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TMI Blog2021 (1) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... , own, Operate and transfer ( BOOT ) basis and the purpose of the construction of the 2 jetties is for the installation of plant and machinery on it. As per data available online, a jetty, in brief, is a structure generally constructed on plinths or pillars that projects from land out into water. It can also be described as a narrow structure projecting from the shore into the deep water as a landing place for ships i.e. the place where ships or boats stop to let people get on or off, or to load or unload goods. Jetty structure is used to berth the vessels alongside and affords them a working platform and can also be called a landing stage at which boats can dock or be moored. However, as discussed in the para above, in the instant case, the 2 jetties proposed to be constructed by the applicant as per the agreement with GMB is not for the aforementioned purpose but solely for installation of plant and machinery on it for the purpose of regasification of LNG. In short, the construction of the above jetties is nothing but a civil structure or an immoveable property constructed on pillars or plinths extending from the sea shore to the deep sea. On going through the definitions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maritime Board(GMB) - The applicant cannot avail input tax credit of GST paid on inputs, input services as well as capital goods procured for the purpose of building the LNG jetties in terms of Section 16 read with Section 17 of the CGST Act, 2017 read with GGST Act, 2017. - GUJ/GAAR/R/46/2020 - - - Dated:- 30-7-2020 - SANJAY SAXENA AND MOHIT AGRAWAL, MEMBER Present for the applicant : Shri. Nirali Gada, Shri Komal Sampat BRIEF FACTS The applicant M/s. Swan LNG Pvt. Ltd., has submitted that they are a private limited company incorporated in India and a subsidiary of Swan Energy Limited. They have submitted that they have entered into a Concession Agreement dated 18th October, 2017 with the Gujarat Maritime Board ( GMB ) to, inter-alia, implement the development, construction, operation and maintenance of Liquefied Natural Gas ( LNG ) Port with a Floating Storage and Regasification Unit ( FSRU ) facility in Jafrabad, Gujarat under the Build, own, Operate and transfer ( BOOT ) basis. As part of developing the LNG Port and FSRU facility, the applicant would be developing an Import Terminal for FSRU near the village Bhankodar near Jafrabad, Gujarat for an output ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for operating the machinery and equipment installed; that the proposed LNG jetties are unique as compared to normal jetty in terms of its purpose and use. While the nomenclature of the said foundation is generally referred as Jetty , but in substance it is actually a foundation for mounting and installing the plant and machinery for LNG operations, that is regasification of LNG; loading, unloading, connecting to pipeline etc. The applicant has stated that the layout and construct of the LNG Jetties, that is, foundation and the equipment to be installed on it, broadly, includes the following: LNGC unloading arms. FSRU loading arms. HP Gas unloading arms. Gang way towers, cold drain tanks. Jetty substation and Instrument Rack Room (IRR). Nitrogen bugger vessels, fire monitor and analyzer shelter. 4. The applicant has stated that they would like to draw reference to Section 16 of the Central Goods and Services Tax Act, 2017 ( CGST Act, 2017 ) read with the Gujarat Goods and Services Tax Act, 2017 ( SGST Act, 2017 ) with respect to admissibility of input tax credit which states that subject to such conditions and restrictions as may be pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inery; that in view of the said explanation, the applicant hereby lists down the various equipment with their description, use and purpose which are installed on the LNG jetties: LNGC unloading arms. FSRU loading arms. HP Gas unloading arms. Gang way towers, cold drain tanks. Jetty substation and Instrument Rack Room(IRR). Nitrogen bugger vessels, fire monitor and analyzer shelter. 4.3 The applicant has detailed the purpose and use of the aforementioned equipment/machineries as under: I. LNGC unloading arms/FSRU loading arms/HP gas unloading arms: Loading/unloading arms permit the transfer of liquefied natural gas from one tank/vessel to another tank/vessel/FSRU through an articulated pipe system consisting of rigid piping and swivel joints to obtain flexibility. II. Gangway towers: Gangway towers help in accessing the vessel s deck which due to variation in sea levels and tidal levels moves up and down . Gangway positioning needs to be adjusted to suit ship s deck level and each tower tier. III. Cold drain tanks: LNG is stored at low temperatures to reduce vaporization of LNG. Cold drain tanks are used to sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, or other things that you need for a particular job or activity. Machinery: a piece of equipment that does a particular job by using electricity, steam, gas etc. Mc-Graw dictionary: Apparatus : It is a collection or set of materials, instruments, appliances or machinery designed for a particular use. Equipment: One or more assemblies capable of performing a complete function. Machinery : A group of parts or machines arranged to perform a useful function. 5. The applicant has submitted that considering the nature and purpose of various equipment in Paragraph 5, LNGC unloading arms, FSRU loading arms, HP Gas unloading arms, Gangway towers, cold drain tanks should be considered as equipment or machinery since they are used for the purpose of mechanically performing a particular activity, therefore such equipment qualify to be covered under the expression plant and machinery ; that as far as the test with respect to qualification of LNG jetties as foundation for such plant and machinery is concerned, the term foundation has not been defined in the CGST Act, 2017 or GGST Act, 2017 and therefore, as per the settled judicial principles of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and machineries to be installed on it and to minimize the effect of shocks and vibrations (dynamic forces) resulting from operation of these machines. The main components of the pile foundation are the pile cap and the piles . This can be demonstrated by way of pictorial representation. The pile cap is an area of the pile foundation on which the equipment will be fastened and installed. The purpose of pile is to attach and support the pile cap to the earth as part of the overall pile foundation. 5.3 The applicant has submitted that pile foundations are generally adopted in the following situations: The sub-soil water table is very high which can easily affect other foundations. Heavy and uniform load is coming to the soil from the structure. Where raft or grillage foundations are either very costly or cannot be adopted due to local difficulties. When timbering of the excavation trenches is not possible. When it is impossible to maintain the foundation trenches in dry condition by pumping due to heavy inflow of seepage or capillary water. When the underneath soil is waterlogged and compressive. Hard firm strata are situated at a deeper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old (example: diesel engine, generating set, power-loom etc.). 