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TMI Blog2021 (8) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... od under HSN (customs Tariff Heading) - the Central Air Conditioning plant fitted in the building cannot be taken as such to the market for sale and cannot be shifted from one place to another as such to erect at another site. It can be shifted only after dismantling the plant which cannot be called Centralised Air conditioning plant after it is dismantled as such the most of the ancillary item like copper pipes, flexible water pipe etc may become obsolete and cannot be shifted at other site. The Central Air Conditioning Plant once installed and commissioned in the building is transferred to the building owner and this involves transfer of property. We thus find no merit to treat an entire Central Air conditioning system a movable property - the supply and erection of subject immovable property- Central Air conditioning system merit its classification under works contract service. Lift - HELD THAT:- The lift has passed the test of permanency as laid down by the Hon ble Supreme Court, in THE MUNICIPAL CORPORATION OF GREATER BOMBAY VERSUS THE INDIAN OIL CORPORATION [ 1990 (11) TMI 407 - SUPREME COURT] and find lift an immovable property. It is noted the applicant s submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f works contract and covered at Section 17(5)(c) CGST Act. Fire Safety Extinguisher - HELD THAT:- The Fire Safety Extinguisher structure contains various types of metal pipes, different types of motors and equipments etc. and all these parts/equipments are assembled at site for the complete set of Fire Safety Extinguisher to came into existence. After assembly and installation at/in the Administrative building, the Fire Safety Extinguisher is commissioned and handed over to the owner of the building by the contractor. The said Fire Safety Extinguisher cannot be shifted as a whole as such to another place. For this it should be first dismantled piece by piece - the system assembled, erected and attached to the earth by a foundation is immovable property and supply is covered within the definition of works contract supply. Generator - HELD THAT:- The generator a movable item and its expense capitalised by the applicant and hold it supply of capital goods. Locker Cabinet - HELD THAT:- The locker cabinet are movable goods. Architect Service Fees and Interior Designer Fees - HELD THAT:- There are no merit to extend the explanation to subject administrative building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of Works Contract and basics of Section 17 (5) (c) (d) are reproduced as follows. Definition of Works Contract As per Section 2(119) of GST Act, Work Contract means 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. The expression Work Contract is limited to contract to do with immovable property. A contract will amount to a Works Contract only where the resultant product is immovable property. 3. The applicant has submitted that from the above definition it can be seen that the term Works Contract has been restricted to contract for building construction, fabrication etc. of any Immovable Property only. Also Para 6(a) of Schedule II to the CGST Act, 2017 states that Works Contract as defined in Section 2(119) of the CGST Act, 2017 shall be treated as a Supply of Services. 3.1 As per Section 17 (5) (c) of the CGST Act, 2017, Input Tax Credit shall not be availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Plant Machinery Yes Being Plant not covered under Immovable Property hence ITC available 2. New Locker Cabinet Locker Cabinets Yes Being Furniture not covered under Immovable Property hence ITC available 3. Lift Plant Machinery Yes Being Plant not covered under Immovable Property hence ITC available 4. Electrical Fittings, such as Cables, Switches, NCB and other Electrical Consumables material Electrical fittings Yes Being Electrical Fittings not covered under Immovable Property hence ITC available 5. Roof Solar Plant Machinery Yes Being Plant not covered under Immovable Property hence ITC available 6. Generator Plant Machinery Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by applying permanency test. The transaction would not be classifiable to cover under the definition of Works Contact due to failure to pass permanency test of Immovable Property. This view is confirmed by AAAR of Maharashtra Bench in the case of M/s. Nikhil Comforts reported in 2020 (41) GSTL 417 (App. AAR - GST - Mah.) and AAR of Uttrakhand Bench in the case of M/s. BAHL Paper Mills Ltd. reported in 2018 (14) GSTL 306 (AAR - GST). (ii) Locker Cabinet: The said Supply will be booked under the head of Furniture Fixtures in the Books of Accounts. Locker Cabinets will be ultimately used for provision of Supply of Taxable Service. The said Supply is Supply of Goods which is movable and there is no element