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of <h1>Mobile service providers can claim CENVAT credit on excise duties for mobile towers and prefabricated buildings as movable goods</h1> <h3>M/s BHARTI AIRTEL LTD. Versus THE COMMISSIONER OF CENTRAL EXCISE, PUNE</h3> M/s BHARTI AIRTEL LTD. Versus THE COMMISSIONER OF CENTRAL EXCISE, PUNE - 2024 INSC 880, 2025 (391) E.L.T. 3 (SC) Issues Involved:1. Whether mobile service providers (MSPs) can claim CENVAT Credit on excise duties paid on mobile towers and prefabricated buildings (PFBs) under the CENVAT Credit Rules, 2004.2. Whether mobile towers and PFBs qualify as 'capital goods' or 'inputs' under the CENVAT Rules.3. Whether these items are movable or immovable properties.4. The conflicting decisions of the Bombay High Court and the Delhi High Court on the above issues.Issue-wise Detailed Analysis:1. CENVAT Credit Eligibility for Mobile Towers and PFBs:The core issue is whether MSPs can claim CENVAT Credit on excise duties paid for mobile towers and PFBs. The Bombay High Court ruled against MSPs, stating that these items do not qualify as 'capital goods' or 'inputs' under the CENVAT Rules, thus denying CENVAT Credit. Conversely, the Delhi High Court allowed the credit, considering these items as eligible under the CENVAT Rules. The Supreme Court examined the provisions of the CENVAT Rules, particularly Rule 3(1), which allows credit on 'capital goods' or 'input' received in the service provider's premises. The Court concluded that if mobile towers and PFBs qualify as 'capital goods' or 'inputs,' MSPs are entitled to CENVAT credit.2. Qualification as 'Capital Goods' or 'Inputs':The Supreme Court analyzed whether mobile towers and PFBs qualify as 'capital goods' or 'inputs.' Under Rule 2(a)(A), 'capital goods' include goods falling under specified chapters of the Central Excise Tariff Act and used for providing output service. The Court noted that towers and PFBs do not fall under these specified chapters. However, the Court considered whether these items could be deemed 'capital goods' under Rule 2(a)(A)(iii) as accessories of 'capital goods' like antenna and Base Transceiver Station (BTS), which fall under Chapter 85. The Court held that towers and PFBs enhance the functionality of antennas and BTS, qualifying them as accessories and thus 'capital goods.' Additionally, the Court considered these items as 'inputs' under Rule 2(k), as they are used for providing output service, i.e., mobile telecommunication.3. Movable or Immovable Properties:The Supreme Court assessed whether mobile towers and PFBs are movable or immovable properties. The Court applied various tests, including the functionality, permanency, and marketability tests. It concluded that these items are movable properties. The towers, brought in a completely knocked-down or semi-knocked-down condition, can be dismantled and relocated without damage, indicating movability. The Court emphasized that attachment to the earth for stability does not render these items immovable if they can be dismantled and sold in the market.4. Conflicting Decisions of High Courts:The Bombay High Court held that mobile towers and PFBs are immovable properties and do not qualify as 'capital goods' or 'inputs,' thus denying CENVAT credit. In contrast, the Delhi High Court found these items movable and eligible for credit. The Supreme Court agreed with the Delhi High Court, ruling that towers and PFBs are movable and qualify as 'capital goods' and 'inputs,' entitling MSPs to CENVAT credit. The Court set aside the Bombay High Court's judgment and upheld the Delhi High Court's decision, allowing MSPs to claim CENVAT credit on these items.Conclusion:The Supreme Court resolved the conflicting views by determining that mobile towers and PFBs are movable properties and qualify as 'capital goods' and 'inputs' under the CENVAT Rules. Consequently, MSPs are entitled to claim CENVAT credit on excise duties paid for these items, which can be used to pay service tax on the output services provided by them. The Court dismissed the appeals against the Delhi High Court's judgment and allowed the appeals against the Bombay High Court's decision.
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