Delhi High Court: A petition was filed by Indus Towers (petitioner) challenging the common show-cause notice issued for pan India 48 GST registrations raising a staggering demand of Rs. 5454,64,35,047/- and characterization of telecommunication towers as immovable property and thus falling within the ambit of Section 17(5) of the CGST Act and being illegible for input tax credit. A division bench of Yashwant Varma and Girish Kathpalia, JJ., set aside the impugned orders and directed the authorities to re-examine the matter, ensuring that the interpretation aligns with the statutory purpose of facilitating seamless input tax credit and avoiding cascading tax burdens.
The impugned show cause notice issued under Section 74 of the CGST Act raises a demand of tax along with interest and penalty for the period 01-07-2017 to 31-03-2024 relating pan India to 48 Goods and Services Tax registrations of the writ petitioner. Indus Towers explains that it is engaged in the business of providing passive infrastructure services to telecommunication service providers. The impugned show cause notices seek to deny input tax credit on inputs and input services used for setting up passive infrastructure on the ground that the same were used in the construction of telecommunication towers and consequently falling within the ambit of clause (d) of Section 17(5) of the CGST Act.
The petitioners asserted that telecommunication towers are moveable items of essential equipment used in telecommunications which can be dismantled at site and thus capable of being moved. It is explained that only the concrete structure on which those telecommunication towers are placed could be treated as an immovable element of that equipment, whereas the steel/metal structures can be shifted to other locations. It was asserted that the erection of those towers on a concrete base is essentially for the purposes of according stability to the towers and that in itself would not detract from their basic characteristic of being items of equipment which are principally moveable. Thus, it was contended that the assumption that the installation of these towers results in the establishment of an immovable structure is misconceived.
The Court noted that the stand taken by the respondents, namely, of telecommunication towers being liable to be viewed as immovable property is rendered untenable. Relying on Bharti Airtel Ltd v. Commissioner of Central Excise, 2024 SCC OnLine SC 3374, it was noted that the telecommunication towers would clearly not qualify the five fundamental precepts which define an immoveable property. It was found that they neither qualify the test of permanency nor can they be said to be “attached to the earth”. Mobile towers, it was held, could be dismantled, and moved and they were never erected with an intent of conferring permanency. Their placement on concrete bases was only to enable those towers to overcome the vagaries of nature. Therefore, there cannot possibly be a doubt with respect to telecommunication towers being moveable property.
The Court remarked that “Turning then to the provisions of Section 17(5) itself, it is pertinent to note that the said provision sets out various goods and services which would stand exorcised from Section 16(1) and thus not liable to be taken into consideration for the purposes of availing input tax credit. Amongst the various goods and services which find mention in sub-section (5) are those received by a taxable person for construction of an immovable property. Clause (d) of Section 17(5), also excludes from immovable property “plant or machinery”. The expression “plant and machinery” has been defined by the Explanation appearing in Section 17(5) to mean apparatus, equipment and machinery fixed to earth by foundation or structural support. However, it specifically excludes telecommunication towers from the ambit of the expression “plant and machinery”.”
The Court opined that the specific exclusion of telecommunication towers from the scope of the phrase “plant and machinery” would not lead one to conclude that the statute contemplates or envisages telecommunication towers to be immovable property. The telecommunication towers would in any event have to qualify as immovable property as a pre-condition to fall within the ambit of clause (d) of Section 17(5). Their exclusion from the expression “plant and machinery” would not result in it being concomitantly held that they constitute articles which are immoveable.
The decision in Bharti Airtel (supra), though rendered in the context of the Cenvat Credit Rules, 2004, have on application of the generic principles which would apply to the concept of immovable property, have in explicit terms come to conclude that telecommunication towers are liable to be treated as movable. The Court concluded that telecommunication towers would not fall within the ambit of Section 17(5)(d) of the CGST Act and the denial of input tax credit, consequently, would not sustain.
Thus, the Court allowed the petitions and quashed the impugned orders since the show cause notices proceed on an untenable premise of mobile towers being immovable property.
[Indus Towers Limited v Union of India, W.P.(C) 14710/2024, decided on 12-12-2024]
Advocates who appeared in this case :
Mr. V. Lakshmikumaran, Mr. Yogendra Aldak and Mr. Sumit Khadaria, Advocates for petitioner
Mr. Mukul Singh, CGSC with Ms. Ira Singh and Mr. Aryan Dhaka, Advs. for R-1.
