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TMI Blog2021 (12) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ory on these vessels. Thus Section 17(5)(ab) CGST Act does not come into picture in present case. Section 17(5)(b)(i) CGST Act pertains to blocked credit on renting or hiring of vessels. As already discussed in the aforementioned paragraphs of this Ruling, we find no merit to term and limit the services supplied by the Contractors to M/s Sikka as merely hiring/ renting of vessels, for the services are for the Operation and Maintenance of Vessels to perform and enable, inter alia, i. Transportation/ discharge of cargo; ii. security patrolling services. The bar of blocked credit raised vide Section 17(5)(aa); Section 17(5)(ab); section 17(5)(b)(i) CGST Act is not applicable in subject case - ITC is available for both the cases - application allowed. - GUJ/GAAR/R/57/2021 - - - Dated:- 29-10-2021 - SANJAY SAXENA AND ARUN RICHARD, MEMBER Present for the applicant : Advocates: Shri Aqeel Sheerazi, Shri Vipin Jain, Ms. Parnasi Shingala. Brief Facts: M/s. Sikka Ports Terminal Ltd., hereinafter referred to as M/s Sikka/ applicant for the sake of brevity, has submitted as follows: 2. M/s Sikka runs and operates a port and terminal handling facility at Sikka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanks comprising of 8 floating roof tanks for crude oil with an aggregate storage capacity of 768 kilo tonnes, 22 floating roof tanks for petroleum products with an aggregate capacity of 834 kilo tonnes and 4 conical roof tanks (Marine Tank Farm) for handling draw-off water and potable water. This shall be supported by a complete set of dedicated product pipelines to transfer products from/ to RPL s tank farm. (vi) Sea water outfall system (vii) Support vessels comprising of six marine support vessels, one diving support vessel, three tugs and two pilot boats. 3. The scope of services that the Applicant was required to provide to RIL was set out in para 3.1 of the said long term contract which read as follows: Scope of Services Subject to and in accordance with the terms of this Agreement, RPTL shall: 1. Develop, procure, finance, construct, own, maintain and operate the Facilities so as to enable RPTL on an uninterrupted basis to receive, handle, store and evacuate the Products for RPL; 2. Maintain and operate the Existing Facilities to the extent required to enable it to perform its obligations under this Agreement 3. Provide the Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cilities of SPMs, sub-sea pipelines, MTFs and jetties, the Applicant was also required as per Schedule 2 of the long-term contract, to provide the following essential services for berthing of RIL vessels at the SPM/jetty: 7. Infrastructure facilities including service jetty, tugs, mooring tenders and other floating craft like fighting and pollution control barges, line boats etc. including crew and supporting craft as may be required from time to time for pilotage, berthing and unberthing and pullback operations of tankers of RPL; 8. Navigational aids/facilities including vessel traffic management systems and all necessary facilities for night navigation/ night berthing/ night unberthing of RPL s tankers; and 9. Adequate measures for marine and environment pollution prevention and abatement conforming to all statutory requirement or regulations of Indian Law ... 12. RPTL shall ensure that the Facilities perform at the specified levels of efficiencies. 9. The applicant submitted that SPMs are located mid-sea for the reason that Very Large Crude Carriers ( VLCCs ) which bring in crude oil and other feedstock at Sikka Port need a very deep draught to dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V. The Applicant has appointed a contractor for the operation and maintenance of the DSV. The services of operation and maintenance of DSV inter-alia include efficient operation of DSV, manning of DSV by qualified crew, preventive and corrective maintenance of DSV, maintaining the hull, superstructure, accommodation, gallery, stores and various spaces onboard, etc. as per best maritime practices. The detailed scope of work undertaken by contractors in respect of operation and maintenance service of DSV and sample invoices raised by the contractors on the Applicant are submitted with Advance Ruling Application. Further, a photograph of the DSV along with its specifications was submitted. Security Patrol Vessel (SPV) 2. The Applicant utilizes SPVs (also called Security cum Pollution Control Boats or Security Patrolling Boats) which are used for guarding SPMs located in mid-sea and to check, monitor and control pollution due to oil spills or leaks. The SPVs so employed by the Applicant are integral for discharge of its obligations under the long-term contract, which include ensuring the safety and security of all its facilities to ensure seamless and uninterrupted operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Act inter-alia provides that every registered person shall 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 business. Under Section 17(5), there are certain restrictions to availment of ITC otherwise entitled by Section 16(1). Section 17(5) was amended with effect from 01.02.2019 vide the CGST Amendment Act, 2018 and the amended provisions of Section 17(5)(aa) inter-alia provide that ITC in respect of vessels shall not be available except when used for purposes specified therein. The relevant portion of the amended Section 17(5) is extracted below for reference: (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:- (aa) vessels and aircraft except when they are used (i) for making the following taxable supplies, namely:- (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enable transportation of goods and therefore the bar under Section 17(5)(aa) is not applicable. The Applicant further submits that in order to ensure the legislative objective behind amendment of Section 17, it is necessary to interpret the expression for transportation of goods as for the purpose of transportation of goods so as to give it the meaning as was intended by the Legislature. In this context it may be relevant to note that Courts have held that the term for is to be given a wide meaning and should be interpreted as for the purpose of . 18.1 Reliance is placed on the following amongst other judgements: i. The Hon ble Supreme Court in Indian Chambers of Commerce vs. CIT [(1975) 101 ITR 796 (SC)] held that the expression for has to be interpreted as for the purpose of when used with an active participle of a verb. The relevant extract of the judgement is reproduced as follows: Further, what is an activity for profit depends on the correct connotation of the preposition. For used with the active participle of a verb means 'for the purpose of (See judgment of Westbury C, 1127). 