5.6 The applicant therefore categorically submits that in the present case given the nature, characteristics as well as meanings of foundation and pile foundation , the characteristics, feature, layout and purpose of the LNG jetties qualifies as foundation for the plant and machinery to be installed in it. The applicant has also submitted that the input tax credit of GST charged by its registered suppliers on procurement of inputs, input services or capital goods for building the LNG jetty is a foundation for plant and equipment and therefore there are no restrictions in availing credit as per Section 16 read with Section 17 of the relevant Acts. The applicant has put forward the following questions seeking Advance Ruling on the same: (1) Whether in terms of Section 17 of the CGST Act, 2017 read with GGST Act, 2017, the LNG jetties proposed to be built by the applicant can be said to be covered within expression plant and machinery as foundation to equipment, apparatus, machinery to be installed on it? (2) Whether as per Section 16 read with Section 17 of the said Acts, the applicant can according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very registered person shall be entitled to take input tax credit on any supply of goods or services or both which are intended to be used in the course or furtherance of his business. The applicant has also made a reference to the Explanation to Section 17 of the CGST Act to examine whether the LNG Jetties proposed to be built by the applicant can be said to be a foundation to Plant and machinery . The applicant has put forward the following questions seeking Advance Ruling on the same: (1) Whether in terms of Section 17 of the CGST Act, 2017 read with GGST Act, 2017, the LNG jetties proposed to be built by the applicant can be said to be covered within expression plant and machinery as foundation to equipment, apparatus, machinery to be installed on it? (2) Whether as per Section 16 read with Section 17 of the said Acts, the applicant can accordingly avail input tax credit of GST paid in inputs, input services as well as capital goods procured for the purpose of building the LNG jetties? 9. During the course of personal hearing held on 09.07.2020, the representative of the applicant was asked to submit the photocopy of the agreement of the applicant made wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r boats stop to let people get on or off, or to load or unload goods. Jetty structure is used to berth the vessels alongside and affords them a working platform and can also be called a landing stage at which boats can dock or be moored. However, as discussed in the para above, in the instant case, the 2 jetties proposed to be constructed by the applicant as per the agreement with GMB is not for the aforementioned purpose but solely for installation of plant and machinery on it for the purpose of regasification of LNG. In short, the construction of the above jetties is nothing but a civil structure or an immoveable property constructed on pillars or plinths extending from the sea shore to the deep sea. 10.2 Next, we need to find out the definition of foundation . Since the term foundation is not defined in the CGST Act, 2017, reference is being drawn to the dictionaries for the meaning of the said term. The definition of foundation as per various dictionaries is mentioned hereunder: (a) As per Merriam Webster dictionary: a usually stone or concrete structure that supports a building from underneath. (b) As per Collins dictionary: the foundation of a building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport 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) telecommunications towers; and (iii) pipelines laid outside the factory premises. 11.1 On going through the aforementioned Explanation , we find that it excludes : (i) land, building or any other civil structures. (ii) telecommunications towers; and (iii) pipelines laid outside the factory premises. Condition (iii) specifically states that pipelines laid outside the factory premises shall be excluded from the definition of plant and machinery , which means that pipelines laid inside the factory premises shall be included in plant and machinery. It also means to say that plant and machinery should necessarily be located within the factory premises. Now, in view of the aforementioned discussions in terms of the explanation mentioned above, we find that all the following conditions are invariably required to be fulfilled in order to be eligible to be covered under the definition of plant and machinery : (i) They have to be apparatus, equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.4 The apparatus, equipment and machinery are not fixed to the earth by foundation or structural support. The same are to be fixed to the jetties which by themselves do not fall under the definition of foundation or structural support as discussed earlier. Hence this condition is not fulfilled. 11.5 On going through the submission of the applicant, it is not clear as to whether the aforementioned apparatus, equipment and machinery are involved in the outward supply of goods or services (or both) or otherwise. Although, the representative of the applicant was asked to give a submission in this regard during the course of personal hearing, no submission has been received so far from the applicant. In absence of any submission in this regard, we are left with no option but to conclude that the aforementioned apparatus, equipment and machinery are not involved in the outward supply of goods or services. Hence, we conclude that this condition is also not fulfilled. 11.6 Further, the aforementioned apparatus, equipment and machinery are to be installed on the jetties, which do not appear to be covered under the definition of factory premises . 11.7 In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 capitalisation, to the said immovable property; 13. In light of the foregoing, we rule as under R U L I N G Question-1: Whether in terms of Section 17 of the CGST Act, 2017 read with GGST Act, 2017, the LNG jetties proposed to be built by the applicant can be said to be covered within expression plant and machinery as foundation to equipment, apparatus, machinery to be installed on it? Answer : The LNG jetties proposed to be built by the applicant are not covered within the expression plant and machinery as foundation to equipment, apparatus, machinery to be installed on it in terms of Section 17 of the CGST Act, 2017 read with GGST Act, 2017 for the reasons discussed hereinabove. Question-2: Whether as per Section 16 read with Section 17 of the said Acts, the applicant can acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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