The Supreme Court affirmed telecom operators’ and infrastructure businesses’ rights to CENVAT credit on infrastructure taxes in a historic decision. The ruling overturned the Bombay High Court’s opposing decision in the Bharti Airtel case and upheld the Delhi High Court’s decision in the Vodafone case. The Apex Court’s ruling clarifies the situation for telecom operators by resolving divergent views over the availability of CENVAT credit for telecom infrastructure.
The “permanency test,” which was established in the Supreme Court’s ruling in Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works & Ors, was previously used by the Delhi High Court. The purpose of this test is to ascertain if equipment is considered immovable property.
According to this theory, equipment that is permanently anchored or implanted in the ground is considered immovable property, whereas machinery that is only anchored to guarantee “wobble-free operation” is not. Telecom towers and shelters in the matter under review were constructed off-site, delivered completely knocked down (CKD), and secured to a concrete foundation for operational stability.
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