'For' has many shades of meaning. It connotes the end with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssels to be eligible. Without there being any such explicit conditionality, the word directly cannot be read into Section 17(5)(aa) so as to cast an additional burden on the tax-payer. 19.2 Further, in terms of amended Section 17(5)(b)(i), the ITC in respect of services of renting or hiring of vessels is not available except when such vessels are used for the purposes specified in Section 17(5)(aa). However, the proviso thereof provides that ITC restricted under Section 17(5)(b)(i) shall be available where an inward supply is used for making an outward taxable supply of the same category or as an element of a taxable composite or mixed supply. The relevant portion of Section 17(5)(b)(i) is extracted, as follows, for reference: (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il the ITC of GST paid on Diving Support vessel Security Patrol Vessel as they are using said vessels for furtherance of their business and Section 16(1) of the CGST Act, 2017 allows Input Tax Credit on any supply of goods and services or both to the recipient which are used or intended to be used in course or furtherance of business. In this regard the legal provisions are as follows: a. Section 16. Eligibility and conditions for taking input tax credit. Sub-Section (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. Therefore, it is clear that entitlements to avail ITC are subject to conditions/restrictions. b. Section 17 : Apportionment of credit and blocked credits. Sub-Section (5): Notwithstanding anything contained in subsection (1) of section 16 and subsection (1) of section 18, input tax credit s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repair maintenance in respect of above- mentioned vessels is concerned, Section 17(5)(ab) of the Act is reproduced as follows: 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 services of general insurance, servicing, repair and maintenance in so for as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) of the Act. Provided that the input tax credit in respect of such services shall be available i. where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; ii. where received by a taxable person engaged - I. in the manufacture of such motor vehicles, vessels or aircraft; or II. in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him. 22.1 It is observed that, in the present case, the subject vessels are not used for the purposes specified under Section 17(5)(a) of the Act and are, therefore, not also covered under exception provided under Section 17(5)(ab)(i) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as, Operation and Maintenance of SPM 1 2. iii. With reference to this contract, the question of ITC credit admissibility before us pertains to the portion on Operation and Maintenance of DSV. iv. The fact forthcoming is that divers and their diving equipment are stationed on this DSV, who are specialised to connect discharge pipes of VLCC to the sub sea pipelines for discharge of cargo. v. We note that the Schedule of Rate for Operation and maintenance of Delsager is mentioned separately in the Contract and same reflected in the invoice raised by M/s Samson. vi. The SAC code mentioned in the Invoic No. MHRG202008R0018 dated 17-820 submitted before us is SAC 998717 which pertains to the Maintenance and Repair of Commercial and Industrial Machinery. On reading the Contract in toto, we are of the opinion to give credence to the substance of the Contract and thereby do not limit the scope of services supplied by M/s Samson to M/s Sikka covered within the ambit of SAC 998717. We hold that the SAC quoted by M/s Samson in its invoice shall not alter the factual scope of service supply to M/s Sikka. We hold that the subject manning, operation and maintenance of DSV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. Operation and Maintenance of security boat Eagle; SAC 998717. b. Operation and Maintenance of Security Boar Chetak; SAC 998717. iii. We find that Security and Patrolling Services are received by M/s Sikka with the operation of these two SPVs, with an additional feature of enabling M/s Sikka to comply with its obligations under the environmental laws by checking for any oil spillage/leak. iv. We hold that the SAC quoted by M/s Lilly in its invoice shall not alter the factual scope of service supply to M/s Sikka. We give credence to the substance of the contract and hold that these services are requisite input services for M/s Sikka to supply its outward supply. v. These security and patrolling services are used for guarding SPMs located in the mid sea and to check, monitor and control pollution due to oil spills/leaks. These services ensure safety and security of M/s Sikka s facilities, ensuring uninterrupted operations, to take adequate measures to prevent environment and marine pollution as well as comply with environmental regulations. 4. Contract with I Marine Infratech India Pvt Ltd. i. This Contract reads that it is for hiring of security pat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rehension that Revenue may treat this ITC on subject input services as Blocked credit. 29.1 Revenue vide its submission, aforementioned, has opined subject Credit inadmissible as Blocked credit covered under Section 17(5) CGST Act. 30. We refer to the provisions of Section 17(5) CGST Act. 31. We find that Section 17(5)(aa) CGST Act pertains to Blocked Credit for Vessels. This is blocked credit on vessels which are goods . 31.1 This is not the case before us that M/s Sikka bought vessels and seeks ruling on the ITC on vessels (goods), but it is pertaining to the credit admissibility of Services supplied by Contractors. 32. We note that Section 17(5)(ab) CGST Act pertains to Blocked credit on services of repair and maintenance in so far as they relate to Vessels. Even this is not the case before us. The services supplied by the said Contractors to M/s Sikka is not limited merely to Repair and Maintenance to Vessels but the essence and substance of the Contracts reads that the Services supplied by the said Contractors pertain to enabling discharge of liquid cargo into the sub sea pipelines and also the Services of Security Patrolling cum Pollution checks by way ..... X X X X Extracts X X X X X X X X Extracts X X X X
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