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TMI Blog2018 (10) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... ain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act" 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus - STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. 1. Background of operations: 1.1 The Applicant, a private limited company incorporated under the provisions of the Companies Act, 1956 holding GST registration number ('GSTIN') AADCN1920C1ZZ with effect from 1st July 2017, is located at Plot No. E-1, MIDC, Kesurdi, Khandala, Taluka-Khandala, Dist. Satara-412 801. 1.2 The Applicant is engaged in the manufacturing of medical equipments such as dialyzers, blood tubing sets, arterial fistulas, syringes and needles. 1.3 The Applicant runs a manufacturing facility at Shirwal, Maharashtra. Goods manufactured by the Applicant are sold within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax credit: i. The recipient is in possession of a tax invoice or debit note issued by a registered supplier; ii. The recipient has received the goods or services or both; iii. The tax charged in respect of the supply has been paid to the Government; iv. The recipient has furnished statutory GST returns in terms of Section 39 of the CGST Act, 201 7; and v. The payment is made to supplier within 180 days from the date of issue of invoice. 1.3. In addition to the above, there are certain restrictions imposed on availment of input tax credit under Section 17 (5) of the CGST Act, 2017. Relevant extract of the provision is reproduced below for reference: "(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res, telecommunication towers and pipelines laid outside the factory premises. Therefore, it is evident that input tax credit of 'plant and machinery', unless specifically excluded, is available when used for making outward supplies 1.7 The Applicant submits that none of the costs mentioned in Annexure 4 fall within the scope of exclusions specified under Explanation Il to Section 17 (5) of the CGST Act, 2017. Therefore the question that merits consideration is whether these 'plant and machinery can be said to have been used for making outward supplies. 1.8 The usage of plant and machinery for making outward supplies may be of the following 2 types: i. Directly used for making outward supplies i.e. having a direct nexus for making outward supplies; and ii. Indirectly used for making outward supplies i.e. having an indirect but essential nexus for making outward supplies. 1.9 The Applicant would like to submit that costs incurred for 'Mechanical Works' and 'Electrical Works' are indirectly used for making outward supplies i.e. such costs are essential for carrying out operations for making outward supplies and if such costs are not incurred, the operations for making outward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would, in our judgment, fall within the expression "in the manufacture of goods." 9. In our judgment if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, by commercially inexpedient goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. 12. .... in a factory manufacturing cotton and other textiles, certain electrical equipment in the present stage of development would be commercially necessary. For instance, without electric lighting it would be very difficult to carry on the business. Again electrical humidifiers, exhaust fans and similar electrical equipment would in the modern conditions of technological development normally be regarded as equipment necessary to effectually carry on the manufacturing process. We are not prepared to agree with the High Court that in order that "electrical equipment" should fall within the terms of Rule 13, it must be an ingredient to the finished goods to be prepared, or "it must be a commodity which is used in the creation of goods." If, having regard to normal condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks' mainly entails activities in the nature of Sub-station works, DG Set Works, Lighting Systems, etc. Basis the submission made by the applicant it appears that the Mechanical Works' and 'Electrical Works are indirectly associated with the course or furtherance of their business and are essential for carrying out manufacturing process. Therefore, it appears that the ITC in relation to works mentioned at Sr. No. 3 & 4 of Annexure -4 (Mechanical & Electrical Works) to the application is available to the applicant, in absence of any such restriction. The applicant has already agreed that no ITC is available in relation to civil works. As such it appears that there is no infirmity in the interpretation of the applicant. 04. HEARING The case was taken up for Preliminary hearing on dt. 28.032018 with respect to admission or rejection of present application when Ms. Aabha S Lekhak, Sh. Kanval Ashar and Mr. Shivraj Mhaske, Advocates along with Sh. Manoj Pawar, Senior Executive appeared and made oral submissions requesting for admission of application as per their contentions made in ARA. (They were orally requested to make submissions with respect to specific contracts in execution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit on costs of civil works under the Extension Project. However, the provision u/s 17[5] (c) and 17(5) (d) Of CGST ACT also suggests that input tax credit would be available where such works contract services, goods and/or services are received for construction of an immovable property in the nature of plant and machinery. 4. Therefore, the present application for advance ruling is being filed to determine the eligibility of ITC in relation to costs proposed to be incurred for 'Mechanical Works' and 'Electrical Works' under the Extension Project. 