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TMI Blog2020 (9) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 defines plant and machinery as 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 Land, building or any other civil structure. We find that land filling pit is a combination- of earth work and other capital goods as given in the brief submitted by the applicant. It can t solely or in itself be identified as apparatus, equipment and machinery fixed to earth by foundation. It is also not a structural support for anything. Therefore, we do not agree with the applicant s view that the land filling pit falls under plant and machinery. However, the discussion would be incomplete without deciding the question of Civil Structure, i.e. whether the land filling pit is a civil structure or not. Inasmuch as the said section is found to be valid by the Hon ble High Court, we do not find any reason to go beyond the Statutory Provisions. However, since the appeal against the High Court order supra is pending before the Hon ble Supreme Court, we refrain from commenting on the eligibility of the ITC in the instant case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17(5) (d) of CGST act 2017 ITC cannot be availed on Goods and Services utilized for construction of immovable property (other than Plant or Machinery) on his own account including when such Goods or Services is used in course or Furtherance of business. It is to Say that ITC can be availed on supplies of Goods and Services used for construction of Plant and Machinery and further the act has provided the definition of plant and machinery . 5.2 As per Explanation 2 to Sec 17(5) 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. Here the Plant and Machinery the Company is referring to is a Land Filling Pit which is an apparatus fixed to earth with the help of a structural support that are used for making outward supply of services and does not amounts to any Civil Structure . 5.3 Documents needed for cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t goods includes capital goods and inputs . Here the Land Fitting Pit satisfies the definition of capital asset and therefore, the entity is rightful in claiming ITC . However the Depreciation has not been claimed on the ITC portion . 5.4 The Industrial waste management is essential to protect the environment, the applicant company has undertaken the work of the collection of the medical and industrial solid waste for processing and then disposal of the same scientifically, which in turn helps the country to maintain the intention of Swatch Bharath . In the process of construction of Plant and Machinery which involves various inputs viz., cement, sand, steel, aluminium, wires, plywood, paint, electrical equipments, etc., and also services in the form of consultancy service, architectural service, legal and professional service, engineering service and other services. Therefore, the applicant has to purchase/receive these goods and services for carrying out the said construction. All these goods and services which are purchased / received for such constructions are taxable under the GST Act. 5.5 The GST Act was implemented with effect from 1st Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of GST itself, which is to prevent the cascading effect of multi-stage taxation and the inevitable increase in costs which would have to be borne by the consumer at the end of the day. In the present case also, the effect of denial of input tax credit would be a sharp and inevitable increase in the cost which the owner of the Plant and Machinery would be compelled to incur. 5.8 As already pointed out, these two types of transactions cannot possibly be compared or bracketed together, for the purpose of levy of GST, as already explained in detail earlier. The treatment of these two different types of immovable properties as one for the purpose of GST is itself contrary to the basic principles regarding classification of subject matter for the levy of tax and, therefore, violates Article 14 of the Constitution. Such a classification also constitutes the treatment of assesse like the client on a totally different footing as compared with other assesse who have a continuous business and an unbroken tax chain. Thus, the same violates the client s fundamental right to equality guaranteed by and under Article 14 of the Constitution, on this distinct and independent ground also. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of services, which implies the continuation of the business activity of the client and there is no break in the tax chain and if that is the undisputed clear position then by interpreting Section 17 (5) (d) of both CGST Act and SGST Act, the authorities under both the Acts cannot contend that in the middle of the business the client is not entitled to take credit of input tax, against the CGST and SGST paid on services rendered using such plant and machinery and such an interpretation clearly goes against the intention of the Legislature and also frustrates the object for which the aforesaid Acts were enacted. Such an interpretation will debar those taxable persons like the client, who carry on a continuous business without any break but in spite of that they would be treated differently being denied the benefit of taking input tax credit as available to those taxable person under Section 16 of both CGST Act and SGST Act and such classification of taxable persons into two category even though both have continuous business activities and both have an unbroken tax chain is a clear violation of the fundamental rights of the client as guaranteed under Article 14 and 19(1) (g) of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were mentioned one in paragraph 5 (b) of Schedule Il and the other is in Section 17 (5) (d) of the CGST Act and SGST Act. But the case of the client is completely