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TMI Blog2020 (4) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the GST Acts, input tax credit is not admissible in respect of works contract services or any goods and services for construction of immovable property (other than plant and machinery). Thus, a specific exception is made with regard to plant and machinery. Input tax credit of GST paid on goods and services used to construct the bunds is admissible to M/s. Satyesh Brinechem Private Limited, provided that the bunds are used for making zero rated supplies and fulfill the conditions which are necessary for treating the bunds as plant and machinery . X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 16(1) of the GST Acts which is relevant in this regard reads as under: 2. "16(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of business and the said amount shall be credited to the electronic credit ledger of such person." 3. It is respectfully submitted that the material used for constructing bunds as well as the services availed for construction of bunds are used in the course or furtherance of business and hence input tax credit is admissible under Section 16(1) of the GST Acts. None of the exclusions as contained in Section 17 of the GST Acts satisfied and hence input tax credit is admissible: 2.3 Input tax credit is inadmissible in respect of some transactions as stated in Section 17 of the GST Acts. It is respectfully submitted that "bunds" does not fall under any of the restrictive clauses of Section 17 of the GST Acts and hence input tax credit is admissible to the applicant. "Bunds" are plant and mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained in Section 17 of the GST Acts satisfied and hence, input tax credit is admissible: 2.7 Input tax credit is inadmissible in respect of some transactions as stated in Section 17 of the GST Acts. It is respectfully submitted that "bunds" does not fall under any of the restrictive clauses of Section 17 of the GST Acts and hence input tax credit is admissible to the applicant. Bunds are directly used in the manufacturing process and, hence, they qualify as "plant & machinery": 2.8 It is respectfully submitted that bunds are directly used in the manufacturing process and hence they squarely fall within the ambit of "plant and machinery" as defined in the Explanation to Section 17 of the GST Acts. It is therefore respectfully submitted that the applicant is entitled to input tax credit of tax paid on goods and services used for construction of bunds. Judgment of Hon. Supreme Court squarely supports the applicant 2.9 The applicant is squarely supported by the judgment of Hon. Supreme Court in the case of Scientific Engineering House (P) Ltd. Vs. Commissioner of Income Tax, Andhra Pradesh 157 ITR 86 (S.C.) = 1985 (11) TMI 1 - SUPREME COURT. In this case the Supreme Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a dry dock since it fulfilled the function of a plant mist be held to be a plant. Lord Reid considered the part which a dry dock played in the assessee company's operations and observed: "It seems to me that every part of this dry dock plays an essential part.... The whole of the dock is I think, the means by which, or plant with which, the operation is performed." Lord Guest indicated a functional test in these words: In order to decide whether a particular subject is an 'apparatus' it seems obvious that an enquiry has to be made as to what operation it performs. The functional test is, therefore, essential at any rate as a preliminary. In other words the test would be: Does the article fulfill the function of a plant in the assessee's trading activity? Is it a tool of his trade with which he carries on his business? If the answer is in the affirmative, it will be a plant. " 2.10 According to Hon. Supreme Court the purpose of supplying technical know-how to the assessee was to enable it to undertake its trading activity of manufacturing the goods and therefore it had a vital function to perform in the manufacture of goods. In fact it is only with the aid of technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng employed in carrying on business. In the ultimate analysis the inquiry which must be made is as to what operation the apparatus performs in the assessee's business. The relevant test to be applied is: Does it fulfill the function of plant in the assessee's trading activity? Is it the tool of the taxpayer's trade? If it is, then it is plant no matter that it is not very long- lasting or does not contain working parts such as a machine does and plays a merely passive role in the accomplished of the trading purpose. 