2024 (12) TMI 135 - HC - GST

Input Tax Credit - Challenge to constitutional validity of clauses (c) (d) of Section 17 (5) of the Central Goods and Services Tax Act, 2017 - Construction of immovable property - To be treated as Plant or not - HELD THAT - The Supreme Court in CHIEF COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX ORS. VERSUS M/S SAFARI RETREATS PRIVATE LTD. ORS. 2024 (10) TMI 286 - SUPREME COURT has considered the issue and held clauses (c) (d) of Section 17 (5) of the CGST Act to be intra vires and not unconstitutional. However, their Lordships in M/s Safari Retreats Private Ltd. s case further held that the question whether the construction of immovable property carried out by the petitioners therein amounts to plant has to be decided on its merit by applying the functionality test in terms of the judgment passed in the aforesaid case. Their Lordships also held that the issue must be decided in appropriate proceedings in which adjudication can be made on facts and granted liberty to the petitioners therein to adopt appropriate proceedings or raise the issue in appropriate proceedings. While dismissing the present writ petition qua the constitutional validity of clauses (c) (d) of Section 17 (5) of the CGST Act, liberty is reserved in favour of the petitioner to raise the issue whether the construction of immovable property carried out by the petitioner amounts to plant within the meaning of Section 17 (5) (d) (plant) of Act of 2017 - Petition disposed off.

Summary

Issues:
Challenge to the constitutional validity of clauses (c) & (d) of Section 17 (5) of the Central Goods and Services Tax Act, 2017.

Analysis:

The petitioner filed a writ petition challenging the constitutional validity of clauses (c) & (d) of Section 17 (5) of the CGST Act. The Government Advocate for the State mentioned that the Supreme Court had already adjudicated on this issue in a specific case. However, the petitioner's counsel argued that the constitutional validity had been upheld by the Supreme Court previously and requested liberty to raise a specific issue related to the application of Section 17 (5) (d) of the CGST Act. The Deputy Solicitor General of India and the State counsel did not oppose this request. The High Court heard both parties and carefully reviewed the material on record.

The Supreme Court had previously considered the constitutional validity of clauses (c) & (d) of Section 17 (5) of the CGST Act in a specific case and held them to be intra vires and not unconstitutional. The Court emphasized that the determination of whether a building can be classified as a "plant" under Section 17 (5) (d) depends on the functionality test and the role the building plays in the registered person's business activities. The Supreme Court remanded the case to the High Court for further assessment on whether a shopping mall qualifies as a "plant" under clause (d) of Section 17 (5). The Supreme Court also highlighted that each case must be decided on its merits by applying the functionality test.

In line with the Supreme Court's decision, the High Court dismissed the writ petition challenging the constitutional validity of the clauses in question. However, the petitioner was granted liberty to raise the specific issue of whether the construction of immovable property amounts to a "plant" under Section 17 (5) (d) of the Act. The petitioner was allowed to pursue this issue in appropriate legal proceedings as per the law. The writ petition was finally disposed of with no costs awarded.

This judgment clarifies the constitutional validity of clauses (c) & (d) of Section 17 (5) of the CGST Act and provides guidance on the application of the functionality test to determine whether a building can be considered a "plant" under the Act. The High Court's decision allows the petitioner to further explore the specific issue raised regarding the construction of immovable property in relation to the Act.