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TMI Blog2020 (4) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... ax credit Shall not (sic) be available - Also, credit of input tax may be availed for making zero rated supplies in view of the provisions of sub-section (2) of section 16 of the IGST Act, 2017. However, this provision in also subject to the provision of of sub-section (5) of section 17 of the CGST Act, 2017 - thus, the input-tax credit shall not be available on goods or services covered by sub-section (5) of section 17 of the GST Acts, even if the same are indispensible in the process of manufacture. Whether the goods and services used by the applicant for construction of bunds / crystallizers are covered under sub-section (5) of section 17 of the GST Acts or otherwise? - HELD THAT:- The plant and machinery would be outside the purview of clauses (c) and (d) of Section 17(5) of the CGST Act, 2017 and would be eligible for input tax credit. Whether bunds are plant and machinery ? - HELD THAT:- As held by Hon ble Apex Court in the case of COLLECTOR OF C. EX., CALCUTTA VERSUS ALNOORI TOBACCO PRODUCTS [ 2004 (7) TMI 91 - SUPREME COURT ] circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases; t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease basis. Therefore the manufactured salt is Zero Rated supply under section 16 of the Integrated Goods and Services Tax Act, 2017(herein after referred to as the IGST Act, 2017 ) for the applicant. 2.2 The applicant described the process of manufacturing salt and bromine chemicals. It was 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, hence input tax credit is admissible under Section 16(1) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 (herein after referred to as the CGST Act, 2017 and the GGST Act, 2017 respectively and collectively referred to as the GST Acts ). It was submitted that bunds do not fall under any of the restrictive clauses of Section 17 of the GST Acts and hence input tax credit is admissible. It was further submitted that the bunds are plant and machinery used for manufacturing salt and bromine and hence clauses (c) and (d) of Section 17(5) of the Acts are in applicable. The applicant submitted that the bunds are directly used in the manufacturing process and hence they quali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt appeal. 5.1 It has been submitted in the grounds of appeal that the aforesaid Advance Ruling is based on erroneous interpretation of Bunds as and machinery whereas as per Section 17(5) of the CGST Act, 2017, Bunds qualifies as immovable property. Further, aforesaid Advance Ruling has erroneously allowed input tax credit on excluded category as marked in Section 17, clauses (c) and (d). It has been submitted that in the instant case, Bunds also fall in the category of exclusion mentioned in section 17 being a land, building or any other civil structure and shall not be considered as the apparatus, equipment and machinery, 5.2 It has been further submitted that the applicant themselves have submitted that the applicant has to construct Bunds with soil. However, as per explanation given in Section 17 of the CGST Act, 2017, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents in the matter, which has been recorded by the GAAR in the impugned order. The applicant has submitted that the authorization issued by the Principal Commissioner to file appeal, in exercise of the powers conferred under Section 107(2) of the CGST Act, 2017 is erroneous and as the authorization itself being fundamentally wrong, the appeal filed by exercising the said authorization would be void and liable to be quashed. The applicant has relied-upon-the decision in case of M/s. Tiger Services Vs. CCE, Madurai [2009-TIOL-607-CESTAT-MAD] = 2009 (3) TMI 42 - CESTAT, CHENNAI . 6.3 The applicant has further submitted that the reliance placed on the decision in the case of Konkan LNG Private Limited [2019 (27) GSTL 112 (AAR-GST)] = 2019 (7) TMI 617 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA is not sustainable in the facts of the present case. It has been submitted that as per Section 103 of the CGST Act, 2017, Advance Ruling pronounced under Chapter XVII is binding only on the applicant who had sought the advance ruling and the jurisdictional officer in respect of the applicant who has sought the ruling. It has been submitted that on the contrary, the observations mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... errazyme Chemical, GSB Metal, HB Metal, Steel, Cement, Box Culvert, LDPE Film etc. are used in the construction of the bund . The GST Law does not mandate disallowance of input tax credit merely because various GST suffered material together become immovable post its erection/ construction post its receipt in the factory. For examples various machineries received in a factory may become a cement or sugar plant which is immovable in nature, however, the immovability in itself would not warrant denial of input tax credit under GST law, especially plant and machinery is excluded from the restrictive provisions by way of sub-clause (c) and (d) of Section 17(5) of the CGST Act, 2017. In view of these submissions, the applicant has submitted that since bunds (crystallizers) are covered within the ambit of plant , the applicant is eligible for input tax credit on services received for such bunds, 6.7 The applicant has further submitted that the bunds (crystallizers) are not land, building and any other civil structure which is excluded from the ambit of plant and machinery . It has been submitted that the applicant has nowhere concurred that the bund falls in the category o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2019 wherein Shri Mahendra Kumar, Assistant Commissioner, Division VI, CGST, Ahmedabad South Commissionerate reiterated points made in appeal memorandum and Shri Manakiwala, CA reiterated the points made in written and counter submissions dated 26.12.2019. 