2019 (7) TMI 1736 - AAR - GST

Input Tax Credit - GST paid on the goods or services i.e. supply and installation of Sewage Treatment Plant, supply and installation of Fire-fighting system, supply of Cable for transmission of electricity, supply of other material for lying of Cable and electrical installations and Laying of Cable and electrical installations for transmission of electricity - Section 17(5) of CGST Act, 2017 - HELD THAT - All the goods or services or both are covered under works contract and therefore, Input tax credit is not allowed as per Section 17(5)(c) of the CGST Act, 2017 - In the explanation given or the purposes of clauses (c) and (d) of Section 17 (5) of the CGST Act, 2017; it is clear that construction includes additions to the extent of capitalisation, to the said immovable property. It means the applicant has constructed a building for the purpose of leasing or renting out the same for running an industry and the goods in question have been added to the building already constructed. Therefore, the Input tax credit is not allowed as per Section 17(5)(d) of the CGST Act, 2017 on all the items in question. The plant and machinery means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but with some exclusions as above. In the present case the applicant admits that the Sewage Treatment Plant is attached with the civil structure of the building. Thus, it is clear that it is a part of the civil structure of the building and part of the building so constructed. Therefore the applicant s contention that the Sewage Treatment Plant is covered under the definition of plant and machinery is rejected because it is covered under the exclusion (i) of the explanation - as per the definition of goods some movable property is excluded from the category of goods whereas at the same time, some immovable properties are treated as goods. But the terms movable and immovable property have not been defined under the GST Act. In laymen terms, any goods that can move are movable property and which cannot be moved is immovable property. As per the definition of immovable property contained in the General Clauses Act and the Transfer of Property Act, it is clear that things attached to the earth or permanently fastened to anything attached to the earth is immovable property. Anything imbedded in the earth or attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached, qualifies to be attached to the earth - In the present case, the applicant constructed a building for the purpose of leasing or renting out the same for running an industry. The said building is imbedded in the earth as per clause (b) above and the goods in question are attached to the walls or building so imbedded in the earth for the permanent beneficial enjoyment of the building - the contention of the applicant regarding installation of Sewage Treatment Plant and Fire-fighting system to be covered under plant and machinery is concerned, it is stated by the applicant that the same is installed as per statutory requirement. Thus it is clear that these goods have been installed in the building for the permanent beneficial enjoyment of the building - Input tax credit is not allowed as per Section 17 (5) (d) of the CGST Act. Cable and other material such as PCC Poles, structural steel, cable end kit, HDPE pipes, GO switch etc. - capital goods or not - HELD THAT - These goods also have been installed in the building for transmission of power from outside sources upto the premises. Thus, these goods are also for permanent beneficial enjoyment of the building. Therefore, Input tax credit is not allowed as per Section 17(5)(d) of the CGST Act. The Supreme Court in TRIVENI ENGINEERING INDUS. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 2000 (8) TMI 86 - SUPREME COURT case observed that in order to determine whether an article is permanently fastened to anything attached to the earth, both the intention as well as the factum of fastening has to be ascertained from the facts and circumstances of each case. The Allahabad High Court in THE COMMISSIONER TRADE TAX UP. LUCKNOW VERSUS TRIVENI NL. LTD. 2014 (4) TMI 842 - ALLAHABAD HIGH COURT has observed that permanently fastened to anything attached to the earth has to be read in the context for the reason that nothing can be fastened to the earth permanently so that it can never be removed. If the article cannot be used without fastening or attaching it to the earth and it is not removed under ordinary circumstances, it may be considered permanently fastened to anything attached to the earth. The ITC of GST paid on the Sewage treatment plant; Fire Fighting System; Cable for transmission of electricity from feeding point to the building; other material such as PCC Poles, structural steel, cable end kit, HDPE pipes, GO switch etc. Laying of Cable and electrical installations for transmission of electricity is not admissible to the applicant.

Summary

Issues:
Whether Input Tax Credit (ITC) of GST paid on goods or services like Sewage Treatment Plant, Fire-fighting system, Cable for electricity transmission, and other materials for electrical installations is admissible under Section 17(5) of the CGST Act, 2017.

Analysis:

1. Works Contract Services (Section 17(5)(c)):
- The definition of works contract under Section 2(119) of the CGST Act includes installation and fitting out of immovable property.
- The goods and services ordered by the applicant fall under works contract, hence ITC is not allowed under Section 17(5)(c).

2. Goods or Services for Construction (Section 17(5)(d)):
- The explanation to Section 17(5)(d) clarifies that construction includes additions to immovable property.
- The goods in question were added to the building constructed by the applicant, making ITC inadmissible under Section 17(5)(d).

3. Classification of Plant and Machinery:
- The explanation to Section 17(5)(d) defines plant and machinery as excluding civil structures like the Sewage Treatment Plant attached to the building.
- The Sewage Treatment Plant being part of the civil structure does not qualify as plant and machinery, thus ITC is disallowed.

4. Movable vs. Immovable Property:
- Definitions from the General Clauses Act and Transfer of Property Act clarify immovable property as things attached to the earth.
- The goods in question, being attached to the building permanently, are considered immovable property, disallowing ITC under Section 17(5)(d).

5. Permanently Fastened Criteria:
- Case laws emphasize the intention and factum of fastening to determine if an article is permanently attached to the earth.
- Goods and services installed for permanent beneficial enjoyment of the building are not eligible for ITC under Section 17(5)(d).

Conclusion:
The Authority ruled that the ITC of GST paid on the mentioned goods and services is not admissible to the applicant based on the provisions of Section 17(5) of the CGST Act, 2017. The ruling highlights the inadmissibility of ITC due to the nature of works contract services, construction-related goods, and the classification of plant and machinery.