9911796707
TMI Blog2021 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... for developing a greenfield project of caustic soda plant vide Deed of Rectification executed between GIDC and GNAL on 8-1-18, for which GACL invoiced GNAL for Rs. 85,89,97,520/- (72,79,64,000/- as consideration plus GST of Rs. 13,10,33,520/-) for the act of agreeing to surrender/ transfer its leasehold rights of the plot in favour of GNAL. 3. GNAL submits as follows: (i) One time consideration paid by GNAL to GACL cannot be taken as Sale Price of the Land on the ground that it is neither the Sale of Immovable Property nor is the Sub-Lease of Property. As the ownership of the land remains with GIDC permanently and hence it is just an act of relinquishment of rights in the Leasehold Land. Hence, the said transaction doesn't fall under the purview of Section 17(5)(d). (ii) The rights in the plot of land have been acquired by the GNAL for developing a Greenfield project for manufacturing caustic soda. Therefore, one can conclude that the consideration paid by the GNAL to GACL towards acquiring the rights over the plot of land is in the course of or for the furtherance of business. 4. GNAL has satisfied all the conditions laid down under Section 16 (2) of CGST Act in order to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a 'Plant and machinery', GST chargeable, if any, on transfer of leasehold rights is rightly admissible to them as the bar placed under Section 17(5)(d) of the CGST Act does not apply in a case where goods and/or services are procured for construction of a 'Plant and Machinery'. e) The criteria for eligibility and conditions to take input tax credit of Central Goods and Service Tax ('CGST') and State Goods and Services Tax ('SGST') have been prescribed under Section 16 of the Central Goods and Services Tax Act, 2017 ('CGST Act') and Section 16 of the Gujarat State Goods and Services Tax, Act 2017 ('SGST Act') respectively. Section 16(1) of the CGST Act and SGST Act allows a registered person to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business. Therefore, in order to avail credit, the person should be a 'registered person' and the services supplied to him should be used in the course or furtherance of his business. f) The words "input service" have been defined in section 2(16) the CGST Act, 2017 and SGST Act, 2017 as follows: "input service" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, since the business companies are allowed to take credit of tax paid on inputs supplied/received by them. If therefore input credit is denied to the input service received by the assessee, they will become burden to the assessee, which is against the very grain or principle of GST being a consumption tax. Therefore, the Applicants are eligible to avail input credit of GST paid on lease charges of land. i) Section 16(2) of CGST Act and SGST Act lays down the pre-conditions to avail input tax credit. The conditions prescribed under Sec 16(2) of the Act are as follows: i) Possession of Tax Invoice : They are in possession of tax invoice issued by the lessor. ii) Receipt of Services: They entered into a long-term lease agreement with the lessor vide Lease Agreement dated 8th January 2018. Accordingly, the effective date of commencement of lease is 8th January, 2018. They have the legal right over the land and are in possession of land (for achieving their objective of furtherance of business by construction of plant and machineries for setting up the Caustic soda plant and Power Plant) with effect from 8th January 2018 and as such they are in receipt of services. iii) Payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty (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; (e) goods or services or both on which tax has been paid under section 10; (f) goods or services or both received by a non-resident taxable person except on goods imported by him; (g) goods or services or both used for personal consumption; (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and (i) any tax paid in accordance with the provisions of sections 74, 129 and 130." k) GST paid by the applicant company on the lease charges doesn't get covered in the ineligible list of input services as reproduced above. Moreover, the Hon'ble Supreme Court in Bajaj Tempo Ltd. Mumbai v. CIT (1992) = 1992 (4) TMI 4 - SUPREME COURT observed that while interpreting the statute, provision granting incentives for promoting economic growth and development should be li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd accordingly, they are eligible to avail the GST levied by the lessor on supply of land on lease. m) Thus, in the absence of any restriction on availment of credit under the GST Act on tax paid on leasing of land service (as an objective of furtherance of business for the construction of plant and machineries for setting up Caustic Soda plant, as explained above) and fulfilment of all the conditions to avail credit, the Applicants are eligible to avail credit of CGST and SGST paid to lessor on acquiring land on lease for business activities. 