection and commissioning of towers and PFBs is encompassed within the input service definition in Rule 2(l) of the 2004 Rules. Credit had been denied only because the towers were treated as immovable property; that premise having gone, credit follows. The Court added that Rule 2(l) is wide and inclusive, and that the Tribunal had twice decided the same issue for the same assessee, adopting the Larger Bench view that the CENVAT chain is not broken for input services. [¶13, ¶14, ¶15]
Does Notification No.3/2011-Central Excise (NT) dated 01.03.2011 include authorized service station, tour operator and rent-a-cab?
No. Notification No.3/2011 dated 01.03.2011 does not include authorized service station, tour operator and rent-a-cab. The Revenue did not dispute eligibility to credit on these items but sought a reduction for personal use or consumption by relying on the Notification. The Court held that invocation erroneous, and further that a Notification of 01.03.2011 could not govern a period between 2004 and 2008, even for out-door catering. [¶20, ¶21]
Can exemption under Notification No.4/2004 be denied merely because the telecom facility is used outside the SEZ unit?
No. Exemption under Notification No.4/2004 cannot be denied merely because the telecom facility is used outside the SEZ unit. The Department had no case that the subscribers were outside the SEZ units, and the Tribunal also noted the exemptions in Section 26 and the overriding effect in Section 51 of the SEZ Act. The High Court concurred and answered that question against the Revenue. [¶22, ¶23]
What did the High Court finally decide on the telecom operators' cenvat credit appeals?
The assessees' appeals were allowed and the Revenue's appeals were dismissed, the substantial questions being answered in favour of the assessees. The assessee who had deposited Rs.56,06,101/- as a condition of stay was held entitled to its refund within four weeks, and the objection that the Revenue's appeals fell below the monetary limit in the Litigation Policy was treated as academic since the appeals had been decided on merits. [¶6, ¶7, ¶16, ¶23, ¶26, ¶30, ¶34]
Prepared by the LexStreak Editorial Desk — verify against the judgment.
“13. The reason for denial of the relief is on that ground that the services relate to erection and commissioning of Towers and PFBs that constitute immovable property. In CMA Nos.2260 and 2261 of 2018, we have held that Tower and PFBs are not immovable property and hence, as a consequence, services rendered in connection with the erection and commissioning of the Towers and PFBs would be entitled to cenvat credit.”
“14. That apart, the definition of ‘input services’ under Rule 2(l) of the Cenvat Credit Rules, 2004 (in short ‘2004 Rules’) is wide and inclusive and enables obtaining of credit in respect of services used in relation to setting up of a factory. The activities of erection and commissioning are hence encompassed within the scope of the definition of ‘services’.”
“21. That apart, the Notification is dated 01.03.2011, whereas, the period in question is between 2004 and 2008 and hence it is inapplicable even in the case of out-door catering. Accordingly, the second substantial question of law is answered in favour of the assessee.”
“26. According to Mr.Sai Srujan Tayi, the monetary impact of an appeal would depend on all the issues raised, irrespective of whether the question has been admitted or not. We disagree. While the cumulative monetary impact of all questions raised in the appeal is Rs.9,47,22,210/-, the substantial questions in respect of buildings and pre-fabricated structures were not admitted owing to the judgment of the Supreme Court in Bharti Airtel[^6] that was adverse to the revenue. The monetary limit of the questions that remain is stated to be 72.02 lakhs (approx.) that falls below the tax limit. However, seeing as we have heard and decided the appeals on merits, this submission is rendered academic. CMA Nos.1822 and 1823 of 2018:”
Headnote & Points of Law
You've used your free headnotes this month
The Court's judgment is below in full, free, as always — that never changes. What needs an account is LexStreak's own work on it: the headnote, the questions this judgment settles, and the passages that decide them. A free account opens all of it again.
Create my free accountFree forever plan · 30 seconds · data stays in India
In this batch of appeals, the questions that arise relate to availment of Cenvat Credit on towers and re-fabricated structures/shelters that are part of the Base Transmission Station (BTS).
