Movable property test for telecom towers upheld: CENVAT credit and refund of credit reversed under protest allowed.

Telecom towers fixed on foundations with nuts and bolts, but not embedded in the earth, were treated as movable property because they could be unbolted and relocated without damage and were installed only for stability and effective functioning. On that basis, CENVAT credit as inputs and capital goods was held admissible, and denial of credit on immovability grounds was unsustainable. Credit reversed under protest could also be reclaimed by refund, and the pending issue of eligibility in a separate notice did not make the claim premature. The refund authority was required to decide the claim on merits, and the refusal to sanction refund was set aside.

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Issues: (i) Whether telecom towers fixed on foundations with nuts and bolts, without being embedded in the earth, were movable property and therefore eligible for CENVAT credit as inputs and capital goods under the CENVAT Credit Rules, 2004; (ii) Whether the refund claim for credit reversed under protest was premature because a separate show cause notice on eligibility had not yet been adjudicated.

Issue (i): Whether telecom towers fixed on foundations with nuts and bolts, without being embedded in the earth, were movable property and therefore eligible for CENVAT credit as inputs and capital goods under the CENVAT Credit Rules, 2004.

Analysis: The applicable test was whether the goods were attached to the earth in the sense recognised by the General Clauses Act and the Transfer of Property Act. The permanency test, as explained by the Supreme Court, requires examination of the intention of fixation and the factual manner of attachment. Goods fixed merely to ensure stability, wobble-free operation, or effective functioning, and capable of being unbolted and relocated without damage, do not become immovable property. On the facts, the towers were erected above the ground on foundations using nuts and bolts, were not embedded in the earth, and could be moved without damage. The earlier Bombay High Court decisions were distinguished because they proceeded on admitted facts of embedment in the earth.

Conclusion: The towers were movable property and credit was admissible; the denial of CENVAT credit on the ground of immovability was unsustainable and was against the assessee.

Issue (ii): Whether the refund claim for credit reversed under protest was premature because a separate show cause notice on eligibility had not yet been adjudicated.

Analysis: Credit reversed under protest without prior determination may be reclaimed through a refund claim. The refund sanctioning authority cannot decline to decide the claim by treating it as premature merely because another notice is pending. Once a refund application is filed, the authority must allow it or reject it on merits. Since the refund claim arose from reversal made under protest and the eligibility issue had already been adjudicated in the refund proceedings, there was no basis to keep the claim in abeyance.

Conclusion: The refund claim was not premature and the assessee was entitled to refund of the reversed credit.

Final Conclusion: The impugned order rejecting refund was set aside and the assessee succeeded on the entitlement to avail CENVAT credit and obtain refund of the amount reversed under protest.

Ratio Decidendi: Goods fixed only for stability or efficient working, and capable of removal without damage, are not immovable property; where credit is reversed under protest without adjudication, refund cannot be denied as premature and must be decided on merits.

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