different from the two categories mentioned hereinbefore. The Plant and Machinery which the client is constructing is neither intended for sale nor on his own account but it is intended for offering services . Therefore, by no stretch of imagination, it can be concluded that the Plant and Machinery which is constructed by the client is intended for sale or on his own account and as such when the said Plant and Machinery is constructed purely for the purpose of offering service, then such construction of the Plant and Machinery will not come within the mischief of Section 17(5)(d) of CGST Act and SGST Act. On the aforesaid clear position of law, if the GST authorities are trying to bring the client case under section 17(5) (d) of both the aforesaid Acts then several words has to be read into the Section 17 (5) (d) of the said two Acts which are not permissible in law and it is a well settled law that in constructing fiscal statute and in determining the liability of a subject to tax, one must have regard to the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im input tax credit. 6. Opinion of the Jurisdictional Officer: The authority received opinion/comments from the jurisdictional office of the Principal Commissioner of Central Tax, West Commissionerate, Bangalore, which are as under: 6.1 The work involved in the construction of the landfill, as seen from the scope of work documents, is civil in nature on the basis of the following lines. Basic design of cells in landfills, liner installation and leachate collection system. Technical specifications for single composite liner system, double composite liner system, cover system. Construction of main leachate pipe, tank and treatment facility Design of slopes Various design requirements for liner system s adequate stability at the base of the landfill (in soft soil), along the sides of the landfill, adequate strength to withstand construction loads/ vehicle loads et al. 6.2 The above-mentioned details as per applicant s submission clearly shows that the landfill pit comprises extensive civil work in order to be built which is basically a concrete structure after undertaking extensive geological survey of the property, a design is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction of building or godown considering them as plant and machinery viz. (apparatus) being used in course of supply of service? However, inadmissibility of ITC is clearly stated for - land, building or any other civil structures . Also, on similar issue in the case of Safari Retreats Private Limited, the Department has filed an appeal before Hon ble Supreme Court of India as Hon ble High Court of Orissa has allowed ITC (though not declared ultra vires) on goods and services consumed in construction of shopping malls rented out by the assessee. Hence as discussed above, it is opined that ITC cannot be claimed on construction of Landfill Pit as per Section 17(5)(d) of CGST Act 2017. PERSONAL HEARING / PROCEEDINGS HELD ON 30.07.2020 7. Sri. S R Raghunatha, C A and duly authorised representative of the applicant appeared for personal hearing proceedings held on 30.07.2020, reiterated the facts narrated in their application furnished written submissions, in support of their argument. DISCUSSION FINDINGS 8. We have considered the submissions made by the Applicant in their application for advance ruling as well as the issues involved relevant facts having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spirit of the Act and would result in cascading effect. Secondly, land filling plant is an apparatus fixed to earth with the help of structural support and for that reason can be called plant machinery. Lastly, it is not a civil structure. We will discuss these in the following paragraphs. 13. Section 17(5)(d) of the CGST Act, 2017 denies availment of ITC on goods and services when supplied for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services are both are used in the furtherance of business. Here, two aspects are noteworthy. One is that such goods and services should be used for the construction of an immovable property and the other is that the activity is carried on his own account. Applicant does not deny that the land filling pit is an immovable property. However, the applicant contends that the activity is not carried on his own account but is intended for offering services. We do not agree with the applicant s view because applicant has not constructed the landfill pit on behalf of someone else. He is not under any contractual obligation with any entity to construct the land filling pit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the landfill site. A closure and post-closure plan which lists the steps that must be taken to close and secure a landfill site once the filling operation has been completed and the activities for long-term monitoring, operation and maintenance of the completed landfill. These guidelines also emphasize adoption of single liner system or double liner system depending upon the rainfall, type of sub-soil and the water table beneath the base of the landfill. In a place where rainfall is high and /or sub-soil is highly permeable (e.g. gravel, sand, silty sand) and /or the water table is within 2.0 m to 6.0 m, the guidelines suggest to adopt double composite liner. The specifications of the single composite liner, double composite liner system and cover system are given below in Figures: 16. We observe that civil structure involves engineering work at both levels i.e above and below the ground. We find that the applicant has performed civil work to create the landfill pits below the ground and therefore it is a civil structure. 17. The applicant has further placed reliance on the judgment rendered by the Hon ble High Court of Orissa in the case of M/s. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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