Delhi High Court Quashes Rs. 5,454 Cr GST Demand Against Indus Towers
Indus Towers Limited (‘Company’) challenged the common show-cause notice issued for pan-India 48 GST registrations, raising
Delhi High Court Quashes Rs. 5,454 Cr GST Demand Against Indus Towers
Indus Towers Limited (‘Company’) challenged the common show-cause notice issued for pan-India 48 GST registrations, raising a staggering demand of Rs. 5,454,64,35,047/-.
The Company is in the business of providing passive infrastructure services to telecommunication service providers. The show-cause notice sought to deny the input tax credit (‘ITC’) on inputs and input services used for setting up passive infrastructure, on the grounds that the same were used in the ‘construction’ of telecommunication towers, consequently contravening Section 17(5)(c)/(d) of the CGST Act, read with the explanation of Section 17 of the CGST Act.
It was argued that the question of whether telecommunication towers should be treated as immovable property has already been conclusively settled by the Hon’ble Supreme Court in Bharti Airtel v. Commissioner of Central Excise, Pune & connected matters (judgment dated 20.11.2024, 2024 INSC 880). The argument was made that, as per the Supreme Court’s ruling in Bharti Airtel, telecom towers are inherently movable items.
However, while the department did not dispute the findings in Bharti Airtel, it distinguished the case in light of the Explanation to Section 17 of the CGST Act and the specific exclusion of telecommunication towers from the said Explanation.
The Court relied on the principles laid down in Bharti Airtel, including annexation, the intent of the parties, the functionality test, permanency test, and marketability test in determining what constitutes immovable property.
The court held that the specific exclusion of telecommunication towers under the Explanation to Section 17 would not lead to the conclusion that the statute contemplates or envisages telecommunication towers as immovable property. The Court further stated that telecommunication towers would, in any case, 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 them being deemed immovable property. Consequently, the show-cause notices issued to the Petitioners were quashed.
The matter was led by V. Lakshmikumaran, along with Yogendra Aldak, Agrim Arora, and Sumit Khadaria, Advocates from Lakshmikumaran and Sridharan Attorneys, who represented three out of the two Petitioners.