6. GNAL vide its letter dated 30-9-21, submitted as follows: i. We have already obtained GST registration on 01.07.2017 and our Dahej Plant site address has been added as Additional Place of Business in our Registration Certificate. The copy of our Registration Certificate is submitted herewith as Annexure - 1. ii We hereby confirm that, no residential colony has been constructed till date and the Company does not have any plan to construct any residential colony in future on the above land for the Project Site at Dahej for which GACL has agreed to surrender their leasehold rights in favour of GNAL. iii The total area of land for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act. 10. GNAL seeks Ruling whether said GST portion borne by it, is admissible as ITC. We are not getting into the merit of SAC in the subject invoice raised by GACL on GNAL, but do hold that GACL has transferred its lease hold right on land to GNAL, for GNAL to further its caustic soda project. GNAL in written submission dated 23-9-21, at page 11 held the activity between GACL and GNAL as leasing of land liable to GST. 11. We refer to Section 16(1) CGST Act, reproduced as follows: Section 16(1) 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. 12. Further we refer to the Non Obstante Section 17(5) CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be applied to interpret the words ''plant or machinery' used in clause(d) of Section 17(5) of the CGST Act. We find that in ordinary usage 'and' is conjunctive and 'or' disjunctive. From the well known dictum of the Supreme Court that grammar is a good guide to meaning but is a bad master to dictate, it will appear that there is no hard and fast rule as to the meaning of the word 'or' and this word gets its proper meaning from the particular context from which it has been used. Justice G.P.Singh in the principles of Statutory Interpretation(Thirteenth Edition) Chapter 7 page 485 has stated as follows: "The word 'or' is normally disjunctive and 'and' is normally conjunctive but at times they are read as vice versa to give effect to the manifest intention of the Legislature as disclosed from the context. As stated by Scrutton L.J. "You do sometimes read 'or' as 'and' in a statute. But you do not do it unless you are obliged because 'or' does not generally mean 'and' and 'and' does not generally mean 'or'. Further, as pointed out by Lord Halsbury, the reading of 'or' as 'and' is not to be resorted to, "unless some other part of the same statute or the clear intention of it require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty (other than plant or machinery).... In such a hypothetical case and limiting to the wordings of Section 17(5)(d) only, there would have been a prima facie merit in the submission of the GNAL to consider that subject ITC is not blocked. But the word used in the said Parliamentary Act in said clause (d) is 'for' and not 'used'. The word 'for' indicates a purpose, an intended goal. Here, 'for' is to be construed to indicate the purpose to construct the buildings/ civil structures, administrative block et al on the leased land. The purpose to enter into the subject agreement with GACL for the subject land is to construct factory with administrative block, et al, so that GNAL may pursue its business. 14.1 With respect to the plant and structural work, GNAL submitted as follows : Plant & Structural Works The power plant civil and structural works shall cover all buildings, structures, equipment & structure foundations required for installation of the power plant. Main Plant Building The main plant building including the adjacent control room shall be a concrete framed structure (with a common column for power house building and control room building) supported over isolated/ c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anism to award proportionate credit for GST in such cases. 16. We rest on the dictum, 'first things first', that is to say, the land will be used for construction of the immovable property such as civil structures/ administrative block/ sheds/ factory building. Further, We note that the explanation to said section 17(5) defines 'plant & machinery' as, Explanation.-For the purposes of this Chapter and Chapter VI, 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 towers; and (iii) pipelines laid outside the factory premises. 17. We note that this issue was raised in the 37th GST Council held on 20-9-21, wherein H'ble Punjab Finance Minister vide letter dated 25-2-19 Highlighted this issue, the enclosure 5 Page no 242 as available at http://www.gstcouncil.gov.in/37th-gst-councilmeeting, is reproduced as follows: "Enclosure 5 Request to exempt GST on long term lease of land for setting u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce the wordings of H'ble Delhi High Court, in the case of Manufacturers Traders Association vs UOI-2020 (43) G.S.T.L. 616 (Del.), at para 10: 'GST Council - Status of - This is a Constitutional body brought into existence by 101st Amendment and is chaired by the Union Minister for Finance with Finance Minister of all States as members - Rates of GST are jointly decided and recommendations made to Central and State Governments - It is highest deliberative forum to resolve issues arising out of the implementation of the GST and the Council embodies the spirit of Co-operative Federalism'. The H'ble Court further ruled that it cannot sit in appeal and postulate that the decision of the Council is not what they have unwaveringly held it to be. 19. In conspectus of aforementioned discussion and findings, we pass the Ruling based on the following five grounds: i. The expression 'plant and machinery' excludes land. As expounded at para 13 of this Ruling, with this expression of Plant and Machinery excluding land, explicitly incorporated in the Blocked Credit section 17(5) CGST Act, We hold that Legislature has expressed its intent that ITC shall not be available in respect of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