of Works Contract resulting into Immovable Property at all. Further, even though, said Supply will be capitalized, it will be classified under Furniture Fixture . The Supply is of Movable Goods and there is no element of Works Contract , the restriction of Section 17 (5) of the CGST Act, 2017 does not apply and hence the ITC is available without any restriction. (iii) Lift: The said Supply will be booked under the head of Plant Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arts . Further, it cannot be prudent to say that the Lift assembled and erected at the premises of the Applicant at its Office will be immovable property as something attached to earth like a building or a tree. If the Applicant want to sell the Lift it will always be removed/ dismantled from its base and sell it. Further, whatever is embedded in earth must be treated as immovable property is basically not sound. For example, a factory owner or a house-holder may purchase a water pump and fix it on a cement base for operational efficiency and also for security. That will not make the water pump an item of immovable property. Some of the components of water pump may even be assembled on site. That too will not make any difference to the principle. The test is whether the Lift can be sold in the market and it is seen from record that it can be sold. Just because a plant and machinery are fixed in the earth for better functioning, it does not automatically become an immovable property. The Supplier will himself buy several items and will complete the machinery. They will purchase a large number of components and fabricate a few and assemble the Lift at site. If it is sold, it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be qualified as Plant and Machinery will be used by a Taxable Person for furtherance of business i.e. in its business of supplying Taxable Service. Even though the Generation of Electricity is an Exempt Supply, the Applicant will be using such electricity and solely will be consuming it captively for the purpose of supplying Taxable Service. From above, it is very well understood that the Roof Solar Plant will be attached to earth for operational efficiency. The whole purpose behind attaching the Roof Solar Plant to a concrete base will be to secure maximum operational efficiency and also for safety. Further, it is also seen that the Roof Solar Plant will be saleable and observed if somebody wants to purchase, the whole Roof Solar Plant could be dismantled and sold to him in parts . Further, it cannot be prudent to say that the Roof Solar Plant assembled and erected at the premises of the Applicant at its Office will be immovable property as something attached to earth like a building or a tree. If the Applicant want to sell the Roof Solar Plant it will always be removed / dismantled from its base and sell it. Further, whatever is embedded in earth must be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding to generate Electricity in case of power failure which will be ultimately used for provision of Supply of Service. For this the Applicant will enter into Contract for Supply with the vendor. The said Supply will be capitalized, it will be classified under Plant Machinery . Once, it is proved that the Supply is of Movable Goods and there is no element of Works Contract , the restriction of Section 17 (5) of the CGST Act, 2017 does not apply and hence the ITC is available without any restriction. This view is confirmed by AAR of Maharashtra Bench in the case of M/s. Nipro India Corporation Pvt. Ltd. reported in 2018 (18) GSTL 289 (AAR - GST) wherein the Authority had categorically allowed the ITC on DG Set considering it as Plant Machinery . (vii) Fire Safety Extinguishers The said Supply will be booked under the head of Plant Machinery under the Books of Accounts. The Applicant will install Fire Safety Extinguishers at their Building to prevent any mishap. For this the Applicant will enter into Contract for Supply with Supply and Installation of Fire Safety Extinguishers . Any Supply, to get covered under Work Contract Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o perform the structural design of Building will be ultimately used for provision of Supply of Service. As mentioned in the Application, the said expenses will be booked as Revenue Expenditure in the Profit Loss Account . As per the Explanation to Section 17 (5), 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. In the instant case, the said expenses is not being capitalized and charged to Profit Loss Account and hence the ITC is admissible. (ix) Interior Designing Fees: The said Supply will be booked under the head of Profit Loss Account in the Books of Accounts. The Applicant has appointed the Interior Designer who perform the Interior Design Development of Building which will be ultimately used for provision of Supply of Service. As mentioned in the Application, the said expenses will be booked as Revenue Expenditure in the Profit Loss Account . As per the Explanation to Section 17 (5), for the purposes of clauses (c) and (d), the expression construction includes re-construction, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t including when such goods or services or both are used in the course or furtherance of business. 