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TMI Blog2021 (4) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... getting it laid and the said pipes are laid as a Works Contract including the foundation and structural supports; the Storage Tanks and water tanks along with the foundation are sourced as Works Contract ; the pile foundation for the entire project site is sourced as Works Contract . It is not in dispute that the Pipelines, storage tanks and water tanks are put in place for furtherance of their business and thereby the tax paid on these becomes eligible credit subject to limitations under Section 17(5) of the Act as these are constructed under Works Contract and the resultant is an immovable property. Goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline - HELD THAT:- It is seen that the applicant sources Pipes on own account and the same is laid as a Works Contract including the foundation. Section 17(5) restricts the credit on such goods received for construction Works Contract service received except when such goods/Works Contract services are availed in respect of Plant and Machinery and Explanation, which defines Plant and Machinery restricts credit on the Pipelines laid outside the factory . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being dispatched to the end customers as per their requirements. Refrigerated storage tanks are constructed in a manner which can facilitate storage of Propane/ Butane and maintain its characteristics. It is built with certain equipment along with the concrete inputs to enable it to perform the said functions. Therefore, it is clear that these tanks are used for making outward supply . Eligibility of credit of tax paid on construction of water lank to follow the fire protection measure al Terminal - HELD THAT:- The applicant is eligible for availment of input tax credit of GST paid on goods and services for setting up of Fire Water reservoir (tank) including the structural support thereon as per the Purchase Order No 4500405071 dated 11.03.2020 subject to the condition that the tanks are capitalized in their books of accounts as Plant and Machinery and not as Immovable Property and the applicant are not eligible to avail input credit of goods and services used for Pile foundation and input credit on goods and services used for such pile foundation. - TN/10/ARA/2021 - - - Dated:- 31-3-2021 - THIRU. SENTHILVELAVAN B., I.R.S AND THIRU KURINJISELVAAN V.S., M.SC., (AGRI. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd services procured for construction of foundation/structural support through piling. The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of ₹ 5,000/- each under sub-rule (11 of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that their Tuticorin terminal is contemplating expansion to increase the LPG capacity from 3,50,000 Metric Tons Per Annum (MTPA) to 12.00.000 MTPA. The expansion will involve suitable augmentation of existing facilities including Utilities and Offsite systems. The following expenditure is proposed to be incurred by them in the process of expansion amongst others:- 1. Construction of transfer Pipeline - The existing unloading arms and transfer Pipelines shall continue to be available for unloading LPG from ships. As part of proposed expansion, new Propane and Butane unloading arms (one each) designed to handle 500 MT/hr each of refrigerated Propane and Butane shall be installed at jetty. The approximate linear length of each new pipeline shall be 4.1 km and shall be installed adjacent to the existing piping corrid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the depth has been achieved a reinforcement cage (prefabricated) shall be placed inside the borehole and then filled up with concrete of required grade. These piles are finished at ground level. Since the storage tanks need an elevated base, the piles are further extended to another 1.5m above the ground level upon which a pile cap/ concrete foundation is made joining all the piles together to form a load bearing plat form. 2.2 On their interpretation of law, they have stated the following grounds, each of which is taken in the alternative and without prejudice to the others: 1 Eligibility of taxes paid on laying of pipelines . Reading the provisions of Section 16(1) of CGST Act 2017. Section 2(59) of CGST Act. Section 2 (19) of CGST Act, Section 17(5)(c ).(di and the Explanation to Section 17(5) of the of CGST Act for the instant case, it could be concluded (hat in order to avail the credit the procurement transaction has to pass the following tests:- A Blocking of input tax credit under Section 17 (5) shall apply to pipelines used for outward supply of goods;- Decoding the provision at S. 17(5) and the Explanation, following inference can be drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve placed Reliance in this regard on the following case laws:- Jaypee Rewa Cement Vs Commissioner of Central Excise. M.P./2001 (133) ELT. 3 (S.C.)] Commissioner of C Ex., Belgaum Vs Bellary Steel and Alloys Ltd. 2008 (226) E.L.T. 280 (Tn. Bang) Central Excise and Service Tax, Ahmedabad-III 2014-TIOL-2217-CESTAT-AHM. Further, transporting Propane/Butane from Jetty to the Terminal for