2021 (12) TMI 611 - AAAR - GST

Input tax credit - land filling pit can be considered as Plant and machinery or as civil structure - whether the Appellant is entitled to avail input tax credit on the construction of land filling pit or is it hit by the restriction laid down in clause (d) of Section 17(5) of the CGST Act? - HELD THAT - It is an engineered pit in which layers of solid waste are filled, compacted and covered for final disposal. Land filling is the term used to describe the process by which solid waste is placed in the landfill. The purpose of land filling is to bury/alter the chemical composition of the waste so that they do not pose any threat to environment / public health. Landfills are built to concentrate the waste in compacted layers to reduce the volume and monitored for the control of liquid and gaseous effluent in order to protect the environment and human health. It is lined at the bottom to prevent groundwater pollution. Each layer of solid waste is covered with a layer of compacted soil until the capacity of the landfill is reached. It is then covered and sealed. The life span of a landfill ranges from 12 to 40 years. The definition of the expression plant and machinery as given in the Second Explanation to Section 17(5) uses the term means . As per the principles of interpretation of law laid down by higher judicial forums, a definition which uses the term means has to be strictly construed to mean only what is stated therein and nothing more, nothing less. For the land filling pit to be considered a plant , it has to be either an apparatus , equipment or machinery which is fixed to the earth. Foundations and structural supports used to fix such apparatus, equipment and machinery to the earth are also covered within the ambit of the definition of plant and machinery . The definition also has certain exclusions to make it clear that even if they are fixed to the earth, they will not be considered as plant and machinery . The use of the word means indicates that the definition is hard and fast and no other meaning can be assigned to the expression than what is put down in the definition. In the second explanation given in Section 17, while providing the meaning of the term plant and machinery, it has been clearly stated that Buildings and Civil Structures shall not be covered under the term Plant. However, while so clarifying, it has been accepted and understood that plant and machinery many a times requires support structure and/or foundation for installation and cannot work otherwise. Thus, civil structures such as foundation and supporting structure for fastening of plant and machinery to earth has been included as part of plant and machinery. However, any other civil structure has clearly been excluded from the definition of plant and machinery . The land filling pit comes within the ambit of the exclusion and hence is not eligible for input tax credit. Appeal dismissed.

Summary

Issues Involved:
1. Whether the land filling pit is considered "Plant and Machinery" and thus eligible for input tax credit.
2. Whether the land filling pit is considered a "civil structure" and thus ineligible for input tax credit.
3. Whether the principles of natural justice were violated by the AAR by not considering the appellant's submissions and judicial precedents.

Detailed Analysis:

1. Classification of Land Filling Pit as "Plant and Machinery":
The appellant argued that the land filling pit should be classified as "plant and machinery" and thus be eligible for input tax credit under Section 17(5)(d) of the CGST Act. They cited various judicial precedents to support their claim that the term "plant" should be given a wide meaning, including the Supreme Court decision in *Scientific Engineering House (P) Ltd vs Commissioner of Income Tax, Andhra Pradesh*. The appellant emphasized that the land filling pit is an apparatus essential for their business of solid waste management and disposal, thus meeting the "functionality test."

2. Classification of Land Filling Pit as a "Civil Structure":
The AAR and the appellate authority concluded that the land filling pit is a "civil structure" and not "plant and machinery." They based their decision on the definition provided in the Second Explanation to Section 17(5) of the CGST Act, which excludes civil structures from the definition of plant and machinery. The authorities emphasized that the land filling pit is an engineered structure embedded in the earth, constructed using geo-synthetic materials, and thus falls within the ambit of a civil structure.

3. Violation of Principles of Natural Justice:
The appellant contended that the AAR violated the principles of natural justice by not considering their submissions and judicial precedents in the denovo proceedings. They argued that the AAR's order was a verbatim reproduction of its earlier order, which had been set aside by the Karnataka High Court for not sharing the jurisdictional officer's opinion with the appellant. The appellate authority acknowledged the appellant's grievance but upheld the AAR's decision, stating that the land filling pit is a civil structure and thus ineligible for input tax credit.

Conclusion:
The appellate authority upheld the AAR's decision that the land filling pit is a civil structure and not plant and machinery, thus ineligible for input tax credit under Section 17(5)(d) of the CGST Act. The appellant's arguments and judicial precedents were considered but ultimately found unconvincing. The appeal was dismissed on all accounts.