8. The term construction includes additions to the immovable property to the extent of capitalization. Nowhere is it said that the capitalized amount needs to be declared as in the books of accounts within the value of immovable property i.e. buildings. The Accounting Standards which enumerate the classes of Fixed Assets being land and buildings, furniture and fixtures, etc. does not classify property as movable and immovable property and an asset classified as fixture could still be immovable property within its meaning. In case of any immovable property, if the asset qualifies to be an immovable property but shown as a discrete element in the books of accounts, it still remains an immovable property. Mere declaration of the same under a different class of Fixed Assets does not change its nature being an immovable property. 9. The applicant has submitted that the cost/expenses towards Central Air Conditioning Plant, New Locker Cabinet, Lift, Electrical Fittings, such as Cables, Switches, NCB and other Electrical Consumables Materials, Roof Solar, Generator, Fire Safety Extingu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the nature of works contract services and it is blocked under section 17(5) of the CGST Act 2017. Question on which Advance Ruling sought 13. Whether the Applicant, having undertaken the Construction of their New Administrative Office, will be eligible for the ITC of following: (i) Central Air Conditioning Plant (Classified Grouped under Plant Machinery ) (ii) New Locker Cabinet (Classified Grouped under Locker Cabinets ) (iii) Lift (Classified Grouped under Plant Machinery ) (iv) Electrical Fittings, such as Cables, Switches, NCB and other Electrical Consumables Materials (Classified Grouped under Separate Block namely Electrical Fittings ) (v) Roof Solar (Classified Grouped under Plant Machinery ) (vi) Generator (Classified Grouped under Plant Machinery ) (vii) Fire Safety Extinguishers (Classified Grouped under Plant Machinery ) (viii) Architect Service Fees (Charged to Profit Loss Account) (ix) Interior Designing Fees (Charged to Profit Loss Account). Personal Hearing 14. Shri Hardik Shah, C.A. appeared for hearing (Video conferencing) on 30-6-21 and reiterated the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so. 5 (iii) Refrigeration/ Air Conditioning Plant : These are basically systems comprising of compressors, ducting, pipings, insulators and sometimes cooling towers etc. They are in the nature of systems and are not machines as a whole. They come into existence only by assembly and connection of various components and parts. Though each component is dutiable, the refrigeration/air conditioning system as a whole cannot be considered to be excisable goods. Air conditioning units, however, would continue to remain dutiable as per the Central Excise Tariff (iii) Now we have the issue before us whether the air conditioning plant is a movable or immovable property. We find it apt to refer to case law: Municipal Corporation of Greater Bombay ors. V. Indian Oil Corporation Ltd. [199 Suppl. SCC 18], wherein one of the questions Hon ble Supreme Court considered was whether a petrol tank, resting on earth on its own weight without being fixed with nuts and bolts, had been erected permanently without being shifted from place to place. It was pointed out that the test was one of permanency; if the chattel was movable to another place of use in the same position or liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act. (v) When Hon ble Supreme Court [2011 (267) ELT (435) (S.C.)] has termed Air conditional Plant as an immovable property, we find no reason to dwell on this issue further. We refer to Article 141 of our Constitution, 141. Law declared by Supreme Court to be binding on all courts: The law declared by the Supreme Court shall be binding on all courts within the territory of India . (vi) We find supply of centralised air conditioning plant covered at Section 17(5)(c) CGST Act. We note that section 17(5) CGST Act is a Non obstante sub section, overriding the provisions of section 16(1) and Section 18(1) CGST Act. (vii) We find the applicant referred to case law of M/s. Nikhil Comforts and M/s. BAHL Paper Mills Ltd by AAAR and AAR respectively. As per Section 103(1) CGST Act, the said Rulings are not binding on this Authority but binding on their applicants and their concerned officers. We rest on the foundation laid down by the Supreme Court with respect to test of permanency and with respect to terming air conditioning system an immovable property. We are bound by the law of the land, as per Article 141 of our Constitution. 