8. The applicant vide letter dated 02.01.2020 Submitted that they would like to place additional submission and appear in person for personal hearing and requested to grant an opportunity for personal hearing and written submission. Accordingly, an opportunity of Personal Hearing has again been granted on 13.01.2020, wherein Shri Paresh M. Dave, Shai Amal p. Dave and Shri Ashish Shah appeared on behalf of the applicant and submitted detailed written submission of dated 13.01.2020, a synopsis and copies of relied upon circular and judgements in support of their arguments. Shri Mahendra Kumar, Assistant Commissioner appeared on behalf of the appellant department. 9.1 In the written submission dated 13.01.2020, the applicant has, inter-alia submitted that the bunds are clearly Plant and machinery as they arc the tools of the trade and without them manufacture of salt is impossible. It has been submitted that the appellant d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been therefore submitted that bunds are plant and machinery and therefore input tax credit is admissible to it. The applicant has submitted that the submission of the appellant department that bunds are civil structures and therefore they are not plant and machinery is incorrect and should be rejected. 9.3 It has been submitted by the applicant that the emphasis of the appellant that bunds are constructed by the respondent and are therefore immovable property and hence input tax credit is not admissible, is unwarranted and unjustified. It has been submitted by the applicant that even if what is constructed is Immovable property, if it qualifies as plant and machinery, then input tax credit is admissible under the GST Acts. The applicant referred to the definition of works contract given under section 2(119) of the GST Acts and submitted that the works contract necessarily relates to immovable property and when plant and machinery is carved out as an exception to works contract for granting input tax credit, it is a provision granting input tax credit even if plant and machinery is immovable property. It has been further submitted that machinery or equipment fixed to ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant is entitled to input tax credit and consequently refund of tax paid on the purchases of goods and procurement of services for the construction of bunds. 9.6 It is the submission of the applicant that the appellant department has erred in relying upon the submission of the applicant in the application for advance ruling for not falling in the exception relating to plant and machinery pertaining to land or building or any other civil structure, to contend that since the applicant has categorized it as immovable property, it is not entitled to input tax credit. It has been submitted that since the applicant is seeking input tax credit on the ground that bunds are used as plant and machinery in the manufacture of salt, it has to satisfy all the conditions for treating bunds as plant and machinery. It is for that reason that in the application submitted for advance ruling, apart from submitting that bunds qualify as plant and machinery as per the decided cases, it was submitted as to why it does not fall in the exception relating to land or building or any other civil structure. The applicant has submitted that unless the contention about applicability of principle of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture should be in the nature of land and building, because these two words precede the expression any other civil structure and therefore this expression takes colour from the preceding words. It has been submitted that civil structures like land and building only are excluded from input tax credit scheme and not civil structures which directly contribute to production and consequently supply of goods. It has been submitted that bunds are not immovable properties like land and building, and hence not excluded from input tax credit scheme only because they are constructed and they are in the nature of immovable property . 11.1 The appellant department has, vide letter dated 16.01.2020 inter-alia submitted that bunds also fall in the category of exclusion mentioned in section 17, being land, building or any other civil structure and shall not be considered as the apparatus, equipment and machinery. The judgement of Hon ble High Court of Calcutta in the case of Singh Alloys Steel Ltd. Vs. Assistant Collector of Central Excise [1993 (66) ELT 594 (Cal.)] = 1993 (1) TMI 97 - HIGH COURT AT CALCUTTA has been relied wherein the terms apparatus , appliance , equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing and protecting machineries, equipment etc., whereas manufacturing of salt and chemicals is actually undertaken by using bunds and therefore builds are actually contributing directly to manufacture of the goods 12.3 The applicant has requested to reject the appeal filed by the appellant department with all consequential benefit to the applicant. FINDINGS :- 13. We have carefully gone through and considered the appeal and written submissions filed by the CGST department, written submissions and synopsis filed by the applicant, submission made at the time of personal hearing, Advance Ruling given by the GAAR and other material available on record. 14. As regards the submission of the applicant that the appeal authorization has been issued under Section 107(2) of the CGST Act, 2017, which is improper hence appeal filed by exercising the said authorization would be void and liable to be quashed, it is observed that the appeal in the present case has been filed in prescribed Form ARA-03 under Rule 106(2) of the Central Goods and Services Tax Rules, 2017. Review Order No. 02/2019-20 as well as the forwarding letter clearly mentions that the appeal is tiled under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) whether bunds are any other civil structure as mentioned in clause (i) of explanation below Section 17 of the GST Acts ? 