CENVAT credit on telecom towers and shelters upheld where erection goods qualified as inputs and capital goods.

Mobile towers and prefabricated telecom shelters were treated as movable goods on the tests of permanency, annexation, functionality and marketability, so they were not immovable property. The Tribunal further held that towers, as integral accessories supporting antenna and BTS equipment, fell within capital goods, and the steel items used in their erection also qualified as inputs for output telecom services. Denial of CENVAT credit merely because the goods were used in erecting towers and shelters was therefore unsustainable, and the credit was held admissible.

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Issues: Whether mobile towers and prefabricated buildings/shelters used for telecom infrastructure are movable goods and whether the CENVAT credit on angles, channels, beams and similar items used for their erection is admissible as inputs or capital goods.

Analysis: The Tribunal followed the Supreme Court's ruling that mobile towers and prefabricated buildings are to be tested on permanency, annexation, functionality and marketability, and are movable goods rather than immovable property. It was further held that towers support the antenna and BTS as integral accessories and therefore fall within the ambit of capital goods. Since the items are used in providing output telecom service, they also qualify as inputs for the purposes of CENVAT credit. On that basis, denial of credit merely because the goods were used in erection of towers and shelters was unsustainable.

Conclusion: The denial of CENVAT credit was set aside and the credit was held admissible in favour of the assessee.

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