manufacture of final product is to be considered as used within the factory. In the regard, they rely upon the decisions in the following cases:- J.K Udaipur Udyog Ltd. Vs Commissioner of C. Ex., Jaipur II 2002 (147) ELT.996 (Tri. Del) M/s Birla Corporation Ltd Vs Commissioner of Central Excise 2005-TIOL-99 SC-CX. Commissioner v. GSPL India Transco Ltd (2016 (43) S.T.R. J23 (Guj.)) Based on above, they have concluded that transportation of Propane/Butane is not possible without laying of pipeline for transport. Therefore, laying of pipelines is an integral part of applicant s business operations and hence used in course of furtherance of the business. Further to the above, it can be concluded that laying of pipeline for transport of Propa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... close to the sea, the soil is filled up with clay with a very high ground water table ( 1 m). this would mean that the load bearing capacity (weight per sqm the soil can withstand) is very low. Since the tanks are quite heavy, they need to increase this load bearing capacity. Therefore, the foundation by way of piling is must. The input and input services used for laying foundation and structural support of plant and machinery, therefore is eligible for input tax credit. The detailed explanation for the eligibility of the input tax credit are stated in the foregoing paras. Reading the provisions of Section 16(1) of CGST Act, Section 2(59), Section 2(19) of the Act together, the essential requirement for availing the credit of the input taxes paid in respect of the inward supplies of goods and services, is that the said supplies shall be used or intended to be used in the course or furtherance of the business. Further, in view of the restrictions as per Section 17(5) of the Act, the input tax credit on goods and services is restricted if the same is used for construction of an immovable property unless that immovable property results in a plant and machinery* as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratus is a compound instrument designed to carry out a specific function or for a particular use . I. C.B. (P) Ltd. a CCE.1997 (95) ELT 239 (T). Equipment : Equipment is a thing which is used for a particular purpose. (Collins Cobuild Dictionary, as referred in O.K Play (India/ Ltd v. CCE, (2005) 2 SCC 460. 468, para 29) The definition of Capital Clouds under Modvat Regime and definition of Plant and Machinery under GST is exactly same. The Propane/Butane is stored, processed and maintained in refrigerated storage tanks before being dispatched to the end customers as per their requirements. Refrigerated storage tanks are constructed in a manner which can facilitate storage of Propane/ Butane and maintain its characteristics. It is built with certain equipment along with the concrete inputs to enable it to perform the said functions. The refrigerated storage tanks are built for a specific purpose of safe storage of Propane/ Butane. Therefore, refrigerated storage tanks may qualify as an apparatus or tin equipment. In terms of the above definition, foundation and structural support through piles is a group of instruments, tools, materials etc., haring a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. The raw materials used in the manufacture of capital goods are entitled to credit under the definition of inputs under Rule 2(k) of CCR, 2004. As storage tank is specifically included in the definition of Capital goods, the same is not in the nature of Immovable Property and is Plant and Machinery and Inputs and Input Services used for its fabrication was allowed. Without prejudice to the above, as per Explanation to Section 17(5) of CGST Act. definition of Plant and Machinery includes machinery fixed to earth by foundation or structural support that tire used for making outward supply of goods or services or both and includes such foundation and structural supports. Reading all the above provisions together, the essential elements (or availing the credit of the input taxes paid in respect of the inward supplies of goods and services, the said supplies shall be used or intended to be used in the course or furtherance of the business. The equipment, plant and machinery and the tanks need a stable base, without proper foundation and structural support they cannot have a stable base which can take the weight of entire equipment. Plant and Machinery and the tanks with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the inputs used in the construction of water tank as part of firefighting systems is eligible for availing input tax credit. Without prejudice to the submissions made, in addition according to the Income Tax Act, Plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession. Whereas under GST. the definition of plant is restricted to apparatus, equipment or machinery fixed to earth by foundational or structural support used for making outward supply. However, the underlying principle of satisfaction of functional test remains same both under GST and Income Tax. The essence of the test to determine whether an asset can be called a plant is to ascertain whether it can be treated as an apparatus which is used, by a businessman for carrying on