16.2 Before proceeding to examine these issues, the process of manufacture of salt and construction of bunds, submitted by the applicant well relevant provisions of GST Acts may be referred. 16.3 The applicant has submitted the process of manufacture of salt and brine as follows :- (i) Salt and Brine are produced from sea water which requires solar evaporation. For the purpose of manufacturing salt the applicant has to construct Bunds . which are also known as crystallizers wherein Salt gets deposited Due to atmospheric heat and solar evaporation, raw salt crystallize from sea water in the crystallizers within 40 to 45 days. Later on the raw salt thus deposited is harvested either manually or by machines, (ii) In order-to produce industrial salt, the harvested salt in the form of wet crystals is washed in the washery plant with brine to remove insoluble matter as well as soluble impurities. The washery plant consists of steel structures in which the applicant has to install equipment like Belt conveyor, metallic screener, hopper, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, by rotating the discharged water, brine is made which is diverted into the Bromine plant via circuit to extract the bromine from it. 16.4 The relevant provisions related to input tax credit contained in Section 16 and 17 of the GST Acts are as follows :- SECTION 16. Eligibility and conditions for taking Input tax credit. - (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 his business and the said amount shall be credited to the electronic credit ledger of such person. (2) (3) (4) SECTION 17. Apportionment of credit and blocked credits. (1) (2) (3) (4) (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:- (a) (b) (c) works contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore hold that the input-tax credit shall not be available on goods or services covered by sub-section (5) of section 17 of the GST Acts, even if the same are indispensible in the process of manufacture. Whether input tax credit is inadmissible on the bunds on the ground that it is immovable property. 18.1 The issue therefore arises whether the goods and services used by the applicant for construction of bunds / crystallizers are covered under sub-section (5) of section 17 of the GST Acts or otherwise. 18.2 The 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 is covered under clause (c) of Section 17(5) of the GST Acts. The goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business is covered under clause (d) of Section 17(5) of the GST Acts. It is seen from the process of construction of bunds/ crystallizers submitted by the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, 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. However, (i) land, building or any other civil structures; (ii) telecommunication towers; -and (iii) pipelines laid outside the factory premises, have been specifically kept outside the purview of the definition of the expression plant and machinery. 19.2 The expression plant and machinery is specifically defined in the GST Acts. In the explanation below section 17 of the GST Acts, the definition plant and machinery uses the term means . As per the principles of interpretation of law laid down by the higher judiciary, the definition using the term means has to be strictly construed to mean only what is stated therein, nothing more, nothing less. In this regard, the judgement of Hon ble High Court of Kerala in the case of Kerala Public Service Commission Vs. State Information Commission, Kerala [2011 (272) E.L.T. 18 (Ker.)] = 2011 (3) TMI 1299 - KERALA HIGH COURT , may be referred, wherein it has been held as follows:- 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form a useful function. 19.3.3 Similarly, in the case of Modern Malleable Ltd. Vs. Commissioner of Central Excise, Calcutta-II [2008 (228) ELT 460 (Tri, - Kolkata)] = 2007 (11) TMI 232 - CESTAT, KOLKATA , definitions of the term apparatus given in different dictionaries have been referred, which are as follows:- Apparatus - thing prepared or provided for a specific use; any complex machine, device, or system. [Webster s New Dictionary and Thesaurus (Concise Edition)] Apparatus - It is a collection or set of materials. instruments, appliances or machinery designed for a particular use [Mav. Web. Dic]. ap.pa.rat.us - (ap a rat as. -ra tas).n, pl.-tus, -tus.as. 1. a group or aggregate of instruments, machinery, tools, materials etc.,. having a particular function or intended for a specific use. 2. any complex instrument or machine for a particular purpose. 3. any system or systematic organization of acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6) of the GST Acts. 19.4 The applicant has submitted that an essential component of plant and machinery is that it should be used for making outward supply of goods. However, we notice that the applicant has relied upon only part of definition of plant and machinery which has been defined to mean 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. As the bunds are not covered in the first limb of the definition of plant and machinery as bunds are not apparatus, equipment or machinery, they cannot be considered to be covered in the said definition. 19.5 The definition of plant and machinery given in the GST Acts is very specific. Therefore, when the bunds are not covered in the said definition, the fact that the bunds are essentially used in the manufacturing process would not make any difference and the bunds would not get covered under plant and machinery on this ground, as pleaded by the applicant. 