2024 (9) TMI 298 - AAAR - GST

Admissibility of Input Tax Credit (ITC) on the Rotary Parking System falling under HSN code 8428 - Blocking of credit u/s 17 (5) of the CGST/TNGST Act, 2017 - HELD THAT - The appellant renders Renting of Immovable Property Service of the commercial premises owned by him, and that the appellant is proposing to install a Rotary Car Parking System , within the premises owned by him, but not within the building - the provisioning of parking facility is for the tenants of the commercial building as well as the customers of those tenants. The exclusion clause, viz., other than plant and machinery , finds a place under both the clauses (c) and (d) of Section 17 (5) of the CGST Act, 2017, from which it gets conveyed that availment of ITC on plant and machinery is not blocked under the said provisions. It could also be seen from the explanation relating to plant and machinery that apparatus, equipment and machinery gets covered under the said category along with foundation and structural support by which they are fixed to earth, but excludes land, building or any other civil structure. A Rotary Parking System , as the name suggests, is a system in its own right, much more than an equipment, machinery or an apparatus, as it involves the functionality of various items like machines, equipments, motors, frame assembly, pallets, electrical panels, Hydraulic power packs, Operator boxes to floor/walls/columns and other electrical and electronic support system, a specialised civil foundation with steel structure to withstand the load, etc. Therefore, it could be seen that the overall system (Rotary Parking), takes shape and becomes operational only at the site of the appellant when all the constituent parts are assembled first and installed over the civil foundation and steel framework specifically designed for this purpose - the Rotary Parking system ideally falls within the category of a civil structure , which is clearly excluded under the expression plant and machinery - Moreover, as they cannot be termed as equipment, machinery or an apparatus by any means whatsoever, it is convincing that they do not fall within the category of Plant and Machinery , and that they are very much part of the immovable property that is being rented out in the instant case.. The service relating to Renting of Immovable property includes the land, building, staircase, lifts, common basements, play areas, open parking areas, common storage spaces, water tanks, sumps, apparatus connected with installations for common use, all other portion of the project necessary or convenient for its maintenance, safety, etc., and in common use. The corollary is that all the common areas and facilities extended become part of the immovable property that is being rented out. Further, it is not the case here that rent is collected separately for the living space, and for the other common areas or facilities like lifts, basements, play areas, parking facility, water tanks, sumps etc., and that the same is collected for the single service, viz., Renting of Immovable Property . Admittedly, the primary objective in the instant case is to extend the facility to the tenants in relation to Renting of Immovable Property service. Further, it is not the case of the appellant here that they are into providing Parking Service to the general public. Even in the event of considering the fact that they are providing parking service to the customers of tenants or general public and receiving consideration for the same, the ITC eligibility in any case would depend upon the immovable nature or otherwise of the structure constructed for this purpose. The rotary parking system , installed and commissioned at the premises of the appellant amounts to construction of an immovable property, whereby the input tax credit on the purchase of rotary parking system , by the appellant becomes ineligible under Section 17 (5) (d) of the CGST/TNGST Acts, 2017.

Summary

Issues Involved:
1. Admissibility of Input Tax Credit (ITC) on the 'Rotary Parking System'.
2. Classification of the 'Rotary Parking System' as movable or immovable property.
3. Applicability of Section 17(5) of the CGST/TNGST Act, 2017.
4. Compliance with the definition of 'plant and machinery'.
5. Delay in pronouncing the original ruling.

Detailed Analysis:

1. Admissibility of Input Tax Credit (ITC) on the 'Rotary Parking System':
The appellant sought a ruling on the admissibility of ITC on the 'Rotary Parking System' under HSN code 8428. The AAR ruled that ITC is not admissible, leading to the appellant filing the instant appeal. The appellant argued that the supply of the rotary car parking system involves goods and installation services, and should be treated as a 'composite supply' with the supply of goods as the principal supply.

2. Classification of the 'Rotary Parking System' as Movable or Immovable Property:
The appellant contended that the 'Rotary Parking System' is movable and can be dismantled using simple screw driver technology. However, the authority found that the system involves various components like machines, equipment, motors, and a specialized foundation, making it a civil structure. The authority cited the General Clauses Act, 1897, and the Transfer of Property Act, 1882, to classify the system as immovable property. The 'permanency test' from the Supreme Court's decision in the Indian Oil Corporation case was applied, concluding that the system is permanently attached to the earth.

3. Applicability of Section 17(5) of the CGST/TNGST Act, 2017:
Section 17(5) of the CGST Act, 2017, blocks ITC on works contract services and goods or services received for the construction of immovable property, except for plant and machinery. The authority found that the rotary parking system does not qualify as 'plant and machinery' but as a civil structure, thus blocking ITC under Section 17(5)(d).

4. Compliance with the Definition of 'Plant and Machinery':
The appellant argued that the system should be considered 'plant and machinery' as defined in Section 17, which includes apparatus, equipment, and machinery fixed to earth by foundation or structural support. However, the authority noted that the system involves a specialized foundation and structural support, making it a civil structure excluded from 'plant and machinery'.

5. Delay in Pronouncing the Original Ruling:
The appellant highlighted the inordinate delay of 238 days in pronouncing the original ruling by the AAR, which they argued amounts to a denial of justice. The authority acknowledged this concern and advised the AAR to adhere to the timeframe fixed under Section 98(6) of the CGST/TNGST Acts, 2017.

Conclusion:
The authority upheld the AAR's ruling that the 'Rotary Parking System' is an immovable property, making the ITC on its purchase ineligible under Section 17(5)(d) of the CGST/TNGST Acts, 2017. The appeal filed by the appellant was dismissed.