We are sharing with you an important judgment of the Hon’ble High Court of Bombay in the case of Bharti Airtel Ltd. Vs. The Commissioner of Central Excise, Pune III [2014-TIOL-1452-HC-MUM-ST]on following issue:


Whether Cenvat credit is available to provider of Cellular Mobile Service on Tower Parts & Pre-fabricated buildings?

Facts & Background:

Bharti Airtel Ltd. (“the Appellant”) is engaged in providing Cellular telephone services (“the Output Service”) and accordingly paying Service tax as applicable. The Appellant availed Cenvat credit of Excise Duty on the Base Trans-receiver Station (“BTS”) claiming to be a single integrated system consisting of tower, GSM or Microwave Antennas, Prefabricated building, isolation transformers, electrical equipments, generator sets, feeder cables etc., classified under Chapter 85.25 of the Central Excise Tariff Act, 1985 (“CETA”). Accordingly, the Appellant contended that Cenvat credit on said ‘Capital goods’ was rightly available to them under clause (i) of Rule 2(a)(A) of the Cenvat Credit Rules, 2004 (“the Credit Rules”).

Rule 2(a)(A) of Credit Rules reads as under:

“(a) capital goods means:-

(A) the following goods, namely:-

     (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90,      heading 6805, grinding wheels and the like, and parts thereof falling under             heading 6804 of the First Schedule to the Excise Tariff Act;

      (ii)   pollution control equipment;

      (iii) …………………….”

The Commissioner allowed only Cenvat credit on antenna amounting to Rs. 2,38,54,970/- and disallowed the Appellant’s claim for Cenvat credit amounting to Rs. 13,02,08,928/- on other items viz. the tower and parts thereof and the prefabricated building on the following grounds:

  • Tower is fixed to the earth and after its installation becomes immovable and therefore, cannot be called as ‘goods’;
  • Even in CKD or SKD condition, the Tower and parts thereof would fall under Chapter heading 7308 of the CETA which is not specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules;
  • Tower and parts thereof are not directly utilised for output service as the same has been basically a structural support for certain equipment.

Applying the same reasoning, credit on prefabricated building was also rejected.

Thereafter, the Appellant preferred an appeal before the Hon’ble Tribunal where also the said demand was confirmed. Being aggrieved, the Appellant preferred an appeal before the Hon’ble High Court of Bombay.


The Hon’ble High Court of Bombay after detailed deliberation denied the Cenvat credit to the Appellant and held as under:

  • It is clear that each of the components alleged to be comprised under BTS had independent functions and hence, they cannot be treated and classified as single unit.
  • The tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and, therefore, cannot be goods. The towers are admittedly immovable structures and non-marketable and non-excisable.
  • Further in the CKD or SKD condition the tower and parts thereof would fall under the Chapter heading 7308 of the CETA not specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules and therefore not covered under the ambit of ‘capital goods’.
  • The enunciation of law as laid down in the judgment in the case of Simbholi Sugar Mills Vs. Commissioner of Central Excise, Meerut [2001 (135) ELT 1239 (Tri-Del)] clearly shows that the towers are immovable property and non-excisable and hence, can neither be regarded capital goods nor can be categorized as input under the Credit Rules.
  • The alternative contention of the Appellant, that tower is an accessory of antenna and that without towers antennas cannot function and cannot be installed and hence the tower should be treated as parts and components of the antenna is without substance. An accessory or a part of any goods would necessarily mean such accessory or part which would be utilized to make the goods a finished product or such articles which would go into the composition of another article. The towers are structures fastened to the earth on which the antennas are installed and hence cannot be considered to be an accessory or part of the antenna.

Therefore, on the basis of the above judgment, the Hon’ble High Court of Bombay rejected the contention of the Appellant and decided the case in favour of the Revenue.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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October 2020