19.6 The applicant has pleaded that plants and various machinery are also constructed . and plant and machinery are also often permanently fixed or embed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other literature etc., is depreciable asset or not (for the purpose of income Tux Act) ? In this Judgement, it was observed that under section 32 of the Income Tax Act, depreciation allowance is permissible in respect of certain assets specified therein, namely, buildings, machinery, plant and furniture owned by the assessee and used for the purpose of business while section 43(3) of the Income Tax Act defines plant in very wide terms saying plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purpose of the business . In this context, Hon ble Supreme Court decided whether technical knowhow in the shape of drawings, designs, charts, plans, processing data and other literature etc. falls within the definition of plant. (ii) Commissioner of Income Tax, Gujarat Vs. Elecon Engineering Co, Ltd. [1974 96 ITR 672 Guj,] = 1974 (2) TMI 7 - GUJARAT HIGH COURT . In this case also, the issue before the Hon ble High Court was whether drawings and patterns received by an assessee from a foreign company under a collaboration agreement can be said to be plant on which depreciation is allowable under section 32 of the Income Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Gujarat Valued Added Tax Act, 2003. In the context of the said definition of Capital Goods , Hon ble High Court held that Dry Dock and Fit Out Berth ate plant / capital goods. In the present case, the definition of plant and machinery has been specifically given in Section 17 of the GST Acts and the said definition is different than the definition of capital goods given under the Gujarat Value Added Tax, 2003, which was under consideration before the Hon ble High Court in the case of Pipavav Defence and Offshore Engineering (supra). The subject matter of dispute (bund) in the present case is also different. As held by Hon ble Apex Court in the case of Collector of Central Excise, Calcutta Vs. Alnoori Tobacco Products [2004 (170) ELT 135 (SC)] = 2004 (7) TMI 91 - SUPREME COURT , circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases; that disposal of cases by blindly placing reliance on a decision is not proper. Therefore, the aforesaid judgements relied upon by the applicant are found applicable in the present case. 19.9 In view of the foregoing, we hold that bund / crystallizer are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for construction of an immovable property (other than plant and machinery), is not admissible. Works Contract has been defined under section 2(119) or the GST Acts to mean a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. Thus, the phrase any Other civil structures mentioned in the exclusion clause (i) of the definition of plant and machinery would mean all other civil structures, other than foundation and structural supports used to fix the apparatus, equipment, and machinery to earth. 20.2.4 The applicant has relied upon the judgement of Hon ble Supreme Court in the cases of Amar Chandra Chakraborty Vs. Collector of Central Excise [AIR 1972 SC 1863] = 1972 (5) TMI 59 - SUPREME COURT and Siddeshwari Cotto Mills (P) Ltd. Vs. Union of India [AIR 1989 SC 1019] = 1989 (1) TMI 126 - SUPREME COURT . In the case of Siddeshwari Cotton Mills (P) Ltd., Hon ble Supreme Court inter- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there can be no question of invoking this rule. Nor can this rule have any application where the general words precede specific words. [emphasis supplied] Similarly, in the case of Commissioner VAT Vs. Taneja Mines Pvt. Ltd. [2011 (273) E.L.T. 228 (Del.)] = 2010 (8) TMI 721 - DELHI HIGH COURT , Hon ble High Court of Delhi held as follows :- 16. As regards the applicability of the principle of ejusdem generis sought to be pressed into service by the Department, it would be trite that the said principle is not an inviolable rule of law. It is only in the absence of any indication to the contrary that it may be pressed into service. When Entry No. 45 is absolutely clear and unambiguous, the rule of ejusdem generis can have no application. As held in Siddeshwari Cotton Mills (P) Ltd. (supra) and Grasim Industries Ltd. (supra), the said rule has to be applied with caution and not pushed too far. The rule reflects an attempt to reconcile incompatibility between the specific and general words and applies only where the context of the enactment does not require restricted meaning to be attached to the words of general import. But, as stated above, a note of caution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court) grants special leave and decides to hear the matter on merit. Therefore, judgment in the case of Safari Retreats Pvt. Ltd. (supra) is not applicable in the present case. 21. The applicant has submitted that the granting of refund of tax paid on purchases of goods used for exports is also in consonance with the national policy of avoiding tax burden on exported goods so as to permit trade and industry of the country to withstand global competition. In this regard, suffice it to say that the refund of input tax on zero rated supplies is admissible in accordance with the provisions of GST Acts. 22. In View of foregoing, we modify the Advance Ruling No. GUJ/GAAR/R/19/2019 dated 11.09.2019 = 2020 (4) TMI 631 - AUTHORITY FOR ADVANCE RULING GUJARAT by holding that- Bunds constructed by M/s. Satyesh Brinechem Private Limited, Ahmedabad [GSTIN 24AAUCS2572G1Z1) are not plant-and machinery within the definition of the said term under Section 17 of the GST Acts, and therefore, in view of clauses (c) and (d) of. Section 19(5) read with explanation below Section 17 of the GST Acts, Input Tax Credit in respect of works contract service or goods or services u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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