Indus Towers Limited vs Union Of India & Ors. on 12 December, 2024

Summary of Judgment: Indus Towers Limited vs Union Of India & Ors.

Date of Judgment: 12 December, 2024
Bench: Hon’ble Mr. Justice Yashwant Varma, Hon’ble Mr. Justice Girish Kathpalia
Court: High Court of Delhi

1. Outcome

The writ petitions were allowed.
* The Order-in-Original and the appellate order against M/s Bharti Airtel Limited were quashed.
* The Show Cause Notices (SCNs) issued to Indus Towers Limited and Elevar Digitel Infrastructure Pvt Ltd were also quashed, as they were based on an untenable legal premise.

2. Core Issue

The central legal question before the Court was whether telecommunication towers constitute "immovable property" under the Central Goods and Services Tax Act, 2017 (CGST Act). Consequently, the issue was whether Input Tax Credit (ITC) on goods and services used for the construction and erection of these towers is blocked under Section 17(5)(d) of the CGST Act.

3. Key Facts

• The petitioners, including Indus Towers Limited, are engaged in providing passive telecommunication infrastructure services.
• The GST department initiated proceedings against them to deny ITC availed on inputs and input services used for setting up telecommunication towers.
• In the case of Indus Towers, a Show Cause Notice (SCN) was issued under Section 74 of the CGST Act, raising a demand for tax, interest, and penalty for the period July 2017 to March 2024.
• The department's stance was that telecom towers are "immovable property" constructed by the petitioners, and therefore, ITC is inadmissible as per the blockages specified in Section 17(5)(d) of the CGST Act.

4. Arguments

Petitioners' Arguments (Indus Towers, et al.):
* Telecommunication towers are movable equipment, not immovable property. They are fabricated, supplied in Completely Knocked Down (CKD) condition, assembled at the site, and can be unbolted, dismantled, and relocated without damage.
* The towers are affixed to a civil foundation merely for stability and to ensure wobble-free operation, not for the permanent beneficial enjoyment of the land.
* The issue is settled law (res integra), conclusively decided by the Supreme Court in Bharti Airtel Ltd vs. Commissioner of Central Excise, Pune (2024), which held that telecom towers are movable goods.

Respondents' Arguments (Union of India/GST Department):
* While not disputing the Supreme Court's ruling in Bharti Airtel under the old CENVAT regime, the respondents argued that the CGST Act contains a specific provision that changes the legal landscape.
* Their argument was centered on the Explanation to Section 17 of the CGST Act, which defines "plant and machinery." This Explanation specifically excludes "telecommunication towers" from the definition of plant and machinery.
* Since Section 17(5)(d) allows ITC on plant and machinery (as an exception to the immovable property rule), the specific exclusion of telecom towers from this exception implies that the legislature intended to treat them as immovable property for the purpose of blocking ITC.

5. Court’s Reasoning

The High Court rejected the respondents' arguments and reasoned as follows:
1. Immovability is a Pre-requisite: The primary condition for the applicability of the ITC blockage under Section 17(5)(d) is that the goods or services must be used for the construction of an "immovable property".
2. Telecom Towers are Movable: The Court relied heavily on the Supreme Court's binding precedent in Bharti Airtel (2024). The Supreme Court, after applying established legal tests (permanency, functionality, marketability, nature of annexation, etc.), conclusively held that telecom towers are movable property ("goods") and not immovable property. Their affixation to the earth is temporary and for operational efficiency, not for permanent enjoyment of the land.
3. Interpretation of the Explanation to Section 17: The Court held that the specific exclusion of "telecommunication towers" from the definition of "plant and machinery" in the Explanation to Section 17 does not automatically render them immovable property.
4. Logical Flaw in Respondents' Argument: The respondents' argument puts the cart before the horse. The question of whether something is excluded from the exception (plant and machinery) only arises if it first falls within the main rule (immovable property). Since the Supreme Court has already established that telecom towers are fundamentally movable, they do not fall within the main scope of Section 17(5)(d) at all.
5. Conclusion: As telecommunication towers are not immovable property, the ITC blockage under Section 17(5)(d) of the CGST Act is not applicable. The denial of ITC by the department was therefore based on an untenable legal premise.

6. Statutory References

• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 16(1)
  • Section 17(5)(c) and 17(5)(d)
  • Explanation to Section 17
  • Section 74
• Transfer of Property Act, 1882:
  • Section 3
• General Clauses Act, 1897:
  • Section 3(36)
• Cenvat Credit Rules, 2004:
  • Rule 2(k)

7. Precedents Cited

• Bharti Airtel Ltd vs. Commissioner of Central Excise, Pune, 2024 SCC OnLine SC 3374
• Vodafone Mobile Services Limited vs. Commissioner of Service Tax, Delhi, 2018 SCC OnLine Del 12302
• Commissioner of Central Excise, Ahmedabad vs. Solid and Correct Engineering Works, (2010) 5 SCC 122
• Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad, (1998) 1 SCC 400
• Triveni Engineering & Indus Ltd. v. Commissioner of Central Excise, (2000) 7 SCC 29
• Narne Tulaman Manufacturers Pvt. Ltd. Hyderabad v. Collector of Central Excise, Hyderabad, (1989) 1 SCC 172
• Quality Steel Tubes (P) Ltd. v. Collector of Central Excise, U.P., (1995) 2 SCC 372
• Mittal Engineering Works (P) Ltd. v. Collector of Central Excise, Meerut, (1997) 1 SCC 203