CMA Nos.2260 and 2261 of 2018 have been filed by Bharati Airtel Ltd. The substantial questions of law admitted on 10.06.2026 are as follows: (i). Whether the Hon’ble Tribunal misdirected itself in following the decisions in the case of Bharti Airtel Limited V. CCE, Pune III (2014 (35) STR 865 (Bom)) and Tower Vision India Pvt. Ltd. (2006 (42) STR 249) ignoring the binding judgment of the Hon’ble Supreme Court in CCE V. Solid & Correct Engineering Works ((2010) 5 SCC 122)? (ii). Whether the Hon’ble Tribunal erred in not appreciating that the towers and pre-fabricated structures/shelters are part of the Base Transmission Station (BTS)? (iii). Whether the Hon’ble Tribunal erred in not appreciating that the Towers and Pre-fabricated structures/shelters are “accessories” of BTS and/or antenna/dish which are classified under Tariff Heading 8517 and therefore, qualify as capital goods under the CENVAT Credit Rules, 2004? (iv). Whether in the facts and circumstances of the case, the issue of tower being immoveable, non-marketable and non - excisable or not, was completely immaterial and irrelevant? (v). Whether the Hon’ble Tribunal erred in not appreciating that the subject goods like “Towers” and “Pre-Fabricated structures/ shelters” on which duty is paid are used for providing the output service i.e., telecommunication service? (vi). Whether in the facts and circumstances of the case the Hon'ble Tribunal failed to appreciate that “Towers” and “Pre- Fabricated structures/shelters” were used as an integral part of the output services viz. telecommunication services and therefore, would be covered within the definition of inputs as given under the CENVAT Credit Rules, 2004?
Both Mr.Karthik Sundaram, learned counsel for the assessee and Mr.Sai Srujan Tayi, learned Senior Standing Counsel for the Department accede to the position that the issue stands covered by a recent judgment of the Supreme Court in the assessee’s own case in Bharti Airtel v. Commissioner of Central Excise1 rendered after considering the dichotomy of views of the Bombay High Court in Bharti Airtel Ltd. v. Commissioner of Central Excise 2 and the Delhi High Court in Vodafone Mobile Services Limited v. Commissioner of Service Tax, Delhi3. The operative portion of the judgment reads thus:
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, (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.
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 prefabricated 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).
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 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”. ..........
11.10 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).
11.11 However, it is to be noted that it has been provided under subclause (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. ...........
After a discussion of the dictionary meaning of the term ‘accessory’ and the judgment of the Supreme Court in Tata Teleservices Ltd. v. Bharat Sanchar Nigam Ltd. & Ors.4, this is what the Bench says:
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 subclause (iii) of 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.
As a sequitur, the alternate plea of the assessee that the towers and PFBs would qualify to be ‘inputs’ for output telecommunication services was also accepted, as follows:
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.
In light of the aforesaid, CMA Nos.2260 and 2261 of 2018 are allowed answering the substantial questions of law in favour of the assessee.
Learned counsel for the assessee states that per order dated 10.10.2018, deposit of a sum of Rs.56,06,101/- was made as a pre-condition for grant of stay of recovery. In light of the order passed now allowing the appeals, the assessee is entitled to refund which shall be paid over within a period of four (4) weeks from date of receipt of a copy of this order. CMA Nos.2077 and 2461 of 2019:
These appeals have been filed by the Department and respondent/assessee is Vodafone Essar South Ltd. The substantial questions of law admitted on 10.06.2025 are as follows: (i). Whether the Hon'ble CESTAT is correct in allowing the CENVAT credit on Erection & Commissioning services as eligible input service merely on the basis consumption of the services, but totally oblivious of the fact that the said services were not in conformity to the definition of "input service" defined in Rule 2(l) of CENVAT Credit Rules 2004; (ii). Whether the Hon'ble CESTAT is correct in allowing the CENVAT credit on rent-a cab, outdoor catering, authorized service Station, Tour operators without eliminating the usage of such services for personal use or consumption ? (iii). Whether the Hon'ble CESTAT is correct in setting aside the denial of exemption under Notification 4/2004 when the telecom services had not been wholly consumed and utilized within the SEZ?
We have heard Mr.K.S.Ramaswamy, learned Senior Standing Counsel for the appellant and Mr.Raghavan Ramabadran, learned counsel for the respondent.
The issue in relation to cenvat credit on Erection and Commissioning services has been dealt with by the CESTAT in order dated 03.09.2018 and has been followed in the subsequent appeal as well. Mr.Ramaswamy refers to a break-up of services in the show cause notice that contains details beyond those concerning erection and commissioning services.
Both learned counsel agree that out of a sum of Rs.10,19,65,784/-, the quantification of the cenvat available on input services is Rs.8,11,80,660/-, as adumbrated in serial numbers 1 to 4 under Head A, 1 & 2 under Head B and 1 to 9 under Head C under the Heads ‘Cell site related services’, ‘Shelter related services’ and ‘pre-tower and tower related services’ respectively. The services set out under Heads D and E do not form part of the present discussion.
In the interests of clarity, we extract the break-up as below: Sl INCORRECT AVAILMENT OF CENVAT CREDIT ON CENVAT CRDIT INPUT SERVICES (SERVICE TAX No INCLUDING CESS)
A CELL SITE RELATED SERVICE
1 CIVIL CONSTRUCTION 301,240 2 ELECTRICAL WORK 5,190,855 3 LABOUR & MISC CHARGES 2,745,556 4 SECURITY 2,929,079 11,166,730
B SHELTER RELATED SERVICE
1 CIVIL CONSTRUCTION 310,145 2 ERECTION 196,758 506,903
C PRE TOWER AND TOWER RELATED SERVICE
1 ASST VERIFICTION – AUDIT 29,804 2 CIVIL WORK 26,310,554 3 CONSULTANCY 77,400 4 DESIGN 83,304 5 ELECTRICAL INSTALLATION 285,606 6 ERECTION & INSTALLATION 42,504,363 7 ERECTION & PAINTIN 8,066,681 8 FRIEGHT PAID 1,765,187 9 TIC-FESIBILITY FOR ERECTION 464,129 79,557,027
The reason for denial of the relief is on that ground that the services relate to erection and commissioning of Towers and PFBs that constitute immovable property. In CMA Nos.2260 and 2261 of 2018, we have held that Tower and PFBs are not immovable property and hence, as a consequence, services rendered in connection with the erection and commissioning of the Towers and PFBs would be entitled to cenvat credit.
That apart, the definition of ‘input services’ under Rule 2(l) of the Cenvat Credit Rules, 2004 (in short ‘2004 Rules’) is wide and inclusive and enables obtaining of credit in respect of services used in relation to setting up of a factory. The activities of erection and commissioning are hence encompassed within the scope of the definition of ‘services’.
Moreover, the same issue had arisen in the case of this assessee, both in the Tribunals at Chennai and Bombay and vide decisions dated 14.07.2025 and 26.08.2025 in Service Tax Appeal Nos.41118 of 2015 and 41740 of 2015, and have been held in favour of the assessee following the decision of the Tribunal in Vodafone Idea Ltd. V. CST. Mumbai5, the relevant portion of which reads thus:
“7. The referral Bench has referred the issue to the Larger Bench because according to them the issue about admissibility of Cenvat credit in respect of input services used for erection and commissioning of Telecom Towers by the Telecom Service providers have been decided by various Benches of the Tribunal without examining the issue in the light of the definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 as well as the decision of the Hon’ble Bombay High Court in the matter of Bharti Airtel (supra). As per the referral Bench the Hon’ble High Court while deciding the issue about admissibility of Cenvat Credit against the assessee therein, did not make any distinction in repect of inputs and input services. It also observed that the services in respect of which the Cenvat credit has been claimed are not for providing the output services but have been used for commissioning the erection of telecom towers, which have been held by the Hon’ble High Court as immovable property, not goods and thus the Cenvat chain is broken the moment it is admitted that these services have been used for erection and commissioning of the immovable property. 8. The Larger Bench on the aforesaid issues/doubts raised by the referral Bench, while answering the reference, has observed that the decision in Bharti Airtel is limited to ‘input’ as source of credit consequent on finding of ineligibility for claim as ‘capital goods’ and, therefore, not relevant in dispute over entitlement of ‘input service’ as credit. There is no break in CENVAT chain insofar as ‘input service’ is concerned. The decision of the coordinate benches survives as precedent to the extent appropriate to the facts of the present dispute. 9. Since the issue referred by the referral Bench has been answered by the Larger Bench in the above terms therefore following the same, the impugned order is set aside and the appeal filed by the appellant is allowed.”
