2026 (3) TMI 981 - AT - Service Tax

Cenvat credit on telecom towers and associated input services allowed; transfer of valid unutilized credit permitted on centralized registration shift.

Clarifies that telecom towers and prefabricated shelters constitute movable goods and, when serving as components of BTS/antenna, qualify as capital goods ... Eligibility of CENVAT credit on telecom towers, prefabricated shelters and related capital goods - definition of ‘input services’ as provided under Rule 2(l) - input services used for erection and operation of telecom towers - Legality of transfer of unutilized CENVAT credit upon shifting centralized registration/centralized accounting - tests of movability and functionality. Eligibility of CENVAT credit on telecom towers, prefabricated shelters and related capital goods - HELD THAT:- The Tribunal held that the issue is no longer res integra in view of the Hon'ble Supreme Court decision in M/s Bharti Airtel Ltd [2024 (11) TMI 1042 - SUPREME COURT] and subsequent Tribunal/High Court decisions following it. Applying the tests of movability and functionality, towers and prefabricated shelters qualify as 'goods' and as components/accessories of capital goods for provision of telecommunication services; consequently they fall within the definition of capital goods and inputs under the Cenvat Credit Rules. The Tribunal further followed decisions that extend this reasoning to input services used for erection and related activities, and therefore set aside the impugned orders denying such credit and allowed the assessee's appeals. [Paras 6, 7, 8] Impugned orders denying CENVAT credit on the specified goods and input services set aside; appeals allowed. Transfer of unutilized CENVAT credit on shifting of centralized accounting/registration from Jaipur to Gurgaon was sustainable and demand in respect of such transfer was rightly dropped - HELD THAT:- The Tribunal upheld the Adjudicating Authority's finding that Rule 10 applies to shifting or transfer of business (change of ownership, sale, merger, amalgamation, lease or transfer to joint venture) and not to mere relocation of centralized accounting/registration. The Commissioner had examined Rule 10 and concluded there is no statutory bar on shifting centralized accounting and billing; centralized registration is administrative and does not alter tax liability or credit rights. Precedent of this Tribunal and benches (Central Bank of India [2018 (4) TMI 1241 - CESTAT NEW DELHI], Mafatlal [2020 (6) TMI 61 - CESTAT AHMEDABAD], B.S.N.L. [2024 (1) TMI 583 - CESTAT CHANDIGARH]) supporting transfer where original credit is undisputed was applied. Consequently, the demand for transfer of unutilized credit was correctly dropped and the Revenue's appeal on this point was dismissed. [Paras 53, 54, 55, 56, 57] Impugned order dropping the demand relating to transfer of unutilized CENVAT credit upheld; Revenue's appeal dismissed. Final Conclusion: The Tribunal allowed the assessee appeals and set aside orders denying CENVAT credit on towers, shelters, related capital goods and input services, and dismissed the Revenue's appeal upholding the dropping of the demand arising from transfer of unutilized CENVAT credit upon change of centralized registration. Issues: (i) Whether CENVAT credit is admissible on telecom towers, tower parts, prefabricated shelters and input services used in erection/construction of towers; (ii) Whether transfer of unutilized CENVAT credit is permissible upon shifting of centralized registration/centralized accounting from Jaipur to Gurgaon.Issue (i): Admissibility of CENVAT credit on towers, tower parts, prefabricated shelters and input services used in erection/construction of towers.Analysis: The Tribunal considered binding authoritative decisions including the Hon'ble Supreme Court judgment in M/s Bharti Airtel Ltd v. CCE, Pune and subsequent Tribunal and High Court decisions applying the tests of permanency, intendment, functionality and marketability to conclude that towers and prefabricated shelters are movable goods rather than immovable property. The judgments treated such towers and shelters as components/accessories of BTS/antenna and, therefore, as capital goods and inputs within the definitions in the Cenvat Credit Rules, 2004. The Tribunal also relied on Larger Bench and other precedent holdings that input services integrally connected to setting up and operating telecom towers qualify as input services eligible for credit when used in provision of taxable output services.Conclusion: In favour of the Assessee. The impugned orders denying CENVAT credit on towers, tower parts, prefabricated shelters and related input services are set aside and the Assessee's appeals on this issue are allowed.Issue (ii): Legality of transfer of unutilized CENVAT credit upon shifting centralized registration/centralized accounting from Jaipur to Gurgaon.Analysis: The Tribunal examined Rule 10 and its sub-rules of the Cenvat Credit Rules, 2004 and the impugned authority's reasoning that Rule 10 addresses transfers on account of change of ownership, sale, merger, amalgamation, lease or transfer of business and that nothing in Rule 10 prohibits shifting of centralized accounting or centralized registration. The Tribunal also considered precedents (including Central Bank of India, Mafatlal Industries Ltd and B.S.N.L.) holding that where credit was validly availed and not disputed, procedural formalities of transfer under centralized registration cannot be used to deny substantive credit. The factual record showed no allegation that the credit was incorrectly availed or already utilized at the transferor office and that audits had not revealed infirmity.Conclusion: In favour of the Assessee. The impugned order dropping the demand relating to transfer of unutilized CENVAT credit on shifting centralized registration is upheld and the Revenue's appeal is dismissed.Final Conclusion: The Tribunal allowed the appeals filed by the Assessees challenging denial of CENVAT credit on towers, related goods and input services, and dismissed the Revenue's appeal challenging the dropping of demand relating to transfer of unutilized CENVAT credit on shifting centralized registration; the Assessees therefore obtain the principal relief sought on both issues.Ratio Decidendi: Towers and prefabricated shelters used in telecom services are movable goods and qualify as capital goods/inputs under the Cenvat Credit Rules, 2004; input services integrally connected to setting up and operating such infrastructure are eligible as input services; transfer of validly availed unutilized CENVAT credit on change of centralized registration/centralized accounting is not barred by Rule 10 where there is no transfer of business as contemplated in Rule 10 and where the credit availed is not shown to be incorrect or already utilized.