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2019 (9) TMI 1444 - AAAR - GSTInput Tax Credit - civil and railway allied works in connection with the laying of private Railway Siding - signaling telecommunication system, mechanical and structural works in relation to Railway Siding - execution of P-Way, Civil, overhead electrification, general electrical and signaling telecommunication works for the proposed block station yard in relation to private Railway Siding - HELD THAT - The instant contract consists of transfer of property in goods, coupled with supply of services which leads to the inevitable conclusion that this is a case of Works contract, covered under the definition of Works contract defined under Section 2(119) of the CGST Act, 2017 supra. Works contract, covers in its ambit only certain works performed on immovable property. The details of works as enumerated above and as forthcoming from the contract, goes to show that the said project of Private Railway siding awarded to the Contractor by the Appellant is not as simple or movable. The work consists of an entire system comprising of a variety of different structures which are installed after a lot of prior work which involves Civil work, Civil engineering, Ground work, supply, Foundation work, Fabrication, Erection of Building Steel Structures, sheds, Block cabin, Railway allied works, Signaling telecommunication works, Construction of Railway Staff quarters, Station building etc.. The magnitude of project covers a large area, tailored specifically to fit the dimensions and orientation of the needs of the project. In no case it appears to be prudent or for that matter viable to move these items from one place to the other. Thus, the project of construction of Private Railway siding fulfills the conditions of it being an immovable property. Works contract, covers in its ambit only certain works performed on immovable property, we in affirmation with the findings of the AAR and more so with no visible intention to dismantle the said project of construction of private Railway siding, these being intended to be used for a fairly long period of time and on the basis of the scope of work itself as forthcoming from the documents supra issued by the Appellant M/s. NMDC, we come to the considered conclusion that the said project of private Railway siding, consists of civil structures with foundations and are immovable in nature. Whether credit of the taxes paid on various items will be eligible if the said laying of private railway siding satisfies the definition of plant and machinery and that the rail network, signaling system and other telecom network established can be regarded as an apparatus or an equipment. The test of immovable property is not relevant for plant and machinery as Section 17(5)(c) and (d) exclude plant and machinery from immovable property. Since, plant and machinery are excluded from immovable property, construction and other activity in relation to plant and machinery shall be eligible for Input Tax Credit unless otherwise restricted. The restriction of ITC is only on the telecom towers, pipelines which are not treated as plant and machinery by virtue of explanation to Sec. 17(5)(c) and (d). Input Tax Credit provisions restrict ITC credit of works contract services for works to be performed on immovable property and also restrict the credit of construction related activity of immovable property even when construction activity do not fall into the scope of works contract. However, works contract and construction activity is eligible for Input Tax Credit if done in respect of plant and machinery - Section 17(5)(c) and (d) would not apply if the expenditure is in relation to a Plant Machinery. Plant and machinery has been specifically defined as any equipment, apparatus attached to earth by foundation or structural support used for supply of goods or services. Plant and machinery to specifically exclude telecom towers, pipelines etc. As per the definition of works contract, the works contract inter alia include construction of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract - Construction activity will not qualify as works contract if there is no transfer of property in goods involved i.e. the contractor is supplying service only without any supply of goods. Works contract may or may not be a construction. In the present case the project of laying a private railway siding consisting of a variety of different structures which are installed after a lot of prior work which involves Civil work, Civil engineering, Ground work, supply, Foundation work, Fabrication, Erection of Building Steel Structures, sheds, Block cabin, Railway allied works, Signaling telecommunication works, Construction of Railway Staff quarters, Station building etc. will render such nexus tenuous. There is no merit in the appeal filed by the Appellant M/s. NMDC against the Advance Ruling Order passed by the AAR, Chhattisgarh and accordingly the said order is upheld.
Issues Involved:
1. Eligibility of Input Tax Credit (ITC) for civil and railway allied works in connection with the laying of private railway siding. 2. Eligibility of ITC on signaling & telecommunication system, mechanical and structural works in relation to railway siding. 3. Eligibility of ITC on execution of P-way, civil, overhead electrification, general electrical and signaling & telecommunication works for the proposed block station yard in relation to private railway siding. Detailed Analysis: Issue 1: Eligibility of ITC for Civil and Railway Allied Works The appellant sought to avail ITC for civil and railway allied works in connection with the laying of a private railway siding. The AAR ruled against the appellant, stating that the appellant is not entitled to ITC on inward supplies for the railway siding activities as they are located outside the appellant's premises, citing exclusions under Section 17(5) of the CGST Act, 2017. The appellant contended that the railway siding is integral and inseparable from the manufacturing process, arguing that it should be treated as "plant and machinery" rather than a civil structure/immovable property. The appellant cited various case laws to support their claim that railway siding qualifies as plant and machinery. The Appellate Authority upheld the AAR's decision, concluding that the project of constructing a private railway siding results in civil structures that are immovable in nature. They emphasized that the works involved (e.g., construction of pathways, level crossing gates, loading platforms, etc.) are civil works resulting in civil structures, and thus, ITC is not available for these works. Issue 2: Eligibility of ITC on Signaling & Telecommunication System, Mechanical and Structural Works The appellant argued that signaling & telecommunication systems, mechanical and structural works related to the railway siding should qualify as "plant and machinery" and thus be eligible for ITC. They cited various judicial precedents and definitions to support their claim that these items should be considered as apparatus or equipment integral to the manufacturing process. The Appellate Authority reaffirmed the AAR's ruling, stating that the items in question do not qualify as plant and machinery as per the definition provided in the CGST Act, 2017. They noted that these works are part of the immovable property and do not have a direct nexus with the outward supply of goods or services. Therefore, ITC is not available for these works. Issue 3: Eligibility of ITC on Execution of P-Way, Civil, Overhead Electrification, General Electrical and Signaling & Telecommunication Works The appellant sought ITC for the execution of P-way, civil, overhead electrification, general electrical, and signaling & telecommunication works for the proposed block station yard. They argued that these works are essential for the manufacturing process and should be considered as plant and machinery. The Appellate Authority, aligning with the AAR's decision, held that these works are part of the immovable property and do not qualify as plant and machinery. They emphasized that the works involved are civil structures and do not have a direct nexus with the outward supply of goods or services. Consequently, ITC is not available for these works. Conclusion: The Appellate Authority upheld the AAR's decision, denying ITC for the civil and railway allied works, signaling & telecommunication systems, mechanical and structural works, and execution of P-way, civil, overhead electrification, general electrical, and signaling & telecommunication works related to the private railway siding. The ruling emphasized that these works result in civil structures that are immovable in nature and do not qualify as plant and machinery under the CGST Act, 2017.
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