2022 (4) TMI 1192 - AAAR - GST

Input Tax Credit of GST paid - goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline which is intended for Unloading propane/Butane from the vessel/Jetty to the Terminal - goods and services used for setting up refrigerated storage tank and input credit of goods and services used for foundation and structural support foundation tanks - goods and services for setting up of Fire Water reservoir (tank and input credit on goods and services used for foundation and structural support for such reservoir - difference of opinion. Whether the applicant is eligible for availment of input tax credit of GST paid on goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline which is intended for Unloading propane/Butane from the vessel/Jetty to the Terminal? - HELD THAT - It is crystal clear that the pipelines laid outside the factory premises is specifically excluded for the purpose of expression plant and machinery particularly for chapter V and Chapter VI. The intention of the Legislature in framing this expression, is to limit the vast definition of plant and machinery for the exclusive purpose of availability of Input Tax Credit on such plant and machinery and thereby the Parliament consciously prohibits the availability of the Input Tax Credit on pipelines laid outside the factory premises. The said exclusion applies to all such pipelines laid outside the factory be it small distance of 4 KM as contended by the Authorized Representative or long distance. When the exclusion has been explicitly provided in the Act, there is no need to borrow the definition from other acts including the subsumed Acts and accordingly the definition of factory as per Central. Excise Act or Factories Act, does not apply to this issue. As the transfer pipelines would not fall under Plant and Machinery, the appellant is not eligible to avail input tax credit on the goods and services used for transfer pipelines, the foundations and structural support related to pipelines would also not eligible for ITC on the goods and services used for foundations and structural support related to pipelines. With regard to lease deed for Right of Way, the same is for the purpose of utilization of land that are required under the relevant Act which has nothing to do with this Act. In fact, the tax element if any involved for the said agreement also not eligible for input tax credit - the Advance ruling authority of Tamil Nadu has rightly ruled that the input tax credit is not eligible for the pipeline laid outside the factory premises and the foundations and structural support for such pipelines. Input Tax Credit - goods and services used for foundation and structural support for the tanks - goods and services used for foundation and structural support for such reservoir - difference of opinion - HELD THAT - On the eligibility of ITC paid on the works contract service for 'Pile foundation to the project site' also claimed as foundation for the 'storage tanks' and water tanks', as there is difference of opinion between the Members, no ruling is offered as per Section 101(3) of the CGST/TNGST Act 2017.

Summary

Issues Involved:
1. Eligibility of input tax credit (ITC) on GST paid for laying of transfer pipeline and its foundation and structural support.
2. Eligibility of ITC on GST paid for goods and services used for setting up refrigerated storage tanks and their foundation and structural support.
3. Eligibility of ITC on GST paid for goods and services used for setting up fire water reservoir tanks and their foundation and structural support.

Issue-Wise Detailed Analysis:

1. Eligibility of ITC on GST Paid for Laying of Transfer Pipeline and Its Foundation and Structural Support:
The appellant argued that the transfer pipelines should be considered as part of the factory premises and thus eligible for ITC. They contended that the pipelines are integral to the manufacturing process and are used for unloading propane and butane from ships to storage tanks. The appellant relied on definitions from the Central Excise Act, 1944, and the Factories Act, 1948, to support their claim that the pipelines fall within the factory precincts. They also cited various judicial precedents, including the Bombay High Court ruling in Reliance Industries and the Chhattisgarh High Court stay order in NMDC Limited.

The appellate authority examined Section 17(5) of the CGST Act, which explicitly excludes pipelines laid outside the factory premises from the definition of plant and machinery for ITC purposes. The authority concluded that the exclusion applies regardless of the pipeline's length and that definitions from other statutes are not applicable. The authority also noted that the exclusion applies to both inward and outward supply pipelines. Consequently, the authority upheld the advance ruling authority's decision that ITC is not available for the transfer pipeline and its foundation and structural support.

2. Eligibility of ITC on GST Paid for Goods and Services Used for Setting Up Refrigerated Storage Tanks and Their Foundation and Structural Support:
The appellant argued that pile foundations are essential for supporting the heavy storage tanks and should be considered as part of plant and machinery, thus eligible for ITC. They cited the explanation to Section 17(5) of the CGST Act, which includes foundations and structural supports within the definition of plant and machinery. The appellant also referenced the National Building Code, 2016, to explain the necessity of pile foundations for load-bearing purposes.

The SGST member agreed with the appellant, stating that pile foundations transmit the load of the tanks to the ground and should be eligible for ITC as part of plant and machinery. However, the CGST member disagreed, arguing that pile foundations are primarily for strengthening the project site and should be considered as civil structures excluded from ITC eligibility. The CGST member emphasized that the pile foundation supports the earth rather than directly fixing the tanks to the ground.

Due to the difference of opinion between the members, no ruling was offered on the eligibility of ITC for pile foundations under Section 101(3) of the CGST/TNGST Act.

3. Eligibility of ITC on GST Paid for Goods and Services Used for Setting Up Fire Water Reservoir Tanks and Their Foundation and Structural Support:
The appellant's arguments and the authority's analysis for fire water reservoir tanks were similar to those for refrigerated storage tanks. The appellant contended that pile foundations are essential for supporting the heavy water tanks and should be eligible for ITC. The SGST member agreed, while the CGST member disagreed, considering pile foundations as civil structures excluded from ITC eligibility.

As with the refrigerated storage tanks, no ruling was offered on this issue due to the difference of opinion between the members.

Ruling:
1. The appellate authority upheld the advance ruling authority's decision that ITC is not available for the transfer pipeline and its foundation and structural support.
2. No ruling was offered on the eligibility of ITC for pile foundations for refrigerated storage tanks and fire water reservoir tanks due to the difference of opinion between the members.