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2025 (4) TMI 225 - AAR - GSTEligibility to take ITC on inputs and input services used for construction of concrete tower to support and erect the VCV lines at the factory of the applicant for manufacture of EHV cables in terms of Section 17 (5) (c) and (d) of the CGST Act 2017 - HELD THAT - The Hon ble Supreme Court in the case of M/s. Safari Retreats P Ltd 2024 (10) TMI 286 - SUPREME COURT while analyzing the expression plant or machinery held that there could be a plant that is an immovable property; that the word plant not having been defined under the Act its ordinary meaning in commercial terms will have to be attached to it. The Hon ble Court thereafter laid down a functionality test further concluding that if a building qualifies to be a plant ITC can be availed against the supply of services in the form of renting or leasing the building or premises provided the other terms and conditions of the CGST Act and Rules framed thereunder are fulfilled; that however if the construction of a building by the recipient of service is for his own use the chain will break and ITC would not be available. Now on examining the matter as to whether it would fall within the other exception of 17 (5) (d) ibid i.e. construction of an immovable property consisting of a plant or machinery we find that the Hon ble Court has laid down a functionality test holding that if a building qualifies to be a plant ITC can be availed. However even on this count if the construction of a building by the recipient of service is for his own use the chain will break and therefore ITC would not be available. It is already held that in the present dispute the appellant has not been in a position to prove that it is not on his own account. Going by the rationale of the judgement supra we hold that on this ground also the appellant would not be eligible for ITC. The plethora of judgements relied upon by the appellant would not support his case more so because in paragraph 25 in the case of Safari Retreats P Ltd the Apex Court has summarized the law regarding interpretation of taxation statutes and thereafter passed the aforementioned judgement which we have relied in coming to the aforementioned findings. Even otherwise we find that the case laws relied upon is not relevant as it mostly pertains to the Income Tax Act. Conclusion - The applicant is not eligible to avail ITC on inputs and input services used for construction of concrete tower to support and erect the VCV lines at the factory of the applicant for manufacture of EHV cables in terms of Section 17 (5) (c) and (d) of the CGST Act 2017.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment is whether the applicant, engaged in the manufacture of Extra-High Voltage (EHV) cables, is eligible to avail Input Tax Credit (ITC) on inputs and input services used for the construction of a concrete tower to support and erect Vertical Continuous Vulcanization (VCV) lines at their factory, in terms of Section 17 (5) (c) and (d) of the Central Goods and Services Tax (CGST) Act, 2017. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents The relevant legal framework involves Section 17 (5) of the CGST Act, which outlines the conditions under which ITC is not available. Specifically, clauses (c) and (d) of this section address works contract services and goods or services received for the construction of immovable property, respectively. The explanation to Section 17 defines "plant and machinery" and outlines exclusions. The court also considered a recent Supreme Court judgment in the case of M/s. Safari Retreats P Ltd, which provided an interpretation of Section 17 (5) (c) and (d), emphasizing the exceptions related to "plant and machinery" and the concept of construction on one's "own account." Court's interpretation and reasoning The court analyzed the provisions of Section 17 (5) (c) and (d) in light of the Supreme Court's interpretation in the Safari Retreats case. It noted that ITC is generally not available for works contract services or goods/services received for constructing immovable property unless they pertain to "plant and machinery" or are not on the taxpayer's "own account." Key evidence and findings The applicant argued that the VCV lines qualify as "apparatus and machinery" and that the concrete tower serves as a foundation and structural support, which should make the ITC eligible. They also cited various case laws to support their position. Application of law to facts The court applied the functionality test as laid out in the Safari Retreats case to determine if the concrete tower could be considered "plant or machinery." It concluded that the construction of the tower was on the applicant's "own account," as it was intended for use in their manufacturing process, thus breaking the ITC chain. Treatment of competing arguments The applicant's reliance on various precedents and a circular regarding ITC on ducts and manholes was dismissed as irrelevant, as these did not pertain directly to the construction of the VCV tower. The court emphasized that the Safari Retreats judgment provided a comprehensive interpretation of the relevant CGST provisions. Conclusions The court concluded that the applicant is not eligible for ITC on the inputs and input services used for constructing the concrete tower, as it falls under the exclusions outlined in Section 17 (5) (d) of the CGST Act. SIGNIFICANT HOLDINGS The court held that: "The applicant is not eligible to avail ITC on inputs and input services used for construction of concrete tower to support and erect the VCV lines at the factory of the applicant, for manufacture of EHV cables, in terms of Section 17 (5) (c) and (d) of the CGST Act, 2017." The judgment reinforced the interpretation that ITC is not available for constructions made on one's "own account" unless they qualify as "plant and machinery" under the specific exceptions provided in the CGST Act. The court's decision relied heavily on the Supreme Court's interpretation in the Safari Retreats case, which clarified the application of Section 17 (5) (c) and (d), particularly regarding the exceptions related to "plant and machinery" and constructions on one's "own account."
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