2.12 Thus according to Hon. Gujarat High Court the collocation of the words "plant and machinery" does not necessarily mean that an apparatus used by the businessman must be such as is used for mechanical operations or processes and that it does not include the place used by a businessman for carrying on his business. Of course the article must be for permanent employment in business and would not include stock in trade which comes and goes. Permanent employment in business requires some degree of durability of the article. What is to be considered is the function performed by the article and its utility in the business activity of the dealer. The functional test is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise. Recent Judgment of Hon. Gujarat High Court squarely supports the applicant 2.16 The applicant is squarely supported in its submission by a recent judgment of Hon. Gujarat High Court in the case of State of Gujarat v/s Pipavav Defense and Offshore Engineering Company Ltd. (2017) 105 VST 60 (Guj.) = 2017 (6) TMI 90 - GUJARAT HIGH COURT wherein it was held that goods used for construction of "dry dock" and "fit out berth" which were necessary for the purpose of the ship manufacturing business of the dealer qualified as "plant and machinery" and therefore input tax credit was admissible in respect of such goods under the Gujarat Value Added Tax Act, 2003. "Any other civil structures" to be read ejusdem generis the words land and building: 2.17 It is respectfully submitted that the phrase "any other civil structures" as appearing in Explanation to Section 17 of the GST Acts is to be read ejusdem generis to the preceding words being land and building. It is respectfully submitted that it is well settled that when particular words pertaining to a class, category or genus are followed by general words, the general words are construed as limited to things of the same kind as thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufacturing activity is undertaken. Any structure which is used as an apparatus in the manufacturing activity will not be "any other civil structure" and it will be a "plant and machinery" for which input tax credit is admissible. Allowance of input tax credit in tune with the basic scheme of the GST Acts which is to avoid cascading effect of taxes 2.20 The applicant points out that one of the fundamental features of the GST Acts is to avoid cascading effect of taxes by maintaining credit chain. Thus the scheme of the GST Acts provides for admissibility of input tax credit in respect of all goods and services which are used in the course or furtherance of business. The admissibility of input tax credit in respect of plant and machinery is also in line with such scheme since plant and machinery are essential for any manufacturing process and without such apparatus the process would be impossible or commercially inexpedient. In the present case it is impossible to manufacture salt and bromine chemicals without construction of "bunds" / "crystallizers" and hence admissibility of input tax credit in respect of goods and services used to construct such "bunds" / "crystallizers" w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of advance ruling under section 97 of the Central Goods and Services Tax Act, 2017/the Gujarat Goods and Services Tax Act, 2017 (herein after collectively referred to as "the GST Acts"): Whether input tax credit is admissible to the applicant under the GST Acts in respect of bunds which are constructed and used in the manufacture of salt and bromine chemicals? 6. We find that the Applicant is a private limited company engaged in the manufacture and supply of salt and bromine chemicals. All types of Salt fall under GST HSN code chapter 2501, which attract nil rate (0%) of GST. Supply of goods or services or both on which nil or 0% GST rate is applicable are called NIL rated supply. Schedule-I of the GST Act contains the goods which are nil-rated supply. For example, cereals, fresh fruits, and vegetables, salt, natural honey, milk, human blood etc.. 6.1 However, the applicant has submitted that the salt manufactured by them is required to be exported as per condition and undertaking given to the Govt. while taking land on lease basis. Therefore, the manufactured salt is 'Zero rated supply' u/s. 16 of the IGST Act for the applicant. 7. To appreciate the fact, it is also n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt including when such goods or services or both are used in the course or furtherance of business. Explanation- For the purposes of clauses (c) and (d), the expression "construction" includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property;" Further, the phrase "plant and machinery" has been defined in Explanation to Section 17 of the GST Acts, which reads as under: "Explanation - For the purposes of this Chapter and Chapter VI, the expression "plant and machinery" means apparatus, equipment and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes- (i) land, building or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises." 10. From the above, it clearly reveals that as per section 16(2) of the IGST Act, Input tax credit is available on inputs and input services to make Zero rated supplies (such supply may be an exempt supply), subject to the provisions of sub-section (5) of section 17 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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