business and whether with that asset he carries on the trade as opposed to the place in which the trade is carried on Therefore, to consider whether the structure is Plant and Machinery it has to be determine whether the asset is used for carrying on trade or whether it is a structure in which business is earned on. As discussed above, an item used for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng arms (one each) shall be installed at jetty and new transfer pipelines shall be laid Unlike a typical pipeline where there is an end to end node, this is a disconnected pipeline. When ship/vessel arrives the pipeline gets connected to both the ends to discharge the Propane/Butane. It is rather called as discharge pipe, This is the unique mode of transportation without which they cannot process and supply LPG The expression Pipeline used in the explanation to Section 17(5) should be understood as long-distance cross-country pipelines to transport liquids mid fluids. In their case, the approximate linear length of each new pipeline shall be 4.3 km and shall be installed adjacent to the existing piping corridor and hence credit is eligible When the expression factory is not defined under the GST Act, a definition given in some other Act passed by the legislature can always be relied upon. Accordingly, they are of the considered view that Section 2(m) of the factories Act, 1948 which defines the term factory should be considered which is as under:- (m) factory means any premises including the precints thereof- (i) whereon ten or more workers are work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines sprinters and water curtain. The main application of water is to use as firefighting and for other miscellaneous purpose, as minimum fire protection measure is required to be taken at the terminal as per lite Oil Industry Safety Directorate requirement (OISD) Standards-Standard 236 They are constructing all the above by laying a foundation and structural support through piling as their project site is located close to the sea. the soil is filled up with clay with a very high ground water table( 1 m), which would mean that the load bearing capacity is very low. Since the tanks are quite heavy, the applicant needs to increase this load bearing capacity. Therefore, the foundation by way of piling is must. The input and input services used for laying foundation and structural support of plant and machinery, therefore is eligible for input tax credit. 3.3 The applicant has also furnished the following: Photographs of Pipeline Exhibits. Water Tank Exhibit and Storage Tank Exhibits; copy of Draft OISD Std 236 The decisions relied upon by them,- Jaypee Rewa Cement Vs Commissioner of Central Excise. M.P. [2001 (133) ELT. 3 (S.C.)] Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2: ITC on refrigerated storage tank at terminal: As per clause (d| to sub section (5) of section 17 of the TNGST Act, 2017, goods or services or both received for construction of an immovable property (other than plant and machinery) on his own account. ITC is not eligible even if used in the course of furtherance of business. Further, item No (i) of Explanation to section 17 of the TN GST Act. 2017 rules out other civil structures from the ambit of plant machinery. Hence, it is opined humbly that. ITC shall not be eligible on the refrigerated storage tank built in the terminal. Issue No. 3: ITC on Eire Water reservoir: As per clause (d) to sub section (5) of section 17 of the TN GST Act. 2017, goods or services or both received for construction of an immovable property {other than plant and machinery) on his own account, ITC is not eligible even if used m the course of furtherance of business. Further, item No (i) of Explanation to section 17 of the TNGST Act, 2017 rules out other civil structures from the ambit of plant or machinery. Hence, it is opined humbly that, ITC shall not be eligible on the fire water reservoir m their premises. Issue No.4 ITC on c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of LPG processing and Supply after unloading the propane and butane from which it is seen that the process are as under: LPG Unloading Propane Butane is received in ship tankers of 22,500 MT capacity at Port jetty of Tuticorin. Refrigerated Liquid Propane and Butane is unloaded through two dedicated Marine unloading arms, simultaneous unloading of 500 MT/h Propane 500 MT/h Butane takes place through 16 new dedicated cross country pipelines to new storage tanks ft; unloading of 250 MT/h Butane through existing 10 line to existing storage tank Propane Butane Storage - Propane Butane is stored in Double walled refrigerated storage tanks each of 15000 MT capacity at a temperature of -45 C in case of propane -5 C in case of butane; Vapours generated during ship unloading and normal boil off operation from storage tanks are compressed through dedicated compressors, liquefied in condensers and sent to 2 Nos of Mounded bullets of each 10O MT capacity using condensate receiver and pumps Propane Butane Loading - For loading of LPG to trucks. Propane Butane are pumped through submerged in tank pumps from respective tanks and heated to 10 C in Air Heating Syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion of Engineering, Supply of Major Raw materials, Pre-Fabrication. Erection, Fitup, Completion of all nozzels piping, Completion of Hydrotest, Painting. Completion of Pre-commissioning activity, Electrical Instrumentation Works, Mechanical Completion, Successful demonstration of PG parameters; under Civil A Structural work for Mounded Bullet - Excavation in ordinary soil. Backfilling in foundation pits. Transporting Stacking the rock, Providing filling grave! NS. Filling inside the retaining wails, providing, mixing, etc Plain CC (Grade MIO) Providing mixing RCC ground level, Providing mixing RCC upto 6m. Providing mixing RCC for walkway. Providing mixing smooth formwork, (gridivi, upto 6m) Providing pockets, blockouts in concrete, Providing Mixing integral corrosion, Providing erecting etc SS Handrail. Corrossion resistnt steel bars. Providing erecting, etc structural steel, Supply Fixing PVC downtake Pipe. Providing applying hot dipped galvanizing,. Provide Laying stone pitching, Providing A laying UPVC Sheet. Providing laying Geotextile sheet terrain. Mobilisation of rigs, tools, tackles etc, Provide construct stone columns. Carry out load tests on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the works. 6. PC) No. 45000407798 dated 08.05.2020 on Maharashtra Seamless Limited, Raigad- for supply of 6* Pipe, SMLS, LTCS for 3,643 M; 10*Pipe, WLD. LTCS for 12 M; 16 Pipe. WLD, LTCS for 598 M; 16 Pipe. WLD. LTCS for 6.680 M with SAC 7304 and GST @18%. From the above, it is seen that the,- Refrigerated storage tanks and Fire water Tanks are got constructed/ Erected Installed along with the related foundation works as Works Contract vide PO No. 4500405026 dated 11.03.2020 and PO No 4500405071 dated 11.03.2020 respectively issued on Sharp Tanks and Structurals Pvt Ltd. Mumbai; Pipes are sourced vide PO No. 45000407798 dated 08.05.2020 issued on Maharashtra Seamless Limited. Raigad; Civil Structural works for laying such pipes across the jetty and the terminal is covered under PO Number 4500407286 dated 22.04.2020 issued on S.R. Selvaraj Sons, Thoothukudi: and Pile foundation works for the project is covered under PO No. 4500401679 dated 10.02.2020 issued on Geo Foundations Structures Private Ltd. From the above, it is further seen that the construction of Refrigerated Storage Tanks and Fire Water Tanks are undertaken by the vendor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up the contentions of the applicant, the Input Tax Credit provisions relating to the present case are examined as under:- Section 2(59) of CGST Act: Input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; Section 2(19) of CGST Act: capital goods , means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business . Section 16(1) of CGST Act: 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. Section 17(5) of CGST Act: (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (1) of section 18. input tax credit shall not be available in respect of the following, namely;- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir own account for getting it laid and the said pipes are laid as a Works Contract including the foundation and structural supports; the Storage Tanks and water tanks along with the foundation are sourced as Works Contract ; the pile foundation for the entire project site is sourced as Works Contract . It is not in dispute that the Pipelines, storage tanks and water tanks are put in place for furtherance of their business and thereby the tax paid on these becomes eligible credit subject to limitations under Section 17(5) of the Act as these are constructed under Works Contract and the resultant is an immovable property. The applicability of the limitations at Section 17(5) of the Act, to the items on which credit is sought is taken up for consideration in the foregoing paras. 9.1 With respect to goods and services for laying of transfer pipeline and the foundation and structural support for such pipeline, it is seen that the applicant sources Pipes on own account and the same is laid as a Works Contract including the foundation. Section 17(5) restricts the credit on such goods received for construction Works Contract service received except when such goods/Works Contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raft Law was discussed by the council, the minutes of which are available in the council s website www.gstcouncil.gov . Reference to the said minutes provides the intentions of the provisions as the same definitely has a refential value, though not binding. The minuted discussions relevant to extension of Credit to Pipelines as discussed are extracted under: 10th GST council meeting, wherein it is minuted as follows: 9.2, SI. No. 18 (Section 16- Eligibility and condition for taking input tax credit): The Hon ble Minister from Kerala stated that the definition of capital goods under Section 16(1) was too wide and needed to be looked into again. He staled that in the VAT law there was a clear negative list of goods on which input Tax credit was permitted. The commissioner (GST policy Wing). CBEC explained that the Council in its 7th Meeting (held on 22-23 December, 2016) had decided not to extend the benefit of input tax