2025 (3) TMI 1126 - HC - GST

Scope of plant and machinery in the explanation appended to Section 17 of the CGST Act applies to the expression plant or machinery used in clause (d) of sub-section (5) of Section 17 or not - constitutional validity of clauses (c) and (d) of Section 17 (5) and Section 16 (4) of the CGST Act - the issue is similar to the issue in Safari Retreats (P.) Ltd. 2024 (10) TMI 286 - SUPREME COURT which i s not considered properly - HELD THAT - In the instant case a perusal of the impugned order in original at Annexure-P dated 09.12.2024 will indicate that the aforesaid judgment of the Apex Court in Safari Retreats (P.) Ltd. has not been considered in its right perspective. Under these facts and circumstances it is deemed just and appropriate to dispose of the petition by remitting the matter back to the respondent for reconsideration afresh in accordance with law. Matter is remitted back to respondent No.1 for reconsideration afresh in accordance with law - petition allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the definition of "plant and machinery" in the explanation appended to Section 17 of the CGST Act applies to the expression "plant or machinery" used in clause (d) of sub-section (5) of Section 17.
• If the explanation does not apply, what is the meaning of the word "plant"?
• Whether clauses (c) and (d) of Section 17 (5) and Section 16 (4) of the CGST Act are unconstitutional.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The relevant legal framework includes the provisions of the Central Goods and Services Tax (CGST) Act, specifically Sections 9, 16, and 17, which deal with the levy and collection of GST, eligibility for input tax credit (ITC), and blocked credits, respectively. The judgment also references the Supreme Court's decision in Chief Commissioner of Central Goods and Service Tax Vs. Safari Retreats (P.) Ltd., which discusses the interpretation of "plant" and "machinery" within the context of the CGST Act.

Court's interpretation and reasoning:

The Court emphasized the importance of the functionality test to determine whether a building can be classified as a "plant" under Section 17 (5)(d) of the CGST Act. The Court noted that the expression "plant or machinery" has not been specifically defined in the CGST Act, and therefore, its interpretation requires a factual analysis based on the business of the registered person and the role the building plays in that business. The Court rejected the argument that the word "or" in "plant or machinery" should be read as "and," emphasizing the legislative intent to differentiate between the two expressions.

Key evidence and findings:

The Court found that the impugned order did not consider the Supreme Court's judgment in Safari Retreats (P.) Ltd. in its proper perspective. The Court highlighted that the functionality test, as established by the Supreme Court, must be applied to determine whether a building qualifies as a "plant."

Application of law to facts:

The Court applied the principles established in Safari Retreats (P.) Ltd. to the facts of the case, determining that the matter should be remitted back to the respondent for reconsideration. The Court emphasized that each case must be assessed on its merits, considering the specific facts and circumstances.

Treatment of competing arguments:

The Court considered the arguments presented by both parties. The petitioner's counsel argued that the impugned order failed to consider the Supreme Court's judgment appropriately, while the respondent's counsel contended that the petition lacked merit. The Court ultimately found merit in the petitioner's arguments, leading to the decision to remit the matter for reconsideration.

Conclusions:

The Court concluded that the impugned order should be set aside and the matter remitted back to the respondent for reconsideration in light of the Supreme Court's judgment in Safari Retreats (P.) Ltd. The Court emphasized the need for a factual determination of whether the building in question qualifies as a "plant" under the CGST Act.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

The Court cited the Supreme Court's judgment in Safari Retreats (P.) Ltd., emphasizing the functionality test: "The question whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of the expression 'plant or machinery' used in Section 17 (5) (d) is a factual question which has to be determined keeping in mind the business of the registered person and the role that building plays in the said business."

Core principles established:

The Court established that the interpretation of "plant or machinery" in Section 17 (5)(d) requires a factual analysis based on the functionality test. The Court also reaffirmed the legislative intent to distinguish between "plant and machinery" and "plant or machinery."

Final determinations on each issue:

The Court determined that the impugned order should be quashed, and the matter remitted back to the respondent for reconsideration in accordance with the Supreme Court's judgment in Safari Retreats (P.) Ltd. The Court emphasized the need for a factual determination of whether the building qualifies as a "plant" under the CGST Act.