19. Lift i. The applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty cannot be subjected to excise under the tariff heading claimed by the Revenue. The case sought to be made out by the petitioner is also covered by the decision of the Government of India in reference, Otis Elevator Company (India) Ltd., 1981 (3) E.L.T. 720 (GOI), wherein it was clearly held that if an article does not come into existence until it is fully erected or installed, adjusted, tested and commissioned in a building, and on complete erection and installation of such article when it becomes part of immovable property, .. - 2001 (138) E.L.T. 635(Tri. - Chennai) in case of Kone Elevators India ltd it was held that Lift coming into existence only after it is installed along with the building and becomes functional, it is immovable property and not goods iii. We hold with full force that lift is an immovable property after being erected and is attached to the building itself. We further refer to Government Circular 58/1/2002-Cx dated 15-1-2002 vide F. No. 154/26/99-CX.4. The relevant extracts are reproduced below and we hold that its rationale and concept are relevant under GST scheme of law also: 5 (iv) Lifts and escalators. (a) Though lifts and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the electrical connections integrated into the electrical system/ network of the building, is immovable property. We cannot envisage a building without light and and therefore by reason of this supply being essential and integral to the administrative block, we may confer this immovable property a subset within the immovable administrative building, treating the building a whole set. (ii) We note the case law cited by the applicant - M/s. Nipro India Corporation Pvt. Ltd. reported in 2018 (18) GSTL 289 (AAR - GST). We find that vide referred Ruling, the Authority denied input credit on structural work, mechanical and electrical related civil work, plumbing, gardening water supply system, dismantling work, internal fire hydrant system, sprinkler works, extinguishers, fire documentation, relocation work. We do not find this case law of much help to the applicant. Therefore, We find no merit to dwell on. Even otherwise, We do not find this Ruling binding on us but for M/s Nipro and their jurisdictional officer. 21. Roof Solar Plant (i) The Applicant entered into a comprehensive SITC Contract (Supply, Installation, Testing Commissioning) with the vendor for insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another place the whole Solar Plant is required to be dismantled and then only be sold/shifted and re-erected at the site. Thus in terms of the order of Hon ble Supreme Court of India delivered in the case of M/s. Municipal Corporation of Greater Bombay ors. V. Indian Oil Corporation Ltd. [199 Suppl. SCC 18] it is an immovable property as per the test of permanency. (v ) This supply is Composite Supply which for the purpose of valuation follows the path laid down at explanation inserted to sr no 234 (schedule I) in entry at column (3) to Notification 1/2017- CT ( R) dated 28-6-17 wherein the the value of supply of goods for the purposes of this entry shall be deemed as seventy per cent. of the gross consideration charged for all such supplies, and the remaining thirty per cent. of the gross consideration charged shall be deemed as value of the said taxable service. (vi) We refer to Sr no 6(a) to Schedule II of CGST Act, wherein the following composite supply shall be treated as a supply of services namely, (a) works contract as defined in clause (119) of section 2 [ CGST Act]. We note that for the purpose of valuation and tax rate, the said explanation to said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said new administrative building. Both these services, as per applicant are Revenue Expenditure. The applicant referred to the Explanation to Section 17 (5), reproduced as follows: 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 . (ii) We find no merit to extend the explanation to subject administrative building, as the said administrative building is a new construction and not falling under reconstruction/ renovation/additions/alterations/repairs. Further the explanation defines an inclusive definition of Construction, defining construction to include, inter alia, re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property. This definition is not exhaustive and does not bar within the definition of Construction, new construction. Whether the supply of architect service or interior decorator service supplied for the new administrative building is revenue or capital expenditure, it does not matter as long as the construction is new and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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