The Supreme Court has dismissed the Special Leave Petitions filed by the Assistant Commissioner of State Tax and other authorities challenging the Andhra Pradesh High Court’s ruling that Wind Turbine Generators (WTGs), despite being erected on foundations embedded in the earth, constitute movable property and goods for GST purposes.
The Bench of Justice Aravind Kumar and Justice Vipul M. Pancholi condoned the delay in filing the petitions but found no grounds to interfere with the Andhra Pradesh High Court’s judgment.
The Supreme Court’s order leaves undisturbed the detailed judgment of the Andhra Pradesh High Court, which had held that the erection and commissioning of WTGs amounted to a composite supply of goods and services, rather than a works contract involving immovable property.
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The dispute arose from the GST treatment adopted for contracts undertaken for the manufacture, supply, erection and commissioning of WTGs.
The taxpayer was engaged in designing, manufacturing, supplying, developing, assembling, erecting and installing Wind Turbine Generators. For the relevant periods during 2017-18 and 2018-19, it treated its contracts as composite supplies of goods and services and discharged GST at 5%.
The State tax authorities disagreed with this classification. According to the authorities, the contracts involved the creation of an installation attached to the earth and therefore amounted to works contracts involving immovable property, attracting GST at 18%. Assessment orders were passed for the periods July 2017 to March 2018 and April 2018 to March 2019, followed by appellate orders confirming the tax demand.
The dispute subsequently extended to penalty proceedings. Separate penalty orders were passed and later affirmed by the appellate authority in April 2024, leading to additional writ petitions before the High Court.
The principal legal issue before the High Court was the nature of the Wind Turbine Generator assembled and erected at the customer’s site.
The tax authorities argued that a WTG could not operate unless it was attached to a foundation embedded in the earth. Since the turbine was installed on a permanent basis and required such a foundation for operation, the authorities considered the entire installation to be immovable property.
The taxpayer, on the other hand, contended that the WTG was fundamentally a collection of movable components that were transported to the site and assembled there. The fact that the completed turbine was anchored to a foundation did not, according to the taxpayer, transform the turbine itself into immovable property.
The High Court undertook a detailed examination of the technical characteristics of a WTG.
A typical WTG comprises a nacelle, rotor, tubular tower and control system. The nacelle houses major mechanical and electrical components, including the gearbox and generator. The rotor consists of the hub and blades, while the tower supports the nacelle and rotor assembly.
The Court noted that the components are manufactured or assembled separately and transported to the project site. The tower is transported in sections, while other major components such as the nacelle, hub and blades are separately moved to the site.
At the site, a foundation is first constructed. Tower sections are then erected, the nacelle is lifted onto the tower and the rotor and blades are assembled and connected. Once these processes are completed, the WTG becomes operational.
A significant factor considered by the High Court was the possibility of dismantling and relocating the WTG.
The Court found that although the foundation itself was immovable, the turbine could be dismantled into its constituent components, transported to another location and re-erected on a newly constructed foundation.
The judgment recorded that WTGs may have to be de-erected for several reasons, including repairs, foundation defects, expiry of land arrangements, underperformance or relocation of the wind farm. Once dismantled, the components can be transported and reassembled at another location.
This ability to relocate the turbine without damaging its essential components became central to the Court’s classification of the WTG as movable property.
The Andhra Pradesh High Court relied substantially on the principles laid down by the Supreme Court in earlier cases dealing with the distinction between movable and immovable property.
The High Court referred to the Supreme Court’s decision in Commissioner of Central Excise, Ahmedabad v. Solid and Correct Engineering Works, as well as T.T.G. Industries Ltd. v. Collector of Central Excise. It also relied upon the Supreme Court’s decision in M/s Bharti Airtel Ltd. v. Commissioner of Central Excise, Pune.
The authorities had relied upon the permanency principle from T.T.G. Industries, arguing that machinery assembled on immovable property with an intention to retain it permanently should itself be treated as immovable property.
The High Court, however, held that the factual circumstances of the WTG case were closer to those considered in Bharti Airtel. In that case, equipment brought to the site in knocked-down or semi-knocked-down condition could be dismantled and relocated without damage, supporting its classification as movable property.
The High Court emphasised an important principle: mere attachment to the earth does not automatically convert an article into immovable property.
Relying on the Supreme Court’s principles, the Court identified several tests for determining the character of property: Nature of annexation: Whether removal would cause damage to the property. Object of annexation: Whether the attachment is intended for permanent enjoyment of the land or merely to facilitate the use of the equipment. Intention of the parties: Whether the attachment was intended to be permanent. Functionality test: Whether fixation is intended to improve the equipment’s operational efficiency and stability. Permanency test: Whether the equipment can be dismantled and relocated without damage. Marketability test: Whether the equipment can be removed and sold in the market.
These tests were applied to the WTGs in question.
The High Court found that the turbine was attached to the foundation for its own beneficial enjoyment and operational efficiency, rather than for the permanent beneficial enjoyment of the land.
The Court noted that the location of a wind turbine is determined by factors such as wind patterns and the suitability of the location for power generation. Therefore, the purpose of fixing the turbine to the foundation was to enable it to function effectively and withstand operational forces, rather than to permanently enhance the land.
The foundation consequently served as a means of supporting the WTG rather than transforming the turbine into an inseparable part of the land.
After applying the various tests, the High Court categorically held that the Wind Turbine Generator constitutes movable property amounting to goods.
The Court reasoned that the turbine could be removed and relocated, its attachment to the foundation was intended for its own beneficial operation, and the turbine could be dismantled without damage and subsequently sold to another purchaser.
This finding was decisive for GST classification.
Since the WTG was held to constitute goods, the supply of the WTG together with associated services was required to be treated as a composite supply of goods and services, rather than a works contract involving immovable property.
Having reached this conclusion, the Andhra Pradesh High Court allowed all four writ petitions.
The Court set aside the assessment orders, appellate orders, penalty orders and the corresponding appellate orders. The assessment proceedings were remanded to the first respondent for completion in accordance with the legal position laid down in the judgment.
The ruling therefore affected not only the classification of the underlying supplies but also the consequential tax and penalty proceedings arising from the department’s treatment of the contracts as works contracts.
The State tax authorities challenged the Andhra Pradesh High Court’s judgment before the Supreme Court through Special Leave Petitions.
The Supreme Court heard the matter on August 12, 2026. The Bench first condoned the delay in filing the petitions. It then recorded that it found no grounds to interfere with the impugned judgment and orders of the High Court and dismissed the Special Leave Petitions.
Thus, while the Supreme Court’s order itself is brief, the dismissal means that the detailed legal determination made by the Andhra Pradesh High Court remains undisturbed in the proceedings before the Supreme Court.
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