'Mechanical Works' entails activities in the nature of Plumbing Works, Fire Protection Work, Air-Conditioning Works, etc and 'Electrical Works' entails activities in the nature of Sub station Work, D G Set Work, Lighting System Work, etc., A detailed break up of activities proposed to be undertaken in the nature of 'Mechanical Works' and 'Electrical Works' is provided in Annexure 4. In view of the above submissions and contentions of the applicant we first of all refer to the provisions under the GST Act with respect to availment of input tax credit which would be applicable to the facts of the present ease as stated and submitted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon. (3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed. (4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. 17. (1) Where the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; (iii) rent-a-cab, life insurance and health insurance except where-- (A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession; (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r due dates as prescribed. We find that apart from conditions as laid down under Section 16 of the GST Act, Section 17 provides for restrictions and factual position and situations where ITC would not be available. The same are very clear from plain reading of Section 17 as referred and detailed above. Thus in view of the above factual position we find that at the time of the hearing we had requested the applicant that taking into consideration the specific contracts in execution of the project, they were required to clarify in detail their eligibility of input tax credit in respect of all sub heading under mechanical and electrical works as given in their ARA individually. We find that the applicant as per request above at the time of the Final Hearing had submitted details with respect to nature. function, use, utility and its relation to plant or machinery or to their business which would be relevant to ascertain their eligibility for ITC claims in their application. The details as submitted by the applicant are reproduced below and an additional column in respect of the view of the members of this Advance Ruling Authority with respect to eligibility of ITC in respect of rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtracts of the Maharashtra Factories Rules. 1963. Not admissible as not used in course or furtherance of business and as per restrictions in Section 17(5) of the GST Act. 8 Sanitary Ware and CP fittings Yes Before entering production floor, every worker is required to pass through a cleanroom where he is required to wear the appropriate protective gear and wash hands for sanitation purposes. Explanation to sub section V and VI of Section 17 of the CGST Act. Admissible 9 Dismantling Work No ___ ___ Not Admissible 10 Fire Protection Work Internal Fire Hydrant System Yes Equipments or apparatus used for fire protection on the production floor. Relevant extracts of the Factories Act, 1948 and Maharashtra Factories Rules, 1963. Not admissible as it does not fall under the definition of P&M as given in Explanation in Section 17 of the GST Act 11 Sprinkler Works Not admissible as it does not fall under the definition of P&M as given in Explanation in Section 17 of the GST Act 12 Extinguishers Not admissible as it does not fall under the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n necessary in the production process. Nitrogen (being an inert gas) is used as a blanket for isolating product from the atmosphere. Explanation to sub section V and VI of Section 17 of the CGST Act. Admissible 25 Process Waste Water Supply System The process waste water supply system is used for disposal of wastes and effluent generated during the production process. Relevant extracts of the Factories Act.1948 Admissible except in respect of pipelines outside factory premises and civil work even inside factory premises. 26 Local Exhaust System The local exhaust system is used for extracting fumes from production process and ventilating machine rooms (where air conditioning fans are placed). Explanation to sub section V and VI of Section 17 of the CGST Act. Admissible 27 HSD-Oil Supply System The HSD-Oil supply system is used to supply fuel for the boiler for steam generation. Steam is used in the production process to maintain the specific required temperature. In order to manufacture Hollow Fibres, constant supply of steam is required to maintain the specific temperature. Explanation to sub se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arm system for production floor. Relevant extracts of the Maharashtra Factories Rules. 1963. Admissible except for civil construction work if any. 37 Public Address System Public address system is used for communication of instructions on the production floor and also in the case of emergencies. Explanation to sub section V and VI of Section 17 of the CGST Act. Admissible except for civil construction work if any. 38 Lightning Protection System Lightning protection for production floor and production utilities. Relevant extracts of the Maharashtra Factories Rules. 1963. Admissible except for civil construction work if any. 39 Demolition Work No ____ Not admissible 06 In view of the deliberations as held hereinabove, we pass the order as under : ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-33/2018-19/B-41 Mumbai, dt. 28.05.2018 For reasons as discussed in the body of the order, the question is answered thus - Question :- "Whether on facts and circumstances of the case, the input tax credit of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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