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2025 (2) TMI 723 - AAR - GSTInput tax credit - Whether input tax credit is available in relation to goods and services received for increasing the height of Tailing Dam used to disposal and treatment of hazardous waste of mining operations known as tailings in terms of Section 17 (5) (c) and 17 (5) (d) of the Central Goods and Service Tax Act 2017? - HELD THAT - Ongoing through the submissions of the taxpayer it is found that Tailing dams are constructed solely using the by-products generated during the second phase of conversion of ore into concentrates at the milling plant. During the second phase of conversion of ore into concentrates at milling plant hazardous waste known as tailings a form of slurry is generated at the tail end of the benefication process. These tailings in the form of slurry consist of crushed rock water and chemicals left over after the extraction of minerals. The provisions of section 17 (5) (c) and 17 (5) (d) of CGST Act 2017 clarifies that GST paid on works contract goods and services received by a taxpayer for construction of immovable property is not eligible for ITC. There are two exceptions in clause (d) to the exclusion from ITC provided in the first part of Clause (d). The first exception is where goods or services or both are received by a taxable person to construct an immovable property consisting of a plant or machinery . The second exception is where goods and services or both are received by a taxable person for the construction of an immovable property made not on his own account. Construction is said to be on a taxable person s own account when (i) it is made for his personal use and not for service or (ii) it is to be used by the person constructing as a setting in which business is carried out. However construction cannot said to be on a taxable person s own account if it is intended to be sold or given on lease or license. When the immovable property is in the nature of plant and machinery then the works contract goods and services received for construction of plant and machinery will be eligible for ITC and will not be hit by the restriction under the said clause (c) or (d) of Section 17 (5) of the CGST Act 2017. Since tailing dams are resting on foundation of natural rock or soil with the help of cement and is stretch over several kilometers it is clear that they are immovable and are thus covered under definition of immovable property . We find that the term civil structure has also not been defined in the GST law. A general understanding of the term can be derived from the definition of civil engineering given as The profession of designing and executing structural works that serve the general public such as dams bridges aqueducts canals highways power plants sewerage systems and other infrastructure - the tailing dam is a civil structure and qualifies in the definition of immovable property. Therefore the submission of the applicant that it is covered under Plant and Machinery is not tenable. The tailing dams can be simply termed as a structure providing storage facility for waste products of mining operations. These storage facilities does not play any role in the quantity as well as quality of the minerals extracted processed and metals manufactured by the taxpayer. Thus the tailing dams can not be qualified to be used for carrying on the core business activities. Conclusion - Input tax credit is not available in relation to goods and services received for increasing the height of Tailing Dam used to disposal and treatment of hazardous waste of mining operations known as tailings in terms of Section 17 (5) (c) and 17 (5) (d) of the Central Goods and Service Tax Act 2017.
1. ISSUES PRESENTED and CONSIDERED
The primary issue considered is whether input tax credit (ITC) is available for goods and services received for increasing the height of a Tailing Dam used for the disposal and treatment of hazardous waste from mining operations, under Sections 17 (5) (c) and 17 (5) (d) of the Central Goods and Services Tax Act, 2017 (CGST Act). 2. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The CGST Act, under Section 17 (5), provides conditions under which ITC is not available. Specifically, Section 17 (5) (c) and (d) restrict ITC on works contract services and goods or services used for constructing immovable property, except when such property is classified as "plant and machinery." The term "plant and machinery" is defined to include apparatus, equipment, and machinery fixed to earth by foundation or structural support used for making outward supply of goods or services, excluding land, buildings, or other civil structures. Court's interpretation and reasoning: The Tribunal analyzed whether the Tailing Dam qualifies as "plant and machinery" or constitutes an "immovable property" under the CGST Act. The Tribunal noted that the dam is constructed using materials like rocks, mud, sand, and cement, and is designed to manage hazardous waste, which aligns with the definition of a civil structure, thus classifying it as immovable property. Key evidence and findings: The Tribunal considered the construction process of the Tailing Dam, which involves using materials that typically constitute immovable property. The dam's purpose is to safely dispose of mining waste, a function mandated by environmental laws, but not directly contributing to the production process of the applicant's core business. Application of law to facts: The Tribunal applied the legal definition of "plant and machinery" and found that the Tailing Dam does not qualify under this category due to its construction and purpose. The dam is primarily a civil structure meant for environmental compliance rather than an apparatus used directly in manufacturing or processing activities. Treatment of competing arguments: The applicant argued that the Tailing Dam is integral to the milling plant and should be considered "plant and machinery." They cited various judgments and interpretations to support their claim. However, the Tribunal found these arguments unconvincing, emphasizing the dam's role as a civil structure for waste management rather than a direct component of the production process. Conclusions: The Tribunal concluded that the Tailing Dam is a civil structure and does not qualify as "plant and machinery" under the CGST Act. Therefore, ITC is not available for goods and services used in its construction or height increase. 3. SIGNIFICANT HOLDINGS The Tribunal held that the Tailing Dam is an immovable property and does not fall under the definition of "plant and machinery." The core principles established include:
Final determinations on each issue: The Tribunal determined that the Tailing Dam does not meet the criteria for "plant and machinery" and thus, ITC is not available for related goods and services under Sections 17 (5) (c) and 17 (5) (d) of the CGST Act. The ruling emphasizes the distinction between structures used directly in production and those serving compliance or ancillary functions.
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