credit on pipelines and telecom towers and the deletion of the proviso in Section 16(1) and the explanation to Section 16(4) was carried out to give effect to this decision. Shri Rajan Khobragade CCT Kerala stated that even after deleting the word pi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icers should re-examine the definition of Capital goods . Minutes of 11th GST Council Meeting given below: 6.2 Shri Upender Gupta, Commissioner (GST policy Wings), Central Board of Excise Customs (CBEC) broadly explained the changes made in the CGST law between the draft of 26th November, 2016 (which was the most recent version of the draft laws put in public domain)and the draft of 1 March 2017 presented as an Agenda Note for the 11th Meeting of the Council. These broad changes are recorded in Annexure 3 and were circulated to the Council members during the meeting . Annexure 3 Changes in Model GST Law (between 26th Nov, 2016 draft to 1st March 2017 draft) Input Tax Credit 1. The definition of aggregate value of turnover has been amended in section relating to Input Service Distributor, in order to enable distribution of GST credit in the ratio of turnover of GST and Non-GST supplier (petroleum etc.) for even State (Section 20). 2 The term plant and machinery has been amended so as to specifically exclude pipelines laid outside the factory premises and telecommunication towers (Section 17). On a cogent reading of the above, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jetty to the Terminal as pipelines laid outside the factory premises as being restricted under Section 17(5) of the act read with the Explanation thereof. 10.1 In respect of Refrigerated storage tanks, it is seen that the stone are sourced as Works contract and the applicant claims that the Storage tanks are Plant and Machinery and therefore the availment of credit on the taxes paid on the putting up of storage tanks along with the foundation and structural works are not restricted under Section 17(5). They have also stated that in the earlier law. Storage Tank was specifically mentioned under Capital Goods and have claimed that as per the Company s Act and the Income Tax Act. Storage Tanks are Capital Goods . It is not in dispute that the refrigerated storage tanks are set up in the course or furtherance of business. The Explanation in Section 17 of the Act defines. Plant and Machinery as an apparatus, equipment, machinery fixed to earth by the foundation or structural support used for making outward supply and excludes land building and civil structure. So we find that the moot point to be decided is whether the refrigerated storage tank falls under the class o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the site, on which a concrete foundation is made on which the refrigerated storage tanks are constructed/fabricated. From the Purchase Order, issued to M/s. Sharp Tanks and Structurals Pvt Ltd Mumbai vide PO No. 4500405026 dated 11.03.2020 (copy of which is furnished), it is seen that the entire refrigerated storage tank along with the foundation and structural support are covered under the scope of this PO. Therefore, we hold that the applicant is eligible for availing credit of tax paid on the setting up of 2 nos of the Refrigerated storage tank ordered vide Purchase Order No. 4500405026 dated 11.03.2020, in as much as such tanks stands accounted as Plant and Machinery in their books of accounts and the structural support to such tanks is as per the scope of the said Purchase Order 10.5 It is further seen from the representative diagram furnished that the concrete foundation is made on the Pile foundation . Tile Foundation is a civil Structure and cannot be attributed as a foundation or structural support for an equipment/apparatus. From the Purchase Orders furnished, we observe that the Pile Foundation for the Project site is vested with Geo Foundations Str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standard-236(copy enclosed). In Page No. 24 of said standard. Fire Water System is prescribed under Fire protection system for LPC Terminal . Water Storage is stated as main component of Fire Water Systems Thus, we And that the water storage tanks with the necessary tools/equipment are to be maintained in the Terminal as a Fire Protection System for LPG Terminal and therefore they are constructed in the course of business. These Tanks are constructed as Works Construct as seen from the Purchase Order No. 4500405071 dated 11.03.2020 issued on Sharp Tanks and Structurals Private Ltd. The important point, therefore to decide on the eligibility to credit on the works received based on this Purchase Order is whether the Waler Storage Tanks are Plant and Machinery as per the Explanation to Section 17 of the Act. 11.2 As brought out in para 10.3 above, an equipment/apparatus is one used for a particular purpose. Considering this definition of equipment/apparatus and the requirement of the applicant to maintain such a water Storage system we are inclined to hold the Water Storage Tanks in the case of applicant, as Plant and Machinery provided, the said tanks are accounte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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