2025 (1) TMI 465 - AAAR - GST

Input Tax Credit - services procured for the operation and maintenance of Diving Support Vehicle owned by them and used by it for supplying port and terminal handling services - services procured for hiring, and for operation and maintenance of Security Patrol Vessel used by it for supplying port and terminal handling services. ITC in respect of services procured for the operation and maintenance of DSV and SPV - HELD THAT - It is evident that section 17 (5) (ab) read with the proviso beneath, restricts ITC in respect of repair and maintenance of vessels. However, the proviso makes the ITC available if the vessels referred to in clause (aa) are used for the purposes specified therein.There are not much merit in it. GAAAR being a creature of the statute ie CGST Act , is not permitted to either put words into the statute or stretch the statute. On a bare reading of the provisions, it is found that as far as ITC of repairs and maintenance of vessels is concerned it would not be available to the respondent since the vessels per se DSV and SPV are not being used for transportation of goods. The respondent therefore will not be eligible for availing ITC on input services in respect of repairs and maintenance received by them. ITC in respect of hiring services of SPV - HELD THAT - In terms of the proviso beneath section 17 (5) (b) (i), ITC is available on hiring of SPV, where an inward supply of such goods or services is used by a registered person for making an outward taxable supply of the same category of goods/service or as an element of taxable composite or mixed supply; that the services procured are not merely those of hiring of vessels but those of operation and maintenance of said vessels. It is an undisputed fact that hiring service was not used for making an outward supply of the same category of service. Further nothing has been produced to contend that the hiring service was used by the respondent for making an outward taxable supply of services which is an element of a taxable composite or mixed supply. There is no explanation forthcoming as to how the input hiring service of SPV was an element of the taxable output service operation and maintenance either as a composite or a mixed supply - ITC is blocked under section 17 (5), ibid in respect of hiring of vessel SPV wherein the contractor of the respondent has discharged GST under SAC code 996602 and 996609. Conclusion - i) M/s. Sikka Ports and Terminals Ltd., the respondent is not eligible for availing ITC on input services in respect of repairs and maintenance received by them for DSVS and SPVs. ii) M/s. Sikka Ports and Terminals Ltd., the respondent is not eligible to avail ITC on hiring of SPVs in terms of section 17 (5) (b) of CGST Act, 2017.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether M/s. Sikka Ports & Terminals Limited is entitled to avail Input Tax Credit (ITC) on services procured for the operation and maintenance of Diving Support Vehicles (DSVs) used for supplying port and terminal handling services.
Whether M/s. Sikka Ports & Terminals Limited is entitled to avail ITC on services procured for hiring, operation, and maintenance of Security Patrol Vessels (SPVs) used for supplying port and terminal handling services.
Whether the ruling by the Gujarat Authority for Advance Ruling (GAAR) is affected by Section 104 of the CGST Act, 2017 due to alleged misrepresentation by the respondent.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: ITC on Operation and Maintenance of DSVs

Relevant Legal Framework and Precedents: The legal framework involves Section 16 and Section 17(5) of the CGST Act, 2017, which address eligibility and blocked credits for ITC. Section 17(5)(ab) specifically deals with repair and maintenance services related to vessels.
Court's Interpretation and Reasoning: The court examined whether ITC is available for services categorized under SAC 998717 and 996751, which pertain to maintenance and repair services and port operation services, respectively.
Key Evidence and Findings: The court found that the services for operation and maintenance of DSVs were essential for transporting goods from Single Point Moorings (SPMs) to storage tanks, but these services did not qualify for ITC under the specified clauses.
Application of Law to Facts: The court concluded that ITC is not available for repair and maintenance services since the DSVs are not directly used for transportation of goods, as required by the proviso to Section 17(5)(ab).
Treatment of Competing Arguments: The respondent argued for a broader interpretation of the term "for transportation of goods," but the court adhered to a strict interpretation of the statute.
Conclusions: The court denied ITC for operation and maintenance services of DSVs.

Issue 2: ITC on Hiring, Operation, and Maintenance of SPVs

Relevant Legal Framework and Precedents: Section 17(5)(b)(i) of the CGST Act, 2017, which blocks ITC on hiring services unless used for specified purposes.
Court's Interpretation and Reasoning: The court analyzed whether the hiring of SPVs falls within the exceptions outlined in Section 17(5)(aa) and (b).
Key Evidence and Findings: The court noted that the SPVs were used for security and patrolling rather than direct transportation of goods.
Application of Law to Facts: The court found that the hiring of SPVs did not qualify for ITC as it did not meet the criteria for transportation of goods or other specified purposes.
Treatment of Competing Arguments: The respondent's argument that the services were part of a composite supply was not supported by evidence.
Conclusions: The court denied ITC for hiring, operation, and maintenance of SPVs.

Issue 3: Misrepresentation and Section 104 of CGST Act

Relevant Legal Framework and Precedents: Section 104 of the CGST Act, 2017, addresses the nullification of advance rulings obtained by fraud or misrepresentation.
Court's Interpretation and Reasoning: The court considered whether the respondent's misstatement about ownership of DSVs affected the advance ruling.
Key Evidence and Findings: The court found that the misrepresentation was a bona fide mistake and not intentional.
Application of Law to Facts: The court held that the ruling should be limited to DSVs owned by the respondent.
Treatment of Competing Arguments: The respondent's claim of inadvertent error was accepted, limiting the scope of the ruling.
Conclusions: The ruling was modified to apply only to DSVs owned by the respondent.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "We find that as far as ITC of repairs and maintenance of vessels is concerned it would not be available to the respondent since the vessels per se [DSV and SPV] are not being used for transportation of goods."
Core Principles Established: The court emphasized strict statutory interpretation concerning ITC eligibility under the CGST Act, specifically regarding the use of vessels for transportation of goods.
Final Determinations on Each Issue:
- M/s. Sikka Ports and Terminals Ltd. is not eligible for ITC on services for operation and maintenance of DSVs and SPVs.
- M/s. Sikka Ports and Terminals Ltd. is not eligible for ITC on hiring of SPVs.
- The ruling by GAAR is limited to DSVs owned by the respondent due to misrepresentation.