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TMI Blog2024 (12) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... n stands disposed of. CM APPL. 73112/2024 (Amendment) in W.P.(C) 13211/2024 Bearing in mind the disclosures made in the application, it is allowed. Application stands disposed of. W.P.(C) 13211/2024 W.P.(C) 14710/2024 & CM APPL. 61806/2024 (Interim Stay) W.P.(C) 16477/2024 & CM APPL. 69485/2024 (Interim Stay) 1. These three writ petitions assail the proceedings drawn by the respondents under the Central Goods and Services Tax Act, 2017 [CGST Act] and essentially question the characterization of telecommunication towers as immovable property and thus falling within the ambit of Section 17 (5) of the CGST Act and being illegible for input tax credit. 2. While Bharti Airtel assails the validity of an Order-in-Original dated 24 March 2023 as affirmed in appeal in terms of the order dated 31 May 2024 passed by the Commissioner of Central Tax Appeals-1, the writ petitions preferred by Indus Towers Limited [W.P. (C) 14710/2024] and Elevar Digitel Infrastructure Pvt Ltd W.P. (C) 16477/2024, impugn Show Cause Notices [SCNs] laying similar allegations. 3. For purposes of brevity, we propose to take note of the salient facts as they obtain in the writ petition preferred by Indus Towe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aft insured by him; (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession: Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.] (c) works contract services when supplied for construction of an immovable property (other than plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self would not detract from their basic characteristic of being items of equipment which are principally moveable. In view of the above, they would contend that the assumption that the installation of these towers results in the establishment of an immovable structure is misconceived. 6. According to the writ petitioners, the question of whether telecommunication towers are liable to be treated as immovable property is no longer res integra and stands conclusively settled in light of the recent decision rendered by the Supreme Court in Bharti Airtel Ltd vs. Commissioner of Central Excise, Pune 2024 SCC OnLine SC 3374. It was pointed out that Bharti Airtel, in fact, affirms the view that was taken by this Court in Vodafone Mobile Services Limited vs. Commissioner of Service Tax, Delhi 2018 SCC OnLine Del 12302, albeit in the context of Rule 2 of the Cenvat Credit Rules, 2004 [2004 Rules]. It was submitted that telecom towers, as the Supreme Court in Bharti Airtel holds, are intrinsically moveable items and were liable to be treated as capital goods entitled to be viewed as inputs under Rule 2 (k) of the 2004 Rules. 7. Both Mr. Lakshmikumaran, learned counsel as well as Mr. Ghosh, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated 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." 13. It proceeded further to negate the contention of the Revenue that mobile towers would qualify the test of "attached to the earth" in the following terms:- "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 speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment 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." " 14. The Supreme Court ultimately came to render the following conclusions :- "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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court has conclusively held that telecommunication towers cannot be construed as being immovable property. While arriving at that conclusion, the Supreme Court had reaffirmed the concept of immovable property as was lucidly explained in Commissioner of Central Excise, Ahmedabad vs. Solid and Correct Engineering Works & Others. (2010) 5 SCC 122 and where it had held as follows:- "29. The Indian law has developed on similar lines and the mode of annexation and object of annexation have been applied as relevant tests in this country also. There are cases where machinery installed by a monthly tenant was held to be movable property as in cases where the lease itself contemplated the removal of the machinery by the tenant at the end of the tenancy. The mode of annexation has been similarly given considerable significance by the courts in this country in order to be treated as fixture. Attachment to the earth must be as defined in Section 3 of the Transfer of Property Act. For instance a hut is an immovable property, even if it is sold with the option to pull it down. A mortgage of the superstructure of a house though expressed to be exclusive of the land beneath, creates an interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on behalf of the assessee was that since the machine was embedded in a concrete base the same was immovable property even when the embedding was meant only to provide a wobble free operation of the machine. Repelling that contention this Court held that just because the machine was attached to earth for a more efficient working and operation the same did not per se become immovable property. 34. The Court observed: (Sirpur Paper Mills Ltd. case [(1998) 1 SCC 400], SCC p. 402, para 5) "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 householder 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 components of the 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression "plant and machinery" would not result in it being concomitantly held that they constitute articles which are immoveable. 19. The decision in Vodafone Mobile Services as well as Bharti Airtel, though rendered in the context of the 2004 Rules, have on application of the generic principles which would apply to the concept of immovable property, have in explicit terms come to conclude that telecommunication towers are liable to be treated as movable. In view of the aforesaid, we have no hesitation in coming to the conclusion that telecommunication towers would not fall within the ambit of Section 17 (5) (d) of the CGST Act. The denial of input tax credit, consequently, would not sustain. 20. We, accordingly, and for all the aforesaid reasons, allow W.P.(C) 13211/2024 and quash the impugned orders dated 24 March 2023 and 31 May 2024. 21. Since the SCNs impugned in W.P.(C) 14710/2024 and W.P.(C) 16477/2024 proceed on a wholly untenable premise of mobile towers being immovable property, we find ourselves unable to sustain those notices also. 22. We, consequently, allow the aforenoted two writ petitions and quash the impugned SCN No. 67/2024-25 [W.P.(C) 14710/2024] and SCN ..... X X X X Extracts X X X X X X X X Extracts X X X X
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