2023 (7) TMI 524 - AAAR - GST

Input Tax Credit - Steel, cement and other consumables - interpretation of the provisions of section 17 (5) (d) of the GST Act - integrated factory building is plant and machinery or not? Whether the overhead crane fixed in the factory premises can be classified as plant and machinery? - HELD THAT - This crane is falling under HSN 8426 and taxable at 9% CGST 9% SGST in schedule III under Sl.No. 327 of rate notification No. 1/2017 Central fax Rate. Chapter 84 deals with machinery and hence the overhead crane would fall under the category of plant and machinery. As per the Explanation under section 17 of the CGST Act, 2017. the expression Plant 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. Therefore, the structural support erected in relation to overhead crane alone would cover under the extended meaning of plant and machinery. The integrated factory building per se is not to be categorized as plant and machinery. The overhead crane and its proportionate structural support would be categorized as plant and machinery as per the explanation to Section 17 of the TNGST Act, 2017. Such structural support would not fall under the category of blocked input tax credit. Hence the appellant would be eligible for input tax credit proportionate to the extent of structural support erected in relation to overhead crane alone subject to fulfillment of conditions stipulated in section 17(5)(c) and (d) of the CGST Act, 2017 and explanation thereunder. However, they are not eligible for input tax credit relating to construction of other civil structure like side walls, roof of the Integrated factory building.

Issues Involved:
1. Eligibility of Input Tax Credit (ITC) on steel, cement, and other consumables used in the construction of an Integrated Factory Building.
2. Eligibility of ITC on structures, pre-cast reinforced concrete beams, poles, and other capital goods used in the Integrated Factory Building.
3. Definition and interpretation of "plant and machinery" under Section 17(5) of the CGST Act, 2017.
4. Application of Supreme Court and ARA rulings to the present case.

Summary:

Issue 1: Eligibility of ITC on Steel, Cement, and Other Consumables

The Appellant sought ITC on GST paid for steel, cement, and other consumables used in the construction of an Integrated Factory Building. The Advance Ruling Authority (ARA) denied ITC on these items, stating that they were used for constructing a civil structure, which does not qualify for ITC under Section 17(5)(d) of the CGST Act, 2017. The ARA emphasized that the factory is a building where machines produce goods, and the structural enhancements are to support the plant and machinery, not part of the plant and machinery itself.

Issue 2: Eligibility of ITC on Structures, Pre-cast Reinforced Concrete Beams, Poles, and Other Capital Goods

The ARA did not provide a ruling on the eligibility of ITC for structures, pre-cast reinforced concrete beams, poles, and other capital goods due to insufficient documentary evidence. The Appellant argued that these items are integral to the operation of the overhead cranes and should be considered part of the plant and machinery, thus eligible for ITC.

Issue 3: Definition and Interpretation of "Plant and Machinery"

The Appellant contended that the Integrated Factory Building should be considered as "plant and machinery" under Section 17(5) of the CGST Act, 2017. They argued that the building's unique features, such as strong foundations, pillars, and gantry beams, make it an essential part of their manufacturing process. The Appellate Authority examined whether the Integrated Factory Building qualifies as "plant and machinery" and concluded that only the structural support related to the overhead crane could be considered as such. The rest of the building, including side walls and the roof, does not qualify for ITC.

Issue 4: Application of Supreme Court and ARA Rulings

The Appellant cited the Supreme Court decision in the case of Jayaswal Neco Ltd. and an ARA ruling in the case of SHV Energy Pvt. Ltd. to support their claim. The Appellate Authority found that these rulings do not apply to the present case. The Supreme Court ruling related to MODVAT credit on railway tracks within a plant, which is different from the current issue. The ARA ruling is binding only on the parties involved in that specific case.

Ruling:

1. The Appellant is eligible for ITC proportionate to the extent of structural support erected for the overhead crane, subject to the conditions stipulated in Section 17(5)(c) and (d) of the CGST Act, 2017.
2. The Appellant is not eligible for ITC on the construction of other civil structures like side walls and the roof of the Integrated Factory Building.

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