In light of the above discussion, CMA Nos.2077 and 2461 of 2019 are dismissed answering the substantial questions of law against the revenue. CMA Nos.2454 and 2455 of 2019:
These appeals have been filed by the Department and respondent/assessee is Bharathi Airtel Ltd. and the substantial questions of law admitted on 10.06.2025 are:- (i). Whether the Hon'ble CESTAT is correct in allowing the CENVAT credit on Erection & Commissioning services as eligible input service merely on the basis consumption of the services, but totally oblivious of the fact that the said services were not in conformity to the definition of "input service" defined in Rule 2(l) of CENVAT Credit Rules 2004; (ii). Whether the Hon'ble CESTAT is correct in allowing the CENVAT credit on rent-a cab, outdoor catering, authorized service Station, Tour operators without eliminating the usage of such services for personal use or consumption ? (iii). Whether the Hon'ble CESTAT is correct in setting aside the denial of exemption under Notification 4/2004 when the telecom services had not been wholly consumed and utilized within the SEZ?
Adverting to the first question, the order of the CESTAT contains a bifurcation of the cenvat credit in relation to services rendered qua towers and shelters at a sum of Rs.22,25,538/-. Following our decision in CMA Nos.2077 and 2461 of 2019, and as the facts and legal position are identical to that matter, substantial question of law No.1 is decided in favour of the assessee.
Question of law No.2 relates to cenvat credit on rent-a-cab, outdoor catering, authorized service station and tour operators. While the revenue does not per se assail the eligibility of the assessee to credit in respect of the aforesaid services, they would submit that a percentage thereof would have to be reduced, providing for personal use or consumption.
For this purpose, revenue relies on Notification No.3/2011-Central Excise (NT) issued by the Department of Revenue, Ministry of Finance dated 01.03.2011, by virtue of which, it is incumbent on the assessee to establish that the services in relation to out-door catering have not been used for personal use or consumption by an employee. The Notification does not include services of authorized service station, tour operator and rent-a-cab and hence the invocation of the Notification to these services is erroneous.
That apart, the Notification is dated 01.03.2011, whereas, the period in question is between 2004 and 2008 and hence it is inapplicable even in the case of out-door catering. Accordingly, the second substantial question of law is answered in favour of the assessee.
As far as the third question is concerned, the Tribunal has, in paragraph 6.2, held the assessee entitled to the exemption sought, in the following terms:
“6.2 With regard to the denial of exemption under Notification No.4/2004 dated 31.3.2004 alleging that the telecom services are not consumed wholly within the SEZ Unit, we find that the mobile services are provided by the appellant to SEZ units. The department does not have a case that the subscribers are outside SEZ units. Merely because the facility of the mobile phone is used outside the SEZ unit also, the exemption in terms of Notification No.4/2004 cannot be denied. Further, the period involved is after 10.2.2006 when the SEZ Act 2005 came into existence. Section 26 of the Act grants various exemptions from taxes and duties to SEZ. Section 51 of the Act provides that the Act shall have overriding effect. Taking into consideration all these aspects, we are of the considered opinion that the denial of exemption is unjustified. The demand raised on this count therefore cannot sustain and requires to be set aside which we hereby do.”
We concur with the CESTAT in regard to the findings as above. Hence, the third question of law is answered against the revenue. In fine, CMA Nos.2454 and 2455 of 2019 are dismissed.
At the fag end of the hearing, and rather belatedly, Mr.Karthik Sundaram, learned counsel for the assessee in CMA Nos.2454 and 2455 of 2019 raises an objection to the maintainability of the revenue appeals as the demand in respect of each of issues canvassed falls under the limit stipulated under the Litigation Policy in Notification F.No.160390/20/2024-JC-CBEC dated 06.08.2024.
The Notification provides for withdrawal of matters below the monetary limits fixed, and paragraph 3 states that matters be contested in cases where the constitutional validity of the provisions is under challenge or Notification/Instruction/Orders/Circulars has been held to be illegal or ultra vires.
According to Mr.Sai Srujan Tayi, the monetary impact of an appeal would depend on all the issues raised, irrespective of whether the question has been admitted or not. We disagree. While the cumulative monetary impact of all questions raised in the appeal is Rs.9,47,22,210/-, the substantial questions in respect of buildings and pre-fabricated structures were not admitted owing to the judgment of the Supreme Court in Bharti Airtel6 that was adverse to the revenue. The monetary limit of the questions that remain is stated to be 72.02 lakhs (approx.) that falls below the tax limit. However, seeing as we have heard and decided the appeals on merits, this submission is rendered academic. CMA Nos.1822 and 1823 of 2018:
CMA Nos.1822 and 1823 of 2018 have been filed by Vodafone Mobile Services. The substantial questions of law admitted on 10.06.2025 are as follows: (i). Whether in the facts and circumstances of the case, the Hon’ble CESTAT has erred in denying cenvat credit of excise duty paid on parts of Towers and Shelters which are used for providing telecommunication network services? (ii). Whether in the facts and circumstances of the case, the Hon’ble CESTAT has erred in not applying the user test to the fact of the instant case? (iii). Whether in the facts and circumstances of the case, the denial of credit on the Input services is valid in law?
Both learned counsel accede to the position that the substantial question Nos.1 and 2 stand covered by our decision in CMA Nos.2260 and 2261 of 2018. Hence, substantial questions of law Nos.1 and 2 are answered in favour of assessee.
Question of law No.3 relates to denial of credit on rent-a-cab, our- door catering and tour operator services. Considering the wide ambit of the input services under Rule 2(l) of the 2004 Rules and the fact that these very services have been allowed in the case of other telecom operators, such as Bharti Airtel whose appeals we have considered today in CMA Nos.2454 and 2455 of 2019, we answer this question of law in favour of the assessee.
In fine, CMA Nos.1822 and 1823 of 2018 are allowed. CMA Nos.2995 and 2039 of 2019:
CMA Nos.2995 and 2039 of 2019 have been filed by Vodafone Idea Ltd. The substantial questions of law admitted on 10.06.2025 are as follows: (i). Whether in the facts and circumstances of the case, the Hon’ble CESTAT has erred in denying cenvat credit of excise duty paid on parts of Towers and Shelters which are used for providing telecommunication network services? (ii). Whether in the facts and circumstances of the case, the Hon’ble CESTAT has erred in not applying the user test to the fact of the instant case?
Following our order in CMA Nos.2260 and 2261 of 2018, CMA Nos.2995 and 2039 of 2019 are allowed answering the substantial questions of law in favour of the assessee. CMA No.134 of 2019:
CMA No.134 of 2019 has been filed by Bharat Sanchar Nigam Ltd. The substantial questions of law admitted on 11.01.2019 are as follows:
“i. Whether the Tribunal was right in concluding that the towers, shelter and accessories used by the appellant for providing telecom services are immovable properties? ii. Whether the appellant is 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 Credit Rules? iii. Whether the Tribunal erred in applying nexus test with reference to MS angles and channels whereas, according to the appellant, what were brought to the site were towers, shelter and accessories for providing services? iv. Whether the appellant was justified in terms of Rule 4(1) of the Credit 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) And v. Whether the emergence of immovable structure at an intermediate stage (assuming without admitting) is a criterion for denial of CENVAT credit?”
Following our order in CMA Nos.2260 and 2261 of 2018, CMA No.134 of 2019 is allowed answering the substantial questions of law in favour of the assessee. (A.S.M.,J.) (S.R.K.,J.) 09-09-2026 sl
Does Section 23(1) of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 require both a condition to provide basic amenities and the transferee's failure to provide them?
WA(MD).2739/2024 · Madras High Court
Can interest paid on capital borrowed for the purposes of business be claimed as deduction under Section 36(1)(iii) of the Income Tax Act, 1961 once business has commenced?
TC.1301/2008 · Madras High Court
Is expenditure on replacement of machinery revenue in nature under Section 37 of the Income Tax Act, 1961 where the installed production capacity has not increased?
TC.1100/2007 · Madras High Court
The Supreme Court and the Madras High Court decide something every day. Read one a day.
A free account gets you the day's judgments in your practice areas, a reading streak, and folders to keep what matters.
Start reading freeOne judgment a day. That's the whole habit.
LexStreak turns the Supreme Court's and the Madras High Court's output into a five-minute daily read for advocates — plain-language headnotes, the questions each judgment settles, and the full text when you need it.
Free forever plan · 30 seconds · data stays in India
Headnote and questions prepared by the LexStreak Editorial Desk · Report an error · Privacy