The Supreme Court has ruled in favor of major telecommunications companies including Airtel, Vodafone Idea, and Tata Telecommunications, in their long-standing dispute over the eligibility for Central Value Added Tax Credit (CENVAT credit) on various items such as tower parts, shelters, printers, and chairs.
Justices BV Nagarathna and N Kotiswar Singh of the Supreme Court delivered a judgment that resolved a series of appeals by these telecom giants, upholding a 2021 decision by the Delhi High Court and overturning a contrary 2014 decision by the Bombay High Court.
The crux of the matter involved whether certain items used in the telecom industry, specifically tower parts and shelters, could be classified as “capital goods” or “inputs” under the CENVAT Credit Rules, 2004. This classification is crucial as it determines if the companies can claim tax credits on these goods, which are essential for the setup and operation of mobile networks.
Justice Singh, reading the judgment’s operative portion, declared, “We have allowed the appeals in the main matter as well as connected matters by the companies.” This ruling aligns with the intent of the CENVAT credit scheme to prevent the cascading effect of taxes on goods and services, which ultimately benefits consumers by lowering the prices of finished goods and reducing manufacturing costs.
The background of the case includes a series of legal challenges initiated by Bharti Airtel, which had been claiming CENVAT credit on excise duties paid for these items until 2006. The Central Excise Department issued a show-cause notice to Airtel in April 2006, demanding the recovery of Rs. 2.04 crore in what it considered improperly claimed CENVAT credits. The department argued that items such as towers and shelters were not integral to the final service provided to consumers